NetScreen: Swede Talking?

How big a deal is an OEM agreement? If you’re Ericsson AB (Nasdaq: ERICY) – the king of handing out OEM deals to every Tom, Dick, and Harald – maybe not that big. But if you’re a recently floated security products provider that has only just gotten involved in the GPRS market, getting an OEM deal with the likes of Ericsson may seem pretty important.

NetScreen Technologies Inc. (Nasdaq: NSCN) will not only be announcing its OEM agreement with Ericsson later this week, it’s expected to be yelling it from the rooftops.

At first glance, the new agreement appears to be an extension of the deal between the two companies announced at CeBit in Germany in March, when it was stated that Ericsson's GPRS (General Packet Radio Service) Packet Core solution bundles already include the recently released NetScreen-500 GPRS security appliance (see NetScreen Debuts Security System.

But Robert Thomas, NetScreen’s president and CEO, says this deal is much more far-reaching than the company’s existing relationship with Ericsson, since a whole range of Ericsson solutions for mobile operators, carriers, and other service providers will include any one of a long line of NetScreen products. “This is a pretty exciting announcement,” he says.

Thomas says he is especially excited about the access the deal will bring NetScreen to the international service provider market. “This will give us an opportunity to grow the service provider side of the market quicker than anticipated. Ericsson is a supplier to carriers worldwide.”

Thomas may be hoping that Ericsson will be able to build on its existing relationship with China Mobile. The largest Chinese wireless operator will formally launch domestic GPRS services this Friday, according to The People's Daily.

“Ericsson’s visibility into multiple service channels couldn’t hurt,” Joel Conover, an analyst with Current Analysis, agrees. “Ericsson has very strong relationships with its carrier partners.”

Michael Tieu, a research analyst with SWS Securities Group Inc. , however, is skeptical as to whether or not the deal will boost NetScreen’s chances at selling its NetScreen-500 appliance to carriers. “I don’t think that it’ll be an immediate revenue source,” he says, but adds, “It’s a good lead to future deals, though. It’s definitely good publicity.”

The agreement may already be paying off for NetScreen. Since signing the deal in Sweden on April 19, the company has already had two or three new customer wins with non-U.S. carriers that use Ericsson equipment. Hong Kong-based Hutchison Whampoa Ltd. is apparently among the wins.

“This deal gives us a headstart,” Thomas says. “It gives us a huge advantage.”

Special to Unstrung by Eugénie Larson, Reporter, Light Reading

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