uploads///Hardware SDN market size

Why Did Juniper’s Stock Fall after the Cisco and Ericsson Deal?

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Hopes of Juniper getting acquired by Ericsson now dashed

Earlier, we discussed the intricacies of Cisco’s (CSCO) partnership with Ericsson (ERIC). However, the deal might have also created a casualty. Juniper’s (JNPR) stock fell by a steep 8% on the day the deal was announced. The market might now believe that Juniper’s scale will become too small given the Nokia (NOK) and Alcatel-Lucent (ALU) merger and the latest Cisco-Ericsson deal.

Another factor that could have influenced Juniper’s valuation is that it was considered to be an acquisition target of Ericsson. This hope of acquisition might have been boosting Juniper. However, now with Cisco and Ericsson partnering, there is little hope that Ericsson will acquire Juniper.

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Juniper has been aggressively trying to leverage the SDN trend

Juniper has been focusing on leveraging the fast-growing software-defined networking (or SDN) market. SDN is a trend of moving from a hardware-centric approach for networking to a virtualized network environment designed to enable flexible and application-driven customization of network infrastructures.

According to a report from SDN Central, and as the chart above shows, the SDN market could grow from $3.4 billion in 2014 to $35.6 billion in 2018 at a compound annual growth rate of 80%. To leverage this growth, Juniper bought SDN vendor Contrail and launched an SDN controller named “OpenContrail.” Similarly, VMware (VMW) bought SDN vendor Nicira for a valuation of $1.3 billion in 2012. After completing this acquisition, VMware named its SDN platform “NSX.”

The PowerShares QQQ Trust (QQQ) invests about 2.8% of its holdings in Cisco.

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