Juniper Stock Takes Sharp Drop In Wake Of Cisco-Ericsson Partnership

Juniper Networks stock took one of its biggest dives this year, plunging nearly 10 percent before recovering some in trading Monday afternoon after the unveiling of a new relationship between arch rival Cisco Systems and Ericsson.

At the stock market close on Friday, Juniper shares were trading at $31.71. But shares tumbled Monday after the Cisco-Ericsson announcement, with Juniper stock closing at $29.22, representing an 8 percent drop.

Partners told CRN the stock took a hit because the Cisco-Ericsson partnership ends the longstanding rumor that Ericsson would buy Sunnyvale, Calif.-based Juniper. The decline was due to investors who had hoped Ericsson would eventually buy Juniper due to its strong networking business, partners said.

[Related: Juniper Enterprise Sales Are Soaring; Partners Seeing More Wins Against Cisco]

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"I can't remember the first time I heard that Ericsson was looking to buy Juniper – it has to be years and years ago," said one solution provider and Juniper partner who declined to be identified. "When Cisco and Ericsson talked about its partnership today, it basically squashed that rumor … probably forever."

Juniper sent CRN a statement regarding the Cisco-Ericsson announcement that said nothing has or will changed.

"Our strategy of solving our customers' toughest networking challenges has not changed," said the statement. "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."

Swedish telecommunications giant Ericsson and the San Jose, Calif.-based networking leader Cisco have created a technology partnership to work on joint development around "next generation" service provider networks and new platforms and services around the emerging Internet of Things. The two companies said the partnership would lead to $1 billion or more in additional sales for each by 2018.

Rumors of Ericsson eyeing the purchase of Juniper popped up earlier this year following analyst reports that said the deal was possible in the wake of equipment maker Nokia's $16.6 billion bid to purchase Alcatel-Lucent in April.

Had it bought Juniper, "Ericsson would have (had) product portfolio gaps in routing and optical relative to both Nokia/Alcatel and Huawei -- its two main competitors," wrote Simona Jankowski, an analyst for investment giant Goldman Sachs, in April. "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."

Instead of acquiring Juniper to combat the threat of a Nokia-Alcatel Lucent combination, Ericsson decided to go with the partnership route instead. Partners said Ericsson won't be seeking to acquire Juniper any time soon if it has a technology relationship with its networking rival, Cisco.

"I don't think Juniper would let itself be bought by Ericsson anymore as things stand right now," said another solution provider and Juniper Elite partner, who wished to not be identified. "I can't see [CEO] Rami [Rahim] selling the company he helped build to someone who's building new technologies with its biggest competitor … I don't honestly thing he would do that."

The Elite partner said that with Ericsson off the table now, solution providers can relax knowing their Juniper business won't be affected by a potential Ericsson purchase.

"Not many partners I talked to ever wanted Ericsson involved in any way with Juniper," he said. "When something like that happens, it can hurt business for us down the line because maybe networking isn't on the top of mind for someone like a Ericsson … It could impact innovation."

In contrast, partners did like the idea of Juniper potentially becoming a private company following reports last week that Juniper hired Goldman Sachs to explore taking the organization private.

"That really opens up the door for things," said the Elite partner. "I definitely see an upside to that down the line."