Juniper Networks Doles Out $176 Million For Contrail Systems
December 13, 2012

Juniper Networks Doles Out $176 Million For Contrail Systems

Peter Suciu for — Your Universe Online

On Wednesday Juniper Networks, manufacturer of networking equipment, disclosed that in an SEC filing its plans to purchase networking start-up Contrail Systems for $176 million in stock and cash. The deal was struck last week and could close before the end of the year, if approval is met.

The terms of the deal would provide Contrail Systems with $57.5 million in cash plus 5,819,148 shares of Juniper stock. Not a bad holiday return for the Contrail investors, especially considering that this past summer they put in $10 million in the start-up; Juniper was a strategic investor in that round.

Juniper issued no official press release, but Bob Muglia, executive vice president of the software solutions division, wrote in a blog post on Juniper´s website:

"We´ve entered into an agreement to acquire Contrail Systems, a Santa Clara, California-based software networking startup founded in early 2012, and we anticipate closing before the end of the year. With this acquisition, Juniper gains SDN technology that augments our portfolio of products and services. As a strategic investor earlier this year, we recognized the inherent advantages of Contrail Systems´ architectural approach and we are excited to take this next step to acquire and combine Contrail Systems into our team."

The acquisition of Contrail is seen as an enterprise software-defined networking play, especially as Juniper has worked to build out software that addressees the changing traffic patterns in the data center.

Contrail Systems has been focused on software-defined network or SDN, and the basic idea with this technology has been that it could provide a way for networking environments to be as programmable as other parts of the overall IT infrastructure, especially as networks have grown incredibly complex to manage.

SDN is also seen as a departure from the way networking gear has generally been run before, and up until now it has generally — with some exceptions — not been open for programmers.

Juniper´s move to acquire Contrail comes just weeks after Cisco announced its own SDN-related purchase of Cariden, for $141 million. That particular strategic business move was more about the opportunity it would give Cisco in network virtualization for service provider customers and the ability to deliver carrier apps on top of its (Cisco´s) platform.

Other names in the SDN space include Nicrira, which was launched this year only to be acquired by VMWare for $1.26 billion, whilst Oracle bought SDN start-up Xsigo Systems in July.

Sunnyvale, California Juniper Networks, which was founded in 1996 and is traded on the New York Stock Exchange (NYSE), has continued to build out software that addresses changing traffic patterns in the data center. With this proposed deal Juniper could get a team that includes former Aruba and Google employees who are aware of challenges faced by enterprise customers. Potential clients include those who would want the advantages of SDN without hiring specialized network engineers or face the prospect of replacing systems.

However, what´s next in store isn´t as clear.

Beyond the blog post Juniper has said little about the deal, and the disclosure Wednesday came with an *K filing with the U.S. Securities and Exchange Commission.