Juniper in Japanese JV - Analyst Blog

Ace networking solutions vendor Juniper Networks Inc. ( JNPR ) is close to having its own operation in the Land of the Rising Sun. Until now, Juniper was happy with its products and services being offered by Japanese resellers or distributors. Now, the networking biggy has decided to form a Joint Venture (JV) namely the J Network Initiative, with its long-time distributor NISSHO ELECTRONICS.

NISSHO ELECTRONICS is a subsidiary of Sojitz Corporation, which operates in many industries, including construction, forestry, plastics, chemicals, mining, petroleum, textiles and international trade. Sojitz also participates in joint ventures with foreign companies in Japan.

The JV will begin operation on January 1, 2012 and is expected to build long-term relations between the two companies. The new unit will house some of the best engineers of both Juniper and NISSHO so as to develop advanced networking solutions to meet the growing demand in Japan. Japan is known for its technological advancement and affluence. So demand of latest products and services in terms of technology is also always on the rise here.

The J Network Initiative will market Juniper's products (Switches, Routers, Data Center Systems and Security solutions) both directly as well as through NISSHO's channel partners. Apart from this, Juniper and NISSHO are also planning overseas business development utilizing the global network of Sojitz. This would bring opportunities to up sell as well as cross sell their products.

Juniper's Japanese business has been growing in recent times as evident from the number of deal wins. In September, the National Institute of Information and Communications Technology deployed routers running the Junos operating system at Access Points of JGN-X (Japan Gigabit Network eXtreme) across the country and overseas.

JGN-X is the latest-generation platform for the sharing of advanced networking technologies between academia, industry and the government. In June, the National Institute of Informatics announced its intention to deploy Juniper's routers and operating system for its Science Information Network 4.

Juniper is also addressing distribution issues in Korea. The company recently entered into a reseller agreement with KT Corp. (formerly known as Korean Telecom), a South Korean telecom service provider. Per the agreement signed in May, KT will promote and sell Juniper's Junos Pulse software and the Junos Pulse Mobile Security Suite to its service holders.

Juniper's strategy appears clear. The company appears to be revamping its distribution in Asia where Cisco Systems Inc. ( CSCO ) is very well entrenched and Hewlett-Packard Company ( HPQ ) jumpstarted its business through the 3Com acquisition. Improved distribution is a solid strategy if the company is to dislodge these big brands.

Nevertheless, Juniper's Japanese connection carries some uncertainty given the current demand environment that is expected to remain weak over the next couple of quarters. During the past two quarters, contribution from this region was affected by the disastrous earthquake in March. Moreover, networking offerings from Toshiba Corp. could also increase competitive pressure.

Juniper has a Zacks #4 Rank, implying a short-term Sell rating.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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