As was widely reported on Tuesday, Nokia has confirmed it’s in talks to possibly acquire Alcatel-Lucent. The biggest implications are in wireless networking, where the two would combine to challenge market kingpin Ericsson.
But the deal would also give Nokia a strong router franchise, anchored by AlcaLu’s Service Router 7750, and an optical networking line that’s consistently a market leader (although in the fragmented optical world, 20 percent share qualifies a company as a “market leader”).
Ericsson, then, would be facing a competitive gap in those two areas “relative to both Nokia-Alcatel and Huawei — its two main competitors,” writes Goldman Sachs analyst Simona Jankowski in a research note issued Tuesday. “A Nokia-Alcatel tie-up could make a potential routing or optical transaction by Ericsson even more likely,” Jankowski writes.
Juniper, with a market capitalization of $9.8 billion, would be one possible routing target. On the optical side, Ericsson could opt for Ciena — which has already been a partner in multilayer SDN controllers — or Infinera, Jankowski writes.
Separately, Juniper’s router business could take a hit from the merger, but it seems the damage might not be too bad.
Juniper has been Nokia’s router partner for years, but NokAlu (or whatever we would call it) wouldn’t need that relationship any more.
Juniper doesn’t disclose how much money that partnership brings in, but we know it’s less than 10 percent of overall revenues. Since 2012, no customer has represented more than 10 percent of Juniper’s revenues in any given quarter, Jankowski writes.
Considering that factor, plus the tendency of routers to stay put in carrier networks for five years or more, Jankowski isn’t all that concerned. “We do not foresee a significant near-term risk to Juniper’s routing business,” she writes.