Finnish tech giant Nokia has denied reports which indicated that it was engaged in talks aimed at acquiring Juniper Networks, a maker of network gear based in the United States. Earlier in the week it had been reported that Nokia was discussing an acquisition of Juniper in a deal that values the U.S.-based network gear maker at approximately $16 billion.
At the end of Wednesday’s trading session, the market capitalization of Juniper stood at $11.26 billion. With a valuation of $16 billion Juniper Networks’ price per share would be $42 and this is a level the stock last reached six years ago.
Negative revenue combination risk
According to Pierre Ferragu, an analyst at Bernstein, some of the factors that might have worked against the idea of Nokia acquiring Juniper networks included an operational alliance which was limited to between $300 million and $400 million. There was also a negative revenue combination risk as well as difficulties in integrating routing products. Juniper Networks manufactures switches and routers which are used in linking computers with the World Wide Web and among its competitors are Hewlett Packard Enterprise and Cisco besides Nokia.
Per Ferragu, the telecommunications best suited to merge with Juniper Networks is Ericsson.
“The natural buyer for Juniper remains Ericsson and for now, Ericsson is not in a position to consider the opportunity,” said Ferragu.
Currently the telecommunications network equipment sector is going through a rough patch due to the fact that demand for mobile broadband equipment used in 4G networks has peaked. Demand for mobile broadband equipment to be used in 5G networks, on the other hand, is still a couple of years away.
The most recent quarterly report showed that Juniper’s revenue decline by 2%. In the case of Nokia sales decline by 9% to reach a figure of $5.7 billion. Nokia estimates that there will be a decline in the global market by a level of between 4% and 5% in 2017 and a level of between 2% and 5% next year. In 2016 Nokia spent approximately $17 billion to acquire French networking-gear maker Alcatel-Lucent.
Nokia’s denial of intentions to acquire Juniper Networks coincides with the Nokia 2 mobile phone being made available in the United States at a price of $99. The phone which is manufactured by HMD Global under license from Nokia will feature Android 7.1 operating system, a 4100mAh battery and Qualcomm’s Snadragon 212 processor. It will come with an LCD display measuring 5 inches.