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Juniper Outbids Rival in M&A Swoop

Michelle Donegan
LR Mobile News Analysis
Michelle Donegan
2/21/2011
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In a dramatic M&A development, Juniper Networks Inc. (NYSE: JNPR) has snatched timing and synchronization specialist Brilliant Telecommunications Inc. from the grasp of would-be buyer Symmetricom Inc. (Nasdaq: SYMM) in an all-cash acquisition for US$4.5 million. (See Juniper Acquires Brilliant.)

The IP networking giant announced Friday it had acquired certain assets of Brilliant, including all its intellectual property (IP), just days after Symmetricom issued a press release stating that it had entered into an agreement to buy certain assets of Brilliant, again including all its IP, for $3.5 million in cash.

Symmetricom's offer also included an additional $2.3 million in cash if certain milestones were hit within six months of the planned transaction.

Symmetricom's announcement of the acquisition agreement, dated Feb. 14, even included a quote from Brilliant's president and founder Dr. Charles Barry: "My team and I are very pleased to join Symmetricom to expand the company's communications market opportunities. The resulting technology suite will provide unmatched breadth and capability for high performance synchronization solutions."

But it appears that Juniper subsequently made Dr. Barry an offer he couldn't refuse. Juniper's deal was done and the transaction closed on Feb. 18. [Ed note: So someone from Juniper remembered to bring the check book to Mobile World Congress last week.]

Why this matters
The M&A tussle over Brilliant shows that the company, which was founded in 2004, has developed technology that's in hot demand. Specifically, its network timing, management and synchronization products will play a critical role for mobile operators as they continue to adopt all-IP in their transport networks.

For Juniper, the move indicates that the IP networking vendor is adding to its portfolio so that it can make a bigger push into mobile backhaul and IP networking for mobile operators.

In its press release about the acquisition, Juniper stated: "Brilliant Telecommunications’ intellectual property addresses the complex timing and synchronization requirements of today’s networks. It will enable Juniper to extend its market-leading position by delivering solutions that offer greater flexibility for service providers as they continue to deploy 3G and 4G networks."

For Symmetricom, apart from the embarrassment of being outbid by Juniper, the attraction to Brilliant could indicate a gap in its product portfolio that it wants to fill. A lingering question is: Where will Symmetricom find those assets now?

For more
Ethernet backhaul is an area where network timing and synchronization has been particularly complex and challenging.



— Michelle Donegan, European Editor, Light Reading Mobile

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Michelle Donegan
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Michelle Donegan,
User Rank: Light Beer
12/5/2012 | 5:12:28 PM
re: Juniper Outbids Rival in M&A Swoop


It's definitely $M.


Sure, it's not a lot of money, relatively speaking for this industry. But Juniper's interest in Brilliant's technology is interesting in terms of how it will fit into its mobile strategy. And the fact that Brilliant attracted these bidders shows there's a need out there for such timing and synchronization specialists -- so watch for who is looking to buy next and who's selling. 


Michelle


 

Bob Saccamano
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Bob Saccamano,
User Rank: Light Beer
12/5/2012 | 5:12:28 PM
re: Juniper Outbids Rival in M&A Swoop
Difference is, one is interesting and one is zzzzz
digits
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digits,
User Rank: Light Beer
12/5/2012 | 5:12:27 PM
re: Juniper Outbids Rival in M&A Swoop


Hi Bob


I would argue that many acquisitions in the $m are more interesting than those in the $b, with the latter often involving massive integration processes that can take years to unravel while the former can involve some strategic and nimble acquisitions of technoogy and/or key people that can save years of R&D and have a dramatic impact on product development. Not always, of course, but as Michelle points out this is inteersting from a strategic viewpoint and if it DOESN'T work out, then Juniper has hardly handicapped itself financially.


And in terms of acquisitions that are industry-changing I always think of Alcatel's purchase of TiMetra in 2003 that ended up making Alcatel-Lucent a big player in the carrier routing space. TiMetra's price tag? $150M in stock.... a $0.15b deal. (and if you valued that stock today you'd arrive at a lower value...)


