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Cisco's new WLAN competitor gets favorable reviews on move

Juniper's acquisition of Trapeze gets approving nod from many analysts

Juniper's acquisition of WLAN pioneer Trapeze Networks is getting generally positive reviews from financial analysts. As expected, Juniper this week announced plans to purchase Trapeze from parent Belden for $152 million in cash.

Juniper had been sizing up a move into WLANs for 2 years or more. Five years ago, it was believed that Juniper would make a run at then-partner Colubris. Then two years ago, it was reported that Juniper was eyeing Aruba and Meru.

Then two months ago, word surfaced that Trapeze, which had recently been purchased by Belden for $133 million but underutilized, was the chosen one.

Analysts acknowledged that Juniper could have raised its ante significantly with Aruba (market cap of over $2 billion and No. 2 to Cisco in WLAN market share) or Meru (~$250 million market cap) but chose to play the safe bet with Trapeze, even though it only has about 2% of the $1.6 billion WLAN market. Juniper is impressed with Trapeze's technology and intellectual property, and is also a customer, according to David Yen, Juniper's executive vice president and general manager, Fabric and Switching Technologies.

Oppenheimer & Co. gives the move a thumbs up:

Overall, we're positive on Juniper's strategic move as it expands its addressable market, its presence in the enterprise market and leverages its growing channel reach. While there are better WLAN assets Juniper could have pursued, we believe acquiring Trapeze represents relatively low risk as Juniper attempts to make its push into the estimated $2B enterprise WLAN market in 2010.

So does Paul Mansky of Canaccord Genuity, who noted that with its WLAN and core router moves this week, Juniper is gaining steam while Cisco deals with a disappointing quarter:

We view wLAN ownership as critical to a well-rounded enterprise portfolio given the likelihood wireless forms an "overlay network" vs. legacy wired infrastructure... With yesterday's new core router introduction, coupled with today's entry into wLAN, business momentum into 2011 compares favorably versus the company-specific challenges at Cisco - making Juniper our preferred growth vehicle. 

UBS, however, noted some caveats with the deal, particularly with Trapeze's "stagnant" market share and Juniper's less than stellar record of acquiring companies down lower in the pack: 

From a market perspective, we expect the enterprise WLAN market to grow at a CAGR of ~25% from 2009-2012, and we note Trapeze share position has been stagnant at the ~2% range...It remains unclear if Juniper will be successful in this transaction though we believe there are synergies. Trapeze has underperformed recently due to a transition to more Trapeze branded products and less focus on OEM sales (3Com, Nortel/Avaya, and Enterasys). Juniper's much stronger market position and networking scale may help. That said, we note Juniper has been unsuccessful with past deals with low market share entry points (Perabit, Redline), which is a risk for Trapeze.

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