Juniper Won’t Race Cisco in M&A Derby

Juniper and Cisco have a few things in common.

One is that that they’re both data-networking companies that have grown bigger with the expansion of the Internet. Something else they have in common is their understandable emphasis on ensuring that network infrastructure remains more than “dumb pipes” in a potentially deflationary period marked by the rise of cloud computing and an increasing reliance on service-provider patronage.

Something they don’t have in common in size. Cisco is a far bigger company than Juniper, and it has financial resources, namely oodles of cash, that its smaller rival lacks. A story in today’s Wall Street Journal drives the point home, noting that Cisco is among a small number of technology titans that have generated the vast majority of the technology industry’s cash flow during the past two years.

The disparity in wealth between Cisco and Juniper has given the larger company a decided edge in the pursuit of acquisitions. In the last few months, Juniper has indicated that it will focus on organic growth rather than on M&A swashbuckling. Juniper cannot outbid Cisco for the affections of venture-funded startup companies, but it can allocate its internal resources to areas where it might get the measure of its bigger, broader-focused rival.

Nothing is likely to change on that front for the next while, with Juniper CEO Kevin Johnson indicating to the WSJ that his company will continue to grow organically. Regarding the M&A game, Johnson said: “For midsize companies, it’s always difficult to break through with M&A because large companies will always outbid them.”

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