And never mind the price - in this case the REALLY interesting dynamic is that JNPR swept in late to snatch Brilliant from another buyer.  

spc_markl
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spc_markl,
User Rank: Light Beer
12/5/2012 | 5:12:27 PM
re: Juniper Outbids Rival in M&A Swoop


Michelle,


Although it seems to be small potatoes in this case, it could be a little analogous to Cisco Systems buying CoreOptics for coherent technology and cornering a good portion of the market – keeping it away from direct competitors.   Otherwise, why not just buy from Symmetricom itself?   In general, timing and synchronization may not require a lot of capital and may be non-sexy, but they can play a critical role in preventing outages.   Another factor could be that Symmetricom has developed somewhat of a reputation of taking advantage of its monopolistic control in other spaces.


Mark

^Eagle^
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^Eagle^,
User Rank: Light Beer
12/5/2012 | 5:12:26 PM
re: Juniper Outbids Rival in M&A Swoop


to spc_markl


while Cisco certainly had good reason to buy CoreOptics, "buying CoreOptics for coherent technology and cornering a good portion of the market" is not an accurate statement.


CoreOptics had no lock out technology in coherent transmission / detection.  They buy did not give Cisco the chance to lock others out of the market for coherent applications.


What CoreOptics DID have was a great MLSE engine that adapts the signal in the electrical domain to provide more effective (longer reach / lower BER) transmission in the optical domain.  And that core MLSE (distortion compensation) also had very interesting uses for analog (video) signals.  


This piece of electronics / firmware / software was CoreOptics key IP.  


The coherent detection components along with transmission components they purchased from commercial external suppliers.  


Some in the market are still wondering why Cisco bought CoreOptics considering how small a share Cisco has in telecom fiber optic transmission.  


However, the ASIC that Core had and ASIC technology they had under development might help Cisco do something interesting on line cards going forward.  After all, up until then, Cisco bought all the transponders they used for 40G from outside.  To that point, CoreOptics purchase probably gave them better control over margins on 40G line cards / transponders.  


But buying Core did not give them any coherent stuff that locks competition out. Except as CoreOptics had developed asics for post processing of coherent detected signals.  Opnext also has an asic, as does Ciena, Fujitsu, and ALU for coherent modules.  others have chips in development. 


sailboat 

spc_markl
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spc_markl,
User Rank: Light Beer
12/5/2012 | 5:12:26 PM
re: Juniper Outbids Rival in M&A Swoop


sailboat,


I did not mean to imply that companies were permanently locked out on the technology. Several companies that were working with CoreOptics were forced to look at other options (not including Fujitsu and NSN, which had agreements in place with the vendor)  Also, the Opnext coherent solution is still in development.


Mark

pdonegan67
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pdonegan67,
User Rank: Light Sabre
12/5/2012 | 5:12:25 PM
re: Juniper Outbids Rival in M&A Swoop


So Juniper's taking another crack at the mobile backhaul space - and about time too. Having signally failed to get much traction with its BX7000 product, Juniper has allowed competitors like Alcatel-Lucent, Tellabs, Cisco and Huawei to disappear off into the distance in terms of product, mindshare and global account footprint in next generation mobile backhaul.


Juniper's strategy certainly needs turbo-charging in this space - and there can be little doubt that the combination of two new products forming part of its Carrier Ethernet Transport 2.0 (CET) strategy and the acquisition of Brilliant has the potential to provide just such a turbo-charge.


Despite proving to be an intractable standard to get right at an operational level (some leading vendors admit that they only have a couple of operators running it in live service, other leaders have lost business due to being unable to get it right) the 1588v2 packet synchronization standard, at which Brilliant excels, remains a key one for mobile operators the world over.


Wireless operators in the U.S don't need it because they have the commercial and political convenience of being able to leverage GPS that's already at the cell site. Elsewhere in the world, it's pretty much a straight choice between Synchronous Ethernet and 1588v2 or a combination of those two - unless of course you want to maintain TDM at the cell site forever.


Brilliant does undoubtedly excel in the 1588v2 standard. Operator feedback on that has been consistent. Its client side implementation is particularly well thought of. The question remains just how much of a boost Brilliant can give Juniper. A lot of big accounts are already locked down where backhaul switches and routers are concerned - providing the vendors can get the synchronization and other future IP-oriented requirements right, that is.


