Is Cisco Preparing To Take Out Juniper?

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 |  Includes: CSCO, HPQ, JNPR
by: Dana Blankenhorn

Anyone who has been on a playground knows that when some little boys hit little girls it's just another way of saying I like you.

The playground fight between Cisco Systems (NASDAQ:CSCO) and Juniper Networks (NYSE:JNPR) could end up the same way.

Cisco has launched a Web site called Overpromisesunderdelivers.net that charges Juniper with creating vaporware, announcing products and then failing to deliver them in order to freeze the market. It is also going after Hewlett-Packard's (NYSE:HPQ) networking business, formerly 3Com, in a big way, leading some to believe HP should sell the unit.

Would Cisco be a buyer? Canalys says Cisco's share of the Ethernet switch market has been falling this year, with Juniper and HP Networking both big gainers. Juniper, however, has a very small percentage of that market, so a buy-out would be unlikely to come with antitrust concerns.

Cisco's price cutting in the market has at least one analyst predicting a share reversal soon. The price-cutting has been so aggressive that total revenue in the space is down 2.5% from a year ago.

This is despite the fact that clouds are the hottest part of the technology landscape right now, and clouds are big users of networking switches.

If the trust-busters targeted Cisco for making an acquisition in the space, meanwhile, the company could easily defend itself by pointing to increased competiton from China's Huawei, to whom it is losing share at the IP Edge. A Juniper acquisition could arrest those losses.

Cisco bears, like Cameron Kaine, call owning Cisco stock a case of emotional attachment, but in a consolidating market further consolidation aids the large, not the small.

Now may be the start of a new Cisco bull run and buying out one of its major competitors could easily accelerate it. Thus the playground tactics. If you hit her hard enough, she might say yes.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.