The Internet will become a faster, more powerful force in e-commerce as a result of an alliance between Nortel Networks (NYSE: NT) and Juniper Networks (Nasdaq: JNPR), according to industry observers.
The companies agreed Thursday to combine technical and marketing resources in a three-year pact, which will merge Nortel’s state-of-the-art, fiberoptic Internet networking systems with Juniper’s high-speed routers. The routers handle heavy Internet traffic for telecommunications firms and Internet Service Providers.
Juniper President and CEO Scott Kriens said that as a result of the deal, the Internet will be “more reliable and faster than ever before. The strengths of our companies will make it possible to deliver advanced IP services that will eliminate bottlenecks and meet the speed and bandwidth demands of emerging applications such as streaming video, voice over IP and multi-cast,” Kriens said.
Both Companies Benefit
Analysts say the deal serves both companies well. The four year-old Juniper gets to use the older company’s existing contracts to expand its presence in North America and abroad. Nortel carries 75 percent of the Internet traffic in North America and 50 percent in Europe, according to analyst firms RHK and The Yankee Group. The Canadian giant, with 1999 revenues of $21.3 billion (US$), has a presence in 150 countries and existing contracts with phone companies in Europe and Asia.
“These companies have different ways of doing business, but Nortel has long-standing relationships with them and we can use those to help reduce the sales cycle for our products,” said Juniper marketing VP Carl Showalter.
“It’s an immediate entry point into larger carriers where Nortel is already providing existing infrastructure,” he added.
Juniper has been building its business by such deals — two other telcom equipment suppliers have agreements to resell the company’s routers.
Agreement Eliminates Competitor
For Nortel, the alliance eliminates a potential competitor and gives it a boost in the emerging high-speed router market, which is expected to grow from $2.1 billion this year to $12 billion by 2003, according to market research firm Ryan Hankin Kent.
The market has been dominated by Cisco (Nasdaq: CSCO), which has cornered about an 85 percent share. But Juniper is one of several startups developing its own routers and Nortel, months late in releasing its own product, can now resell Juniper’s routers.
Routing systems by California-based Juniper are used in most of the world’s largest Internet networks. Juniper’s “backbone routers” are specifically designed for service provider networks, though it also sells routers for smaller startups.
Juniper Shares Rise
Customers of both companies applauded the deal. “The alliance makes a lot of sense and certainly bodes well for service providers interested in deploying technologies supporting the optical Internet,” said Mike Gaddis, CEO of CoreExpress. “This alliance promises to make it even easier for us to deliver increased user benefits.”
Shares in Juniper rose 12 points Thursday after the announcement.