& cplSiteName &

Juniper Buys NetScreen

Light Reading
News Analysis
Light Reading
2/9/2004
50%
50%

IP routing powerhouse Juniper Networks Inc. (Nasdaq: JNPR) announced this morning that it has entered into an agreement to buy network security vendor NetScreen Technologies Inc. (Nasdaq: NSCN) for about $4 billion in stock (see Juniper to Acquire NetScreen).

That's right, $4 billion!

Juniper and NetScreen executives said the motivation behind the deal is to put two best-of-breed technology companies together to create a stronger portfolio of networking products.

"It's time to lead, and there's no better lead than to match strength with strength," says Juniper CEO Scott Kriens. "NetScreen is one of the few technology companies to grow its business every quarter for the last few years through the downturn."

Juniper will exchange 1.4 shares of stock for every share of NetScreen. In morning trading, Juniper's stock was taking quite a shellacking, trading down $3.389 (11.50%) to $26.081, knocking down the price of the deal by a cool $400 million, to $3.6 billion. In contrast, NetScreen's stock shot up $9.36 (35.45%) to $37.25.

The deal is somewhat surprising, in that Juniper has its strength in equipment for service-provider networks, while NetScreen markets security and firewalls largely to the enterprise business market. This will put Juniper in more direct competition with Cisco Systems Inc. (Nasdaq: CSCO), which dominates the enterprise market. "It will stoke the Cisco fire, definitely," says Gabriel Lowy, an analyst with Blaylock & Partners.

Without a doubt, it's a big-ticket purchase, and one fraught with risk.

According to last Friday's stock prices, Juniper paid about a 40 percent market premium for NetScreen. As a stock transaction, it's all relative in a rising market, but Juniper shareholders will likely demand quick results in exchange for their dilutions.

The herd of analysts on the conference call appeared to applaud the deal, peppering the executives of both company with “great deal” and congratulations. But others, speaking after the conference call, were not so effusive.

”I find it incredulous that nobody on the conference call asked how they arrived at the valuation,” says Lowy. “It looks like they’re paying about eight times sales and 55 times earnings -- for what kind of growth rate?”

Juniper executives say the deal is “accretive,” meaning it will add to the company’s profits after the merger is complete. NetScreen’s revenues for the fourth quarter ended December 31 were $81 million, an increase of 59 percent from the comparable prior-year quarter and a sequential increase of 13 percent over the previous quarter. Net income during the December quarter totaled $6.4 million, or $0.07 per basic and diluted share.

Security products have been one of the few networking markets with undisputed strength in the past few years (see Shocking Results in LR's SSL VPN Test), and merger & acquisition activity has been heating up in the market.

The biggest question of all is: Is this market worth the price paid for NetScreen? Some recent data indicates that the security market growth is slowing, in which case Juniper's timing may be late (see Security Sales Stall ).

Infonetics Research Inc. last year issued a report that saw growth in the market slowing. While the VPN/firewall market showed some growth in the second quarter of 2003, it was moderate. The sector only grew 1 percent to $705 million. Infonetics projected in September of last year that the market's revenues would increase to $831 million by the second quarter of 2004. In 2002, the market generated $2.7 billion in revenue. By 2006, Infonetics estimated, the annual revenue for VPN and firewall products could hit $4.2 billion.

To complicate matters, the market is shifting, as demonstrated by NetScreen's entry into the SSL VPN market in the fall of 2003 via its purchase of Neoteris (see Security Players Catch M&A Bug).

Other large networking players, including Cisco and Nortel Networks Corp. (NYSE/Toronto: NT), have been working to beef up their security portfolios, specifically in the market for SSL VPN technology (see Cisco Takes a Stab at SSL, Cisco Prepping SSL Story, Shocking Results in LR's SSL VPN Test, and SSL VPNs: Access Anywhere, Anytime ).

Another big question is how Cisco will respond to Juniper moving deeper into its own turf. Cisco has been integrating security and firewall features into its routers.

Kriens, perhaps anticipating that many will be critical of the move into more of an enterprise market, downplayed this element of the deal:

"As for the question of service provider vs. enterprise... it doesn't matter, because [the distinction] is going away," said Kriens on the conference call. "The question is not whether the network is service-provider or enterprise, but whether the network is mission-critical. Both companies serve the same goal: mission-critical networks."

