The blogosphere buzzed Oct. 18 with news that EMC might snatch up Juniper Networks.
Benzinga.com reported that Juniper had hired J.P. Morgan as advisors to negotiate alternatives, including a sale, with EMC named as a possible buyer. The rumor boosted Juniper’s stock by 9 percent in trading Oct. 18, although that bump proved relatively short-lived.
Although Juniper officially refused to comment, Reuters reported that Juniper hadn’t hired any investment bankers to field acquisition offers for the company, nor received any buyout bids.
The potential thesis behind a Juniper acquisition centers on the benefits of converged infrastructure solutions, which could offer clients a more compelling alternative to picking and choosing among several suppliers. As a storage vendor, EMC lacks the networking piece of that convergence puzzle.
That being said, Juniper is also considered to be more of a player in telecommunications than the data center, which could make it a less attractive target for an organization with EMC’s needs.
Juniper also appears to be in relatively good financial health. The company reports its financial results next Tuesday; analysts expect a profit of 10 cents per share, a decline of 47.4 percent from the company’s quarterly earnings a year ago. During the past three months, WallStreetSheet reported, the average estimate has moved down from 13 cents—indicating that outlook on the company has grown more pessimistic.
Despite that, as CRN recently noted, investment firm ISI Group wrote earlier in October that EMC should look at how Juniper’s network infrastructure and security solutions could help it build a stronger portfolio for large enterprises and service providers. That being said, a Juniper acquisition would be a slap at EMC’s strategic alliance with Cisco Systems, which competes directly with Juniper in the service provider, networking and hardware arenas.
An analyst at Citigroup thought Juniper remains too healthy for a fire-sale buyout. “While we have no direct insights into [Juniper’s] supposed hiring of an investment bank or supposed receipt of an offer to purchase the company, we definitively do not believe [Juniper] is shopping itself at this time,” Kevin Dennean, an analyst at Citigroup, wrote in a report. “We don’t see JNPR as a company in distress or facing the existential challenges/risks that would typically motivate a sale.”
Wells Fargo’s Maynard Um also shot down the idea of an acquisition, while adding that EMC would indeed need to seek out more networking expertise.
“We believe the recent hiring of a CTO with primarily networking background as well as the potential softening of the relationship with Cisco… has raised an increasing view that EMC may be interested in acquiring a networking asset,” Um wrote, as cited by Barron’s. “Given our view that EMC will grow to be a key competitor that offers a full solution (selling the stack of storage, servers, networking, software, and networking), we believe this has merit.”
However, he added, certain factors make Juniper an unfavorable target for EMC, starting with how “the majority of Juniper’s business is from the service provider segment.” It also has a limited data-center presence, he added, and “its key data center platform (Ofabric) has garnered little traction.” Third, the alliance between EMC, Cisco and other partners is unlikely to “unwind at this point of time.” And fourth, EMC “hired a new CTO with networking background, which we think suggests EMC is unlikely to make a large acquisition.”
But that hasn’t stopped the idea of a Juniper acquisition from sparking some imaginations.