Juniper Networks (JNPR) recently announced that it has resolved a long-running patent violation lawsuit with Palo Alto Networks (PANW).
According to the terms, Juniper will receive an upfront payment of $75.0 million in cash and remaining $100.0 million in shares from Palo Alto. Concurrent with the recent settlement, both the companies will drop all pending litigation charges against each other.
Juniper sued Palo Alto for infringing upon seven patents related to firewall and network security in the U.S. District Court of Delaware in Dec 2011, the trial for which was held on Feb 24, 2014.
Subsequently, Palo Alto also accused Juniper of infringing three of its patents.
In addition to this settlement, a mutual patent licensing agreement was approved between the two companies and both agreed to refrain from initiating any legal proceedings against each other for a time period of eight years. Through this settlement, Juniper has not only ensured a recurring revenue stream, but also successfully defended and simultaneously monetized its intellectual property.
Lawsuits are a costly affair that not only hurt company financials but also negatively impact a brand. It is therefore sensible and cheaper to enter licensing agreements and sell more content without the fear of getting sued.
Moreover, the present settlement will also bring down litigation expenses that Juniper incurs every quarter owing to these ongoing patent disputes. This apart, partnerships with leading companies, new customer wins, product launches and international expansion will drive top-line growth.
Additionally, the company’s expansion into the software defined networking segment is expected to strengthen its position in the networking space. Moreover, increased spending by service providers should support Juniper’s near-term fundamentals.
While the company’s new products, cost reduction initiatives and improving execution remain catalysts, increasing competition from Cisco (CSCO) and AT&T (T) and uncertain economic conditions are the possible headwinds.
Currently, Juniper Networks carries a Zacks Rank #2 (Buy).
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