Service Provider Networks / Internet Routing /

Analysts: Juniper's purchase of Unisphere a 'smart move'

By Tim Greene
The Edge, 05/20/02

Juniper Networks is buying edge-router rival Unisphere Networks in a deal that will blend the second- and third-largest sellers of service-provider edge routers and pit them as a combined force against Cisco in that arena.

The combination also means Unisphere's parent company, Siemens, will resell all of Juniper's gear.

"Juniper had actually lost some of their market to Unisphere, so this was a smart move on Juniper's part," says Christopher Nicoll, vice president of Current Analysis. Plus, Siemens reselling the gear brings Juniper worldwide sales and support networks, as well as an established stable of service-provider customers, he says.

"The deal makes strategic sense for Juniper as it increases its penetration in the service provider edge routing market," says Nikos Theodosopoulos, communications equipment analyst at UBS Warburg. "In addition, Juniper will obtain Siemens as a global distributor of its IP product portfolio. Unisphere has been successful in penetrating international accounts through its Siemens affiliation."

Warburg believes RBOCs and PTTs will be the next major set of carriers to deploy IP technology, so this acquisition should enhance Juniper's position with these carriers. "Juniper in our view will now be able to offer a more complete end-to-end IP routing solution - multiservice edge and core - to RBOCs and PTTs," Theodosopoulos says.

"I think it is a good move for both companies, as it will broaden the combined companies' solution offerings," says Kevin Mitchell, an analyst at Infonetics Research. "There's a strong focus on IP/MPLS from both companies, and each company focused on one part of the network and had strength in each - Juniper on the core and Unisphere on the edge."

But the challenge the combined company will face is integrating two edge router platforms the companies have developed, Juniper's M40 platform and Unisphere's ERX, says Ron Westfall, an analyst with Current Analysis. That will require them to somehow give their disparate operating systems a common look and feel.

Mitchell notes that some questions remain in terms of product overlap and how the operating systems will be integrated, if ever. "The single OS from edge to core is a strong - or was a strong - positioning point for Juniper," Mitchell notes.

Another big question is what will happen to the Juniper M5, M10, and M20 edge routers, Mitchell says. Juniper may sell the M5 solely to the enterprise market using Siemens as a distributor, he speculates. There is also significant overlap in R&D effort and dollars for edge functionality, Mitchell says.

"Juniper and Unisphere both announced edge enhancements in the first quarter that were fairly similar, especially regarding MPLS, IPSec, and VPN development, which will be a significant write-off," he says.

One of the attractions of Juniper has been that a single piece of software was common to its entire product lines from edge to core, he says, unlike Cisco, which has several.

But these different software platforms can be seen as a strength, says Joe Furgerson, Juniper's vice president of strategy and product marketing. Juniper's operating system is optimized for core routing, and Unisphere's is customized for handling aggregation and subscriber management, he says. "We have two (operating system) code bases developed from positions of strength. There is no one with an integrated, clean code base that can challenge us," he says.

Lloyd Carney, Juniper's chief operating officer, will be in charge all research and development for Juniper and the research team it acquires with Unisphere, the companies said in a statement.

The planned purchase for $375 million in cash and 36.5 million shares of stock comes to about $740 million total. The deal is expected to close by the end of the year. The announcement comes just weeks after Unisphere divested itself of its voice gear to Siemens in a private sale for an undisclosed amount.

"As a 'single-purpose' product company, Juniper has been hurt by its lack of revenue diversity in other market segments," says Bill Lesieur, director of Technology Business Research in Hampton, N.H. "Juniper recognizes it must broaden its solutions portfolio to further strengthen its status as a Tier 1 telecom equipment provider."

The deal gives Juniper an edge router that has impressive subscriber management capabilities for IP services as well as high port densities to aggregate customer traffic, Westfall says.

Juniper's Furgerson says he views his company's gear as complementary to packet voice equipment, such as the lines of voice gear Unisphere sold to Siemens. But that doesn't mean Juniper wanted to get into that business directly, he says. "There's lots to understand about voice," he says, and Siemens is in a better position to focus on it.