Nokia's Rumored Offer for Juniper Is Rich

CNBC reported late on Nov. 29 that Nokia (NOK) is in talks to buy Juniper Networks for approximately $16 billion, a hefty 43% premium to its $11.2 billion market capitalization at today’s close. This valuation implies a stock price of approximately $42 per share, levels last seen by Juniper shareholders in February 2011. On the surface, we find it difficult to justify such a transaction for Nokia given significant product overlap in its service provider switching and routing segment. Vice versa, we think a bid of $42 per share would be a good deal for Juniper shareholders if the deal were to come to fruition. We will maintain our $26 fair value estimate for Juniper shares and $5.50 per Nokia U.S. ADR until a definitive deal is reached, if at all.

Strategically, Nokia appears to be targeting Juniper's enterprise switching and routing portfolio, although Alcatel-Lucent (which Nokia acquired in 2016) spun-off its enterprise business in 2014 to China Huaxin. In software, both firms also have competing SDN/NFV products. Potentially, we see some merit in terms of market consolidation, especially in the carrier space. However, we find it hard to justify the premium, given significant product overlaps. Meanwhile, Nokia is still in the midst of the challenging integration of Alcatel-Lucent acquisition, while its core telecom market is in a cyclical decline.

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