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January 23, 2006

Siemens: China buy could cost Juniper

Juniper Networks could end up losing more than 10% of its revenue if a rumored deal goes ahead for Siemens to acquire the high-end router business of Beijing, China-based Harbour Networks for $110 million. However, the deal would be beneficial to both Siemens and Harbour, strengthening Siemens' Chinese R&D operations and enabling Harbour to focus on enterprise network products.

By CBR Staff Writer

Siemens is rumored to be looking to acquire Harbour Networks’ high-end router business.

Siemens is sticking to a we can’t comment on market rumors response on the subject but an agreement for it to acquire to acquire Harbour’s PowerHammer core router, edge router and BigHammer metro switch has been widely reported in the Chinese press.

Apart from a customer base among Chinese carriers, Germany-based Siemens would take on 100 Harbour employees, which will strengthen its Chinese R&D operations.

If the deal is confirmed, it will be a big setback for Juniper, for which Siemens has been an important reseller since it sold its Unisphere Networks edge router business to Juniper for $740 million in 2002.

According to Juniper’s last annual filing with the SEC, Siemens accounted for greater than 10% of total revenues in 2004, which works out at more than $133 million worth of business, and the figure is likely to have grown in 2005.

China is one of the most dynamic growth areas for telecoms equipment suppliers and the acquisition of a locally developed product will give Siemens a considerable advantage. Harbour boasts China Netcom, China Telecom, China Railcom, China Unicom, China Mobile, Hutchison Global Communications and PCCW as customers.

With a product range that covers both carriers and enterprise networks, Harbour is hungry for cash, despite raising $37 million in a funding deal led by TVG capital partners in 2005.

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The sale of its products for carrier networks would leave it free to concentrate on its product range for enterprise networks.

Siemens has long been established in China and has received a boost with news that the government plans to issue 3G licenses for the TD-SCDMA standard, which it helped to develop. It will be pursuing that market through a joint venture with another local equipment vendor, Huawei, and the Chinese government has just announced that the standard will be guaranteed at least part of the action when 3G licenses are issued.

While good news for Siemens, this is a nightmare for international handset makers, which will have to develop future handsets capable of using three technologies for roaming customers or see their Chinese competitors enjoy ownership of at least part of the next-generation market.

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