Kriens said that in addition to large enterprise customers such as Merrill Lynch & Co. Inc. and McDonalds, NetScreen sells products to service providers including SBC Communications Inc. (NYSE: SBC), Telecom Italia SpA (NYSE: TI), and China Unicom Ltd.

Kriens said he was confident that the integration of the two companies will go smoothly. The transaction is expected to close in the second quarter of this year.

“I can see the NetScreen building from the window of the conference room. If we can have success with an acquisition from across the country [Unisphere], I’m confident we can have success with a company across the street."

— R. Scott Raynovich, US Editor, Light Reading

(109)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
Page 1 / 11   >   >>
st1rwing
50%
50%
st1rwing,
User Rank: Light Beer
12/5/2012 | 2:29:34 AM
re: Juniper Buys NetScreen
Here it comes again...
photon_tim
50%
50%
photon_tim,
User Rank: Light Beer
12/5/2012 | 2:29:33 AM
re: Juniper Buys NetScreen
Well yes,

but is Netscreen's market the same market that Juniper competes in?
Not sure whether this will derail their focus.

On the bright side: we can look forward to a LR article about the three code trains (JUNOS, JUNOSe, NetOS) in 18 month from now :-)

.. tim
laserbrain
50%
50%
laserbrain,
User Rank: Light Beer
12/5/2012 | 2:29:33 AM
re: Juniper Buys NetScreen
Way better than Unisphere.
Nscn is growing fast and dominates its market.
jsailor
50%
50%
jsailor,
User Rank: Light Beer
12/5/2012 | 2:29:32 AM
re: Juniper Buys NetScreen

or can it be that their carrier customers are asking for centrally manageable IP-SEC based VPN CPE device?

wilecoyote
50%
50%
wilecoyote,
User Rank: Light Beer
12/5/2012 | 2:29:32 AM
re: Juniper Buys NetScreen
I think this is a very interesting move for JNPR. Cisco is actually quite confused in security. They think it should be a feature embedded into a blade, but no one's really listening. You're not going to trust a Cisco firewall. This is Juniper's one opportunity to really get into enterprise (other than buying Foundry, Force10 or Extreme), and they took it.

I have a few questions for them, though: what does Kriens mean it doesn't matter, enterprise or service provider? I don't see a lot of T-640s or M anythings getting sold into enterprise. And I don't see a lot of Netscreen software running service provider networks.

This deal smells a little like Welfleet/Synoptics. Juniper is basically run out of Boston now on the sales side of things. How do the Unisphere guys feel about a price tag that's five times what was paid for their company? How will they manage a bi-coastal operation with businesses that have very little in common?

There's more to this story. But at least Juniper's got a story now. At least they're not a one trick pony anymore. The question is, are they a two headed freak?
echo2
50%
50%
echo2,
User Rank: Light Beer
12/5/2012 | 2:29:29 AM
re: Juniper Buys NetScreen
My options are going to make me rich!

Echo2
brahmos
50%
50%
brahmos,
User Rank: Light Beer
12/5/2012 | 2:29:28 AM
re: Juniper Buys NetScreen
wow..full speed ahead! '99 is back!
I need to testdrive that 7-series bmw.... :)
fw23
50%
50%
fw23,
User Rank: Light Beer
12/5/2012 | 2:29:27 AM
re: Juniper Buys NetScreen

I like this move. Even though Juniper is a very
troubled company that has never made money for
its investors, this is a smart investment.

I think, if anything, they paid too little for
it though. Security is H-O-T HOT right now
and with the war still going, every company
down to mom-and-pop grocery stores and local
gas stations is going to need better security
in all of their operations. The days where
data could travel untrusted are over. The bad
guys have to be kept away from the corporate
CROWN JEWELS.


After the unisphere disaster, this is a great
move. Maybe they can redirect the entire
operation toward security and start phasing out
their legacy electrical router business.

Their legacy business is in slightly less
danger now that Procket has collapsed, but
given the ALL-OPTICAL revolution going on
they still need to get into a new business
before legacy goes the way of the dinosaurs.

Big Red
50%
50%
Big Red,
User Rank: Light Beer
12/5/2012 | 2:29:27 AM
re: Juniper Buys NetScreen
Wow. You should go back to sleep as soon as you can. Your post makes NO sense and almost all of your points are backwards.