 


 

sincronisado
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sincronisado,
User Rank: Light Beer
12/5/2012 | 5:12:23 PM
re: Juniper Outbids Rival in M&A Swoop


Hi Michelle,


 


I fully agree with your comments... It is not a lot of money, but it shows how strategic "timing and synchronization" (mainly IEEE 1588v2) became for players like Juniper. BTW, good move from Juniper...


Now, we need to watch what SYMMETRICOM will do in order to fill the gap they are facing...


On the other hand, it is also going to be really interesting to find out what the other major players (i.e CISCO/CIENA/NSN/ALU, etc...) will do in order to react to this strategic move from Juniper.... The issue they will face is going to be "time to market". I do not recall any other company with the same (or equivalent) technology/products like Brilliant was... All I could find was www.ip-clock.com , so probably JUNIPER's competitors will have to start from the scratch taking time and money (which could most probably cost more than what Juniper spent to acquire Brilliant).


Interesting days...


 

^Eagle^
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^Eagle^,
User Rank: Light Beer
12/5/2012 | 5:12:21 PM
re: Juniper Outbids Rival in M&A Swoop


Mark,


nicely written post.  However, some clarification is still needed.  1) while CoreOptics was a great company (I have many friends there and they were also a company I worked with on a professional level), they were not dominate in their market for 300pin transponders.  They were successful, yes.  but not dominate at ANY account.  They were always one of several sources at each account.  They did gain good share for some special links where longer reach performance was required, but those were niche sales.  2) I am fairly sure that their coherent solution is also still under development.  So the contrast with Opnext is misleading. 3) they sold for about 1x annual revenues.  This would imply that this purchase had less to do with a dominate technology that would differentiate their solution from competition and more to do with Cisco being able to better control their prices (costs) in their supply channel.  4) again, the key tech that CoreOptics had was the electronics engine.  The MLSE chip and versions of similar chips that would make exceptional distortion compensation engines for video signals. 


Considering Cisco's focus on video, and the struggles the SA division has had as of late, I would wager that this purchase was more about the ASIC group that developed the MLSE engine and about the ability to drive costs down than it was about coherent technology.


Especially since Cisco is a very minor player in optical transport these days. They never reached any kind of dominance or even really significant market share from the Cerent purchase and have clearly reduced their R&D in optical transport and clearly reduced their focus on this area.  Drive by Petaluma sometime.  


Why would you invest in a coherent long haul solution at a module level when you have almost no share of long haul transport markets and would need an entire new platform development to take advantage of that transponder technology?


On the other hand, with Cisco's video push, the ASIC team and their knowledge of distortion impairments compensation would be quite useful for Cisco's video efforts IMHO.


Again, for the companies that were working with Core on optical transponders, they all had second and 3rd sources (in most cases Core was a second source) in their supply chain and really anyone who depended on Core for some key niche modules had contracts in place such that Core would continue to supply for some period of time.  as you noted, this included Fuji and NSN.  In that same group was Ericsson and ALU who were protected.


Finally, if you will note, almost everyone who is doing 100G Coherent at this time is rolling their own line cards and not yet planning on MSA based transponders (there are some exceptions, but the big guys are all doing their own right now).  This includes ALU, Ciena, Huawei, Fuji, NSN, and others.  This may change, but for now, they are not buying coherent transponders.  


Hence, my comments about the CoreOptics purchase by Cisco.  Look at other parts of CoreOptics tech to understand why Cisco wanted it.  


sailboat

paolo.franzoi
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paolo.franzoi,
User Rank: Light Sabre
12/5/2012 | 5:12:21 PM
re: Juniper Outbids Rival in M&A Swoop


 


Just to emphasize the point about Cerent, I sent some photos awhile back to Phil of the trucks taking the furniture out of the Cisco builings in Petaluma.  That whole business park is quite sad, I am still truly befuddled why the guys at Cyan felt it important to build their own building.  Not like there isn't several hundred thousand square feet of commercial real estate within walking distance.  Although I have heard that Tellabs now has a tenant for their upstairs, I have not checked that out personally.


seven


 

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