Juniper Networks, Inc. (JNPR)’s Loss is Cisco Systems, Inc. (CSCO)’s Gain
A strategic partnership between Cisco Systems, Inc. (NASDAQ:CSCO) and Ericsson (ADR) (NASDAQ:ERIC) is not something the Street expected. Investors were banking on Ericsson buying Juniper after Nokia Corporation (ADR) (NYSE:NOK) inked a deal for Alcatel Lucent SA (ADR) (NYSE:ALU). Juniper Networks, Inc. (NYSE:JNPR) stock tanked as it became clear; Cisco might have amassed an edge in the carrier router business.
Juniper Networks, Inc. (NYSE:JNPR) is trading below the $30 mark even though it beat estimates with its Q3 earnings and provided a strong guidance. A merger between Nokia and Alcatel is expected to pound more pressure on Juniper, which designs and sells products and services for high-performance networks.
Ericsson would have expanded its product portfolio into routing and Ethernet switch business on acquiring Juniper. Such a move would have strategically positioned it to compete better against Nokia and Huawei seen as its biggest rivals. However it chose Cisco Systems, Inc. (NASDAQ:CSCO) which now is seen as a big threat to Juniper’s router business.
Partnerships in the networking industry most of the time often struggle. However, Ericsson and Cisco Systems, Inc. (NASDAQ:CSCO) remain confident of their ability to realize up to $1 billion in revenues by 2018. Cisco also has an opportunity to grow its networking business at the expense of Juniper at the back of the strategic partnership.
Ericsson Big Loss
Ericsson might have generated more value by partnering or acquiring Juniper according to the Kepler Cheuvreux analyst Sebastien Sztabowicz. Juniper’s strong networking business was seen as a perfect fit for Ericsson. Rumors of a merger between the two popped up earlier in the year when Nokia inked a $16.6 billion to buy Alcatel-Lucent.
There are reports that Ericsson may not seek to acquire Juniper Networks, Inc. (NYSE:JNPR) anytime soon especially with the new strategic partnership with Cisco Systems, Inc. (NASDAQ:CSCO) in place. It is also unclear whether Juniper will agree in future to merge with Ericsson given the way things stand right now.
The fact that Ericsson is working with Juniper Networks, Inc. (NYSE:JNPR) fierce rival in the networking business affects the chances of a deal happening anytime soon. With talk of potential merger out of the table at the moment, the solution provides can now relax knowing very well that Juniper business won’t be affected by a purchase anytime soon.
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