May 27, 2002
(IDG News Service)
Juniper Networks Inc., one of the top rivals of Cisco Systems Inc. in the router market, last week moved to bolster its business by agreeing to buy a U.S.-based division of Siemens AG that makes routers for use at the edges of IP networks.
The planned purchase of the Unisphere Networks Inc. unit would also give Sunnyvale, Calif.-based Juniper access to Siemens' worldwide sales channels through a reseller agreement announced as part of the deal. The companies said Juniper will pay Munich, Germany-based Siemens $375 million in cash plus about 10% of its stock for Westford, Mass.-based Unisphere.
Together, Juniper and Unisphere controlled 18% of the edge router market in the first quarter, second only to Cisco's 59% share, said Kevin Mitchell, an analyst at Infonetics Research Inc. in Woburn, Mass.
Juniper began as a maker of core network routers but has expanded into equipment for the edges of networks. "But there was some question whether their edge routers are optimized to deal with edge-routing needs," Mitchell said.
Adding Unisphere's product line would give Juniper access to edge-routing features such as sophisticated service management software and Multiprotocol Label Switching technology that can reroute data around failed network nodes.
Scott Kriens, Juniper's chairman, president and CEO, said during a conference call that the deal isn't meant to be a cost-cutting move. For example, he said, Juniper plans to continue developing its own Junos routing software along with Unisphere's technology while providing a unified way to manage the products.
Unisphere was formed in 1999 when Siemens combined one of its units with three U.S. start-ups it had acquired. Siemens had hoped to win market share from Cisco, but Thomas Ganswindt, president of Siemens' networking group, conceded last week that the company couldn't "do it all alone" because of the high cost of developing router technology.
Router Agreement
THE ACQUISITION
is expected to be completed in the third quarter and be “slightly dilutive” to Juniper’s earnings this year.
THE COMPANIES
said more than 60% of Juniper’s sales are in the U.S., while 70% of Unisphere’s business is overseas.
THE DEAL
came three weeks after Unisphere’s voice networking technology was folded into Siemens’ other operations.