Ericsson CEO Hans Vestberg is expected to huddle with the company’s top brass next month to talk about how Ericsson will respond to Nokia’s impending purchase of Alcatel-Lucent. News of the upcoming executive meeting boosted Juniper’s stock price on Wednesday. Speculation that Ericsson will try to buy Juniper has been ongoing ever since Nokia and Alcatel-Lucent announced their plans to join forces.
“It makes financially and strategically enormous sense for Ericsson to buy Juniper for a hefty premium,” wrote the analyst team at AllianceBernstein. “Anything up to $35 per share is to us very sensible. If they proceed, a natural next step would be to buy Ciena.”
Last month MKM Partners’ Michael Genovese said that Juniper could be either a target or a buyer if the Nokia/Alcatel-Lucent deal sets off a wave of merger activity in the communications equipment industry.
One source told RCR Wireless News that Ericsson has had its eye on Juniper for several years. But Ericsson may just be window shopping. With a market value of $10 billion, Juniper would be a large acquisition even for Ericsson. The Swedish company currently has $8 billion in cash on its balance sheet.
“We think if Ericsson makes acquisitions, it is likely to look at smaller transactions with a bias toward software and video,” analyst Simon Leopold of Raymond James wrote in a research note this week. He noted that nine of the 10 acquisitions Ericsson has made during the last five years have been software or video-related.
“We believe Ericsson’s R&D efforts are focused on evolving toward a more software-centric business, as well as higher-value services and routing,” wrote Leopold. “We also think it strives to evolve its vertical mix away from wireless telcos. Juniper and Ciena are mentioned most often as targets; we doubt either happens, but would consider Juniper more likely and logical.”
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