Juniper Buying SDN Developer Contrail for $176 Million

Andrew Klips |

20121213-082224.jpgJuniper Networks (JNPR) entered into an agreement on December 7 to acquire start-up networking company Contrail Networks Inc. for $176 million, according to a Juniper 8-K filing on Wednesday with the Security and Exchange Commission. The cash and stock transaction entails a payment of $57.5 million by Juniper to Contrail, net consideration for Contrail shares already owned by Juniper, upon consummation of the acquisition. Juniper will also issue up to 5.82 million shares of JNPR to Contrail shareholders as the remaining portion of the acquisition price for all of the outstanding equity of Contrail.

Contrail develops technology for Software Defined Networking (SDN), a quickly growing sector that some view as a serious threat to sales of legacy routers and switches, such as those made by Juniper. The foundation of SDN is making networking environments as programmable as other parts of Information Technology infrastructures. In short, instead of buying additional hardware for additional capacity or flexibility, SDN technology is being developed to customize network software to meet demands.

Juniper announced the acquisition via a blog posting on its website by Bob Muglia, Executive VP of the Software Solutions division at Juniper. “With this acquisition, Juniper gains SDN technology that augments our portfolio of products and services,” said Muglia in the blog.

Santa Clara, California based Contrail Networks was founded early in 2012. Juniper was an early strategic investor in Contrail.

The deal is expected to be closed by the end of the month.

Other leading players are making moves to establish a foothold in the up-and-coming SDN market. Cisco Systems (CSCO) spoke in October at the OpenStack Summit in San Diego about its strategies about deploying SDN in the cloud. VMWare Inc. (VMW) bought networking start-up Nicira for $1.26 billion in July to gain its technology aiming to virtualize networks similar to the way VMWare has virtualized servers. Also in July, Oracle Corp. (ORCL) bought San Jose, California-based Xsigo, another developer of SDN technology.

Shares of Juniper closed Wednesday at $18.97 and are down about 7 percent in 2012.

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Companies

Symbol Name Price Change % Volume
ORCL Oracle Corporation 38.50 -0.20 -0.52 19,120,264
TAPR Barclays Bank Plc Barclays Inverse US Treasury Composite ETN 07/09/2024 27.25 -1.63 -5.64 1,082
VMW Vmware Inc. Class A 78.76 0.72 0.92 1,673,696
CSCO Cisco Systems Inc. 29.25 -0.20 -0.68 27,069,499
JNPR Juniper Networks Inc. 26.83 -0.15 -0.56 3,788,652

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