Partners To Ericsson: Stay Away From Juniper

A number of Juniper Networks solution providers said they are dead set against any bid by telecom giant Ericsson to swallow up the Sunnyvale, Calif.-based networking vendor.

The outcry against an Ericsson acquisition of Juniper came in the wake of analyst reports that a potential Ericsson-Juniper deal is possible in the wake of Nokia's $16.6 billion bid to purchase Alcatel-Lucent earlier this week.

"An Ericsson acquisition would be a bad thing for us," said an Elite Juniper partner, who wished not to be identified. "We prefer seeing Juniper as an independent company because with those kinds of large acquisitions, some things may still be the same for a little while, but then, often, things change and the larger entity doesn't have the same channel focus."

[Related: Nokia Confirms Plans To Acquire Alcatel-Lucent For $16.6B]

The executive said a company like Ericsson would have less focus on its channel strategy. "Just looking at what Juniper's done recently, they've shed a lot of the less profitable business lines to get back to their core strength with their new products -- so it does look like they could be positioning themselves for an acquisition," he said.

Juniper declined to comment on the possibility of an Ericsson acquisition or the Nokia/Alcatel-Lucent deal. Ericsson, for its part, said it continuously evaluates the "competitive environment, but our focus is on our strategy and our work to deliver leading solutions and services to the leading operators in the world."

Simona Jankowski, an analyst for investment giant Goldman Sachs, said earlier this week in a research advisory that the Nokia/Alcatel deal could lead to an Ericsson networking acquisition -- citing Juniper as a company that would fit into its target profile.

"Ericsson would have product portfolio gaps in routing and optical relative to both Nokia/Alcatel and Huawei -- its two main competitors," wrote Jankowski. "Ericsson has stated an interest in targeting these areas for growth through acquisitions. ... In routing -- e.g. Juniper -- Ericsson has expressed a desire and commitment to be a meaningful player, although it could continue to pursue an organic strategy."

Another Juniper Elite partner said he believes the channel would be given short shrift if a large company like Ericsson takes over Juniper.

"We have a strong relationship with Juniper, but we're just a regional player," he said. "It tends to be harder to work with those types of companies once they are absorbed into a larger company. You end up seeing a lot more of the business going towards the large global players."

One major problem for Juniper Networks that arises from Nokia's acquisition of Alcatel-Lucent is that Juniper Networks' status as a supplier of networking equipment to Nokia is likely to be in jeopardy, analysts said. That's because Alcatel-Lucent, a Juniper competitor, will become Nokia's primary networking offering if the Nokia-Alcatel deal is finalized and completed. Nokia said it expects the acquisition to be completed sometime in the first half of 2016.

Elisabeth Rainge, vice president of communications service provider operations at research firm IDC, said Juniper should be preparing for a scenario for when the Nokia/Alcatel-Lucent acquisition is completed

"Juniper should understand Nokia would have in-house some of the key technologies that it today gets from Juniper," said Rainge. "Juniper needs to be exploring their options because the Alcatel-Lucent portfolio includes IP networking equipment routers that are so essential to who Juniper is."

Rainge said she also sees a potential Ericsson-Juniper Networks deal likely if Nokia completes the Alcatel-Lucent acquisition.

"If Nokia does fully acquire Alcatel-Lucent, then a very logical choice for Ericsson is to buy Juniper. That seems to be the most probable, most reasonable, outcome," she said.

Goldman Sachs' Jankowski said in a research note that, regardless of the Nokia/Alcatel-Lucent deal, she does not "foresee a significant near-term risk" to Juniper's routing business. That's because, she wrote, "routers are often in the network for more than fives years" and "sales cycles can easily last longer than a year especially at a large carrier."

What's more, Jankowski wrote, Juniper could work to replace Nokia as a sales channel "through a direct sales relationship or other channel partners."

Another Elite Juniper partner, who did not want to be identified, said he would be "surprised" if Juniper was acquired by Ericsson. That said, he noted that he would prefer Juniper be acquired by a foreign company like Ericsson, which doesn't have a large U.S. channel.

"I don’t think it would be a good thing for partners, necessarily, because I think Juniper has a great partner program and it’s a small organization, so it's relatively easy to get to know enough of the right people and get connected," he said. "I personally hope it does not happen, but I get it if it does."

A top executive for a $100 million-plus Juniper partner listed on the CRN SP500 said an Ericsson acquisition could halt Juniper's new product momentum. Last month, Juniper unleashed a new line of switches, upgraded routers and made improvements to its physical and virtual security portfolio.

"We don’t know Ericsson, haven't done business with them before," said the executive. "I don’t have anything against them, [but] I don't see their market value helping us [grow] our Juniper revenue. I see Juniper hitting its stride now, especially with security, and would hate to see something jump into the way of that."

PUBLISHED APRIL 17, 2015