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Nokia considers buying Juniper to expand network unit

Thursday, 20 Feb 2014 | 3:55 PM ET
A sign stands outside the headquarters of Nokia Oyj in Espoo, Finland.
Henrik Kettunen | Bloomberg | Getty Images
A sign stands outside the headquarters of Nokia Oyj in Espoo, Finland.

Finland's Nokia is considering buying U.S.-based Juniper Networks to merge into its telecommunications network gear business, German's Manager Magazin Online reported, citing unidentified sources.

Nokia Solutions and Networks (NSN) Chief Executive Rajeev Suri travelled to the United States late last year to discuss with Juniper's management closer cooperation and a possible merger that would strengthen NSN's weak U.S. business, the online magazine said on Thursday.

Juniper has a stock market value of $13.7 billion, making it a major takeover target for Nokia, but Manager Magazin said Nokia could use Juniper's $3.1 billion cash to help finance the purchase.

Juniper's shares were up 2.8 percent at $27.98 in afternoon trading on the New York Stock Exchange. They rose to $28.38 earlier in the session.

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NSN will be Nokia's primary operation after the sale of its devices and services business to Microsoft in a 5.4 billion euro ($7.4 billion) deal, which is expected to close by the end of next month.

Nokia had indicated it is looking at a number of options as part of its strategic review to be completed in March.

A source familiar with NSN's strategy said no such deal was imminent. Analysts have said, however, that NSN and other smaller network equipment players are likely to pursue M&A because high costs of developing better mobile broadband infrastructure puts players with bigger research and development budgets at an advantage.

NSN and Juniper are already in a partnership to develop and sell network equipment to carriers.

(Read more: Nokia's full-year net sales dropped 17% in 2013)

Nokia's former Chief Executive Stephen Elop, who will return to Microsoft after the deal closes, was COO of Juniper for about ccccca year from early 2007.

Raymond James analyst Simon Leopold said a deal with Juniper was unlikely, with a failed joint venture focused on enterprise switching and present partnerships having "not amounted to much."

Nokia would have to offer "at least" 10-20 percent premium to where Juniper's stock is trading now, Needham & Coanalyst

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Alex Henderson said. He added that a deal was unlikely as Nokia lacked the wherewithal and synergies.

Representatives of Nokia, NSN and Juniper declined to comment on the latest report.

Last week, hedge fund Jana Partners disclosed a 2.65 percent stake in Juniper to push the company to cut costs.

Paul Singer's Elliott Management Corp,which owns a 6.2 percent stake in Juniper, has urged the company to buy back shares, start paying a dividend and consider slimming down.

(Watch: WhatsApp: The phone company of the future)

The hedge fund said the "undervalued" stock could be worth $35-$40 if Juniper implemented its suggestions and focused on revamping its core business of making routers and switches for mobile carriers such as Verizon and AT&T.

"We suspect a merger with Nokia would satisfy the activists if Nokia paid a material premium to Juniper's current $27.20 per share, perhaps valuing Juniper over $35 per share, or a market cap above $17.5 billion,'' Raymond James' Leopold said.

After years of concentrating on cutting costs, NSN has said it is now focussing on expanding the business and competing more aggressively against industry leader Ericsson and China's Huawei.

Other sources have said Nokia has considered a tie-up between NSN and French rival Alcatel-Lucent. Suri has not ruled out acquisitions but has also said the company could grow on its own.

Reuters

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