Cisco/Starent Deal: Bad News For Juniper?

This morning’s news that Cisco (CSCO) will buy Starent (STAR) for $35 a share in cash, or $2.9 billion, has been generally well received by the Street, which sees Starent as filling a hole in Cisco’s product line. But the deal has ramifications for Cisco’s competition - in particular for Juniper Networks (JNPR), according to Avian Securities research chief Avi Cohen.

Indeed, Cohen writes that the deal allows Cisco to “solidify leading share in the all-important high-growth mobile packet core segment,” which is bad news for competitors in that segment, including Ericsson (ERIC), Nokia-Siemens Networks, Huawei, Alcatel-Lucent (ALU) and “particularly” for Juniper.

For Juniper, “this acquisition is extremely negative because it significantly impacts JNPR’s ability to compete for mobile core infrastructure builds such as LTE,” Cohen writes. “This puts Cisco into play within themobile infrastructure sector, which the company has not had much success in over the past 18 months…Cisco is intent on remaining relevant within the core networking equipment segment and snatching STAR out from under JNPR is an indication of how far Cisco will go to maintains its market share within core networking accounts.”

Are competing offers possible? Sure. Cohen points to Nokia-Siemens, Acatel and Juniper as the most likely alternative bidders. But he doesn’t think another buyer is likely to emerge given the size of the deal. And really, do you want to get into a bidding war with a company that has $35 billion in cash?

In today’s trading:

• Starent is up $4.96, or 17.1%, to $33.99. (Certainly not trading like the Street expects another bid.)


• Cisco is up 14 cents, or 0.6%, to $23.92. (Like I said, the Street likes this deal.)


• Juniper is down 50 cents, or 1.8%, to $27.42.