As soon as Ericsson and Cisco announced their strategic partnership on Monday, Juniper Networks’ stock plummeted. Juniper was down over 8% on Monday morning after Ericsson and Cisco disclosed their broad resale and patent licensing arrangement to address current and future needs of service providers and enterprises, and opportunities in the Internet of Things.
Ericsson and Juniper have a long history. Ericsson was an early funder of Juniper’s when the router company began operations almost 20 years ago. The companies entered into a joint development arrangement in 2000 that produced a routing node for mobile wireless operators, and have a distribution agreement around that and other complementary products.
Many expected Ericsson to line up more tightly, or even acquire, Juniper after Nokia announced in April it was acquiring Alcatel-Lucent. Now that potential acquisition is off the books. And that long-standing arrangement between Ericsson and Juniper seems to be headed for dissolution too, as does the channel partnership with Nokia once the Alcatel-Lucent buy closes.
Juniper appears to be stranded on an island as its partners align themselves with Juniper rivals to address the next generation of networking.
Juniper said it is business as usual while it evaluates the most recent Ericsson/Cisco arrangement:
Juniper Networks is committed to the success of our customers. Our strategy of solving our customers’ toughest networking challenges has not changed. We continue to maintain close business and technical relationships with our partners and customers. Juniper’s solution roadmap is strong and strategically diversified and we are committed to innovating on performance, automation and how we support our customers.
And it is the latest in a series of partnerships between Cisco and Ericsson. In 2004, the companies signed a multi-year agreement to jointly sell IP infrastructure equipment to telecommunications service providers. The alliance combined Cisco's core routers and switches with Ericsson's softswitch product line.
In 1996, Cisco and Ericsson announced an alliance to collaborate on the development and exploration of wireless Internet services. The results of that collaboration were forgettable, if one former Cisco executive’s recollections about it are accurate, and drove Cisco to instead ally with Motorola in 1999.
Analysts say this is good fodder for Juniper. It must convince customers of the finite lifespan of partnerships as priorities change between the partners (see, “VCE”). It should also remind customers than best-of-breed wins despite the tie ups partners now have with rivals.
“Juniper needs to emphasize that the Cisco/Ericsson alliance can always fray down the line due to shifting alliance priorities,” says Ron Westfall, research director for service provider infrastructure at Current Analysis. “Likewise, Juniper needs to assert that the Nokia acquisition of Alcatel-Lucent does not preclude them from working with Nokia based on operator best-of-breed preferences for routing platforms.”
As for a merger or tight partnership (again) with another telecom titan... is there anyone left for Juniper? Chinese vendors Huawei and ZTE pose national security concerns, Westfall notes.
“Overall, Juniper would prove better off emulating the Cisco strategy of avoiding the costs and integration headaches associated with acquiring a major infrastructure supplier and pursue more creative and robust channel alliances that include license fee agreements to demonstrate long-term commitment objectives,” Westfall says. “Otherwise Juniper risks buying relatively niche infrastructure players such as ADTRAN, ARRIS, Ciena or Coriant with little to no prospect of creating a comprehensive portfolio that can counter the (end-to-end) capabilities of Cisco, Ericsson, Huawei, and Nokia.
“In terms of a bold M&A move Juniper would ultimately be better off merging with a supplier that wields global software and services pedigree such as Amdocs or Oracle -- which owns some telco infrastructure assets and experience from the Acme Packet and Tekelec acquisitions. This would strengthen Juniper’s SDN/NFV proposition including driving adoption of network and service orchestration platforms as well as natively integrating proven and widely deployed routing and IP intelligence with Business Internet platforms” like OSS/BSS and telco analytics, Westfall says.
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