YOKU Youku Tudou Inc. American Depositary Shares, Each Representing 18 Class A Ordinary Shares.

Juniper Networks Inc. (JNPR) announced that its network infrastructure will be deployed by Youku.com Inc. (YOKU) for an undisclosed amount. Youku is a prominent Chinese Internet television service provider and offers online video content for Chinese Internet users.

Per the contract terms, Juniper will provide its Ethernet-based switching infrastructure and Content Delivery Network (CDN) solutions. The EX Series Ethernet switches, which run on the Junos operating software, will help Youku to make optimum usage of its data centers. The CDN solutions will aid Youku improve the quality of its services through simpler network administration.

Leveraging Juniper’s Junos operating platform, Youku should be able to reduce network operating costs and deploy enhanced services faster. Moreover, the platform provides room for enhancement of capabilities without additional capital outlay. Youku’s selection of the Juniper solution was on account of the rapidly-growing Internet usage in China that would require more dependable and scalable infrastructure than it uses currently.

In the U.S., Internet TV is the new kid in the block. But China is already a major player in the Internet TV market with an estimated 400 million of its population hooked on to the Web. We see this as an emerging opportunity for Juniper, since success in Youku’s arena could lead to similar deals, going forward.

In February, Juniper provided its new networking architecture to China Mobile Limited (CHL), the largest mobile network operator in China. The network architecture is intended to help China Mobile to capture share in the growing smartphones market. Juniper’s new network architecture also runs on Junos operating software.

We remain encouraged by the rapid deployment of Juniper’s networking products and services by organizations and government verticals to meet the growing demand. We also appreciate Juniper’s continuous efforts to make strategic acquisitions, which enrich its product portfolio.

However, stiff competition from market leader Cisco Systems Inc. (CSCO) and the upcoming networking company Hewlett-Packard Company (HPQ), as well as Juniper’s European exposure are likely to weigh on its shares.

Currently, Juniper has a Zacks #4 Rank, implying a short-term Sell recommendation.

 
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