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Optical/IP

Juniper's Bizarre Love Triangle

Juniper Networks Inc. (Nasdaq: JNPR) appears to be caught between two uncomprising taskmasters -- Siemens Information and Communications Networks Inc. (ICM N) and Ericsson AB (Nasdaq: ERICY) -- because of its acqusition of Unisphere Networks Inc.

Juniper is actually seeing revenues from its joint venture with Ericsson, selling the J20 "wireless router" (or Gateway GPRS Support Node [GGSN] for the propeller-heads amongst you) to European carriers. However, when rival Europe mobile infrastructure provider Siemens sold its Unisphere subsidiary to Juniper in May of this year, it took a stake of nearly 10 percent in the merged networking company.

Ever since, industry watchers have wondered how Juniper can maintain its relationship with both vendors in this strange ménage, especially as both sides have GGSN products that will be targeted at exactly the same market -- European wireless operators.

However, it looks as if Siemens is giving no quarter. The German firm has told Unstrung that it plans to keep developing the ERX GGSN based on Unisphere technology.

"On May 17, ICM N Management signed the Memorandum of Understanding (MoU) before the Unisphere's acquisition was signed and announced," Franz-Rudolf Borsch, media relations manager of Siemens' mobile arm told Unstrung in an email response to questions. "Our management was aware of the coming change in ownership and still continues to pursue a joint development of the ERX-GGSN. Unisphere's new ownership structure does not change this plan."

In fact, Siemens may even develop other products based on the Unisphere technology. "ICM N will continue to develop and to market the ERX-GGSN and other original Unisphere-Products," says Borsch. "ICM N sees the acquisition as a strong opportunity, as our IP product base now is broadened significantly with the number two player in the market." A spokesperson for Juniper would not confirm or deny the statements.

This is perhaps not surprising, given that Juniper's other partner -- Ericsson -- doesn't just sell the J20, it resells a lot of Juniper gear to its customers, according to analysts, who say that Ericsson is a 10 percent customer of Juniper.

GGSNs, which link next-gen GPRS radio networks to the IP backbone and enable carriers to develop new data services, are one of the few IP networking markets that are likely to grow in the short term. This is why the market is so interesting for Juniper, which is number two in IP networking after Cisco Systems Inc. (Nasdaq: CSCO). Juniper is stuck between a router and a hard place. It wants to keep Ericsson sweet but needs to keep Siemens onside, too. What's a corporation to do?

As Unstrung reported last month (see Juniper's GGSN Gamble?), one possible option for Juniper could be to go it alone and develop a wireless router that it could sell to the wider market. However, this may be a last resort, dependent on how the company resolves its relationship with the two Euro mobile sumos it is presently on the mat with.

Whatever happens, the current situation must be an interesting one for Juniper and Unisphere customers. Unless of course, Juniper is telling them more than what they're telling us, which -- let's face it -- wouldn't be difficult.

— Dan Jones, Senior Editor, and Gabriel Brown, Research Analyst, Unstrung
http://www.unstrung.com
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