IBM, Juniper May Plan Joint Attack on Cisco

(Editor's note: This story has been updated to correct misattributed quotes from Avian Securities analyst Catharine Trebnick) Updated from 12:32 p.m. EDT

Networking specialist Juniper ( JNPR) may be joining forces with IBM ( IBM) in its battle against Cisco ( CSCO), potentially offering upside to investors.

Cisco sent shockwaves through the tech sector last month when it entered the server market with its Unified Computing System (UCS), effectively stepping on the toes of its long-standing partners IBM and Hewlett-Packard ( HPQ).

In a rapidly changing tech landscape, IBM may soon be selling networking gear from Juniper, according to Catharine Trebnick, an analyst at Avian Securities. The partnership, which is an original equipment manufacturer (OEM) deal, could provide a shot in the arm for Juniper.

"Our sources indicate that Juniper and IBM are expected to announce an OEM relationship within the next month or two," he wrote, in a note released Thursday. "We view the continued growth of the IBM/Juniper relationship as positive for Juniper."

Juniper was also upgraded from Equal-weight to Overweight by Barclays Capital on Thursday, and the analyst firm raised its price target to $29. Barclays cited improved sales visibility, which should help boost earnings.

The networking company's shares initially surged on the upgrade and talk of an IBM deal, although the stock slowed down Friday. Juniper fell 12 cents, or 0.5%, to $23.19, while the Nasdaq fell 0.2%.

Juniper declined to comment on the possibility of a deal when contacted by TheStreet.com Friday, and IBM has not yet replied to a request for comment.

Such a deal would not be beyond the realm of possibility. The two firms already work together, and most recently teamed up around cloud computing. Juniper may now be looking to open up a new route to market by bolstering this relationship.

For IBM, a deal to sell Juniper networking gear would mark further distancing from its one-time buddy Cisco.

"It is evident that IBM is focusing resources away from Cisco," wrote Avian Securities' Trebnick. "IBM and Juniper have worked together since 2007 on joint technology solutions, standards development and managed security services."

Despite its potential IBM boost, however, the analyst warns that there plenty of hurdles still line Juniper's path.

"While we view Juniper as one of the few long-term secular growth stories within our coverage universe, we remain neutral due to continued difficult macroeconomic conditions," he wrote, maintaining his $18 price target.

Big shifts clearly are under way in the tech sector.

IBM, for example, has already strengthened its partnership with switch specialist Brocade ( BRCD), recently clinching a new distribution deal for the networking firm's Internet routers and switches.

Brocade is also putting its own squeeze on Cisco, as evidenced by its strong second-quarter results. In addition to IBM, the switch maker partners with Hewlett-Packard and Dell ( DELL) to sell its technology, and it has hinted that deals with other companies could be in the cards.

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