Ericsson, Juniper move to dominate mobile Net

Predicting rapid growth and convergence in the mobile and routing markets, the companies form a joint venture they predict could have a $10 billion market valuation by 2003.

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Mobile leader Ericsson and Internet router manufacturer Juniper Networks on Thursday said they will invest $50 million in a joint venture they say could lead to a $10 billion company in three years.

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Ericsson makes move to dominate mobile Internet
Michael Thurk, executive VP, Ericsson

In a conference call from London on Thursday, leaders of the two companies outlined the venture, which will sell mobile Internet routing products to Internet service providers and mobile operators, with a focus on third-generation networks. In addition to the $50 million stake, the venture will consist of existing technology valued in the billions and personnel committed by both companies.

Current wireless Web technology has not won over consumers, but both the wireless and fixed Internet industries continue to grow at a rapid pace. Executives from Ericsson and Juniper are betting that in time a convergence of those two markets will come, and they want their joint venture to be that new market's leader.

"By 2003 the mobile industry will have grown from $50 billion to nearly $100 billion," said Scott Kriens, chief executive of Juniper. "The routing industry will be $30 (billion) to $40 billion in 2003."

Despite the modest investment both companies are making in the joint venture, "it has a potential $10 billion market valuation" in three years, Kriens said.

At Comdex in Las Vegas two weeks ago, Ericsson president Kurt Hellström predicted cell phones would overtake PCs by 2003 as the primary means of Internet communication.

The aim of the joint venture is to manage data communications between mobile phone networks and Internet Protocol (IP) networks. All hardware manufactured by the joint venture will be sold exclusively by Ericsson.

Ericsson will be the lead partner in the venture, owning 60 percent, the companies said. A board made up of Ericsson and Juniper representatives, to start, will select a chief executive from Ericsson and a chief operating officer from Juniper, company representatives said.

The joint venture is expected to be formed in the first quarter of 2001. No headquarters has been chosen yet, representatives said.

Ericsson is the unquestioned leader in communications hardware, particularly mobile equipment, a position not lost on Kriens. "This is where you'll see our focus" from now on, Kriens said, despite the fact that Juniper has reseller agreements with other mobile manufacturers. "This has our full attention."

For Ericsson, the move makes sense in that it already owns a small stake in Juniper. Ericsson has a long association with the networking company and was one of its early investors when Juniper was just starting up. Ericsson also has resold Juniper's routers.

Thursday's deal is just the latest partnership for Juniper. Over the summer, Nortel Networks struck a deal with the young networking company to sell Juniper routers to its customers.

A recent Dell'Oro report showed Juniper's latest market share in core, or large, Internet routers has grown to 30 percent from just over 22 percent. Market leader Cisco Systems slipped to 68 percent from 75 percent. Still, Cisco maintained a 2-to-1 percentage edge over Juniper, despite Juniper being the only manufacturer on the market with a 10-gigabit router.

Juniper has suffered stock woes recently, with a downgrade by Morgan Stanley Dean Witter and concerns about spending. After trading above $200 per share earlier this month, Juniper closed Wednesday at $115.75.

Kriens said one benefit of the joint venture will be combining the customer bases of the two companies.

Hellström said the move was part of Ericsson's philosophy of "excelling in your core market and partnering with leaders in other markets" to "extend our leadership as an end-to-end mobile solutions provider."

News.com's Wylie Wong contributed to this report.