Big Red
jim_smith
50%
50%
jim_smith,
User Rank: Light Beer
12/5/2012 | 2:29:27 AM
re: Juniper Buys NetScreen
How did you guys miss this one?!

I wish I had some hint that this was coming...
Page 1 / 11   >   >>
Light Reading’s Upskill U is a FREE, interactive, online educational resource that delivers must-have education on themes that relate to the overall business transformation taking place in the communications industry.
NEXT COURSE
Wednesday, September 14, 1:00PM EDT
What Is Agile?
Kent J. McDonald, Product Owner, Agile Alliance
UPCOMING COURSE SCHEDULE
Friday, September 16, 1:00PM EDT
How to Implement Agile
Alan Bateman, Director, Agile Transformation
Wednesday, September 21, 1:00PM EDT
What Is DevOps?
Colin Kincaid, CTO, Service Provider, Cisco
Friday, September 23, 1:00PM EDT
How to Implement DevOps
Burt Klein, DevOps Strategist, Tech Mahindra
in association with:
From The Founder
Light Reading today starts a new voyage as part of a larger Enterprise.
Flash Poll
Live Streaming Video
Charting the CSP's Future
Six different communications service providers join to debate their visions of the future CSP, following a landmark presentation from AT&T on its massive virtualization efforts and a look back on where the telecom industry has been and where it's going from two industry veterans.
LRTV Huawei Video Resource Center
Are You Ready for Huawei Connect 2016?

8|31|16   |     |   (0) comments


Join us for an exclusive sneak peak of Huawei Connect, an integrated conference for the global ICT ecosystem taking place in Shanghai.
Between the CEOs
CEO Chat: UXP's Gemini Waghmare

8|26|16   |     |   (0) comments


Light Reading CEO Steve Saunders and UXP Systems CEO Gemini Waghmare discuss the strategic importance of digital identity for operators in the midst of transformation.
LRTV Custom TV
F5 Virtual Network Function Integrations With Partner Orchestration Platform

8|24|16   |   6:38   |   (0) comments


F5's Kishore Patnam, product manager for F5's service provider solutions, discusses why service providers are moving towards virtualization and how his clients are utilizing F5's solutions.
Between the CEOs
CEO Chat: Intel's Alexis Black Bjorlin

8|17|16   |   06:23   |   (0) comments


Join us for an in-depth interview between Steve Saunders of Light Reading and Alexis Black Bjorlin of Intel as they discuss the release of the company's Silicon Photonics platform, its performance, long-term prospects, customer expectations and much more.
Telecom Innovators Video Showcase
Accelerating Telecom Digital Transformation With Nominum DNS

8|1|16   |   12:04   |   (0) comments


Light Reading's Steve Saunders gets an update from Nominum CEO Gary Messiana on how his company is helping carriers on the digital transformation journey.
LRTV Custom TV
Reinventing Operations for a Virtual, Software-Defined World

7|28|16   |   5:23   |   (0) comments


Heavy Reading Senior Analyst Jim Hodges speaks with Accenture's Larry Socher and Matt Anderson about what service providers must do to transform their business to get the benefits of SDN and NFV including: leveraging DevOps, introducing real-time OSS and implementing analytics.
Women in Comms Introduction Videos
Fujitsu Sales Leader Shares Lessons Learned

7|27|16   |   5:12   |   (1) comment


As Fujitsu's only female sales leader, Annie Bogue knows the importance of asking for what you want, being flexible (she's been relocated five times), keeping a meticulous calendar, 'leaning in,' working harder than everyone else around you, being aware and more.
Telecom Innovators Video Showcase
VeEX Test & Measurement Solutions

7|25|16   |   08:57   |   (0) comments


Cyrille Morelle, president and CEO of VeEX Inc., talks test and measurement with Light Reading's Steve Saunders at BCE 2016. This includes innovative products such as VeSion Cloud-Based platform for network monitoring; MTTplus Modular Test platform for Access, Business, Carrier Ethernet, Transport and Core services; and OPX-BOX+ for Fiber Optics.
LRTV Custom TV
VeEX: Live From BCE 2016

7|25|16   |   03:20   |   (0) comments


VeEX's Senior Director of Business Development, Perry Romano, explains how VeEX provides tools to help install, maintain, monitor and manage network infrastructure efficiently and effectively. The portfolio of products on display include the RXT-6000, MTTplus and TX300s.
LRTV Custom TV
Real-Time Telemetry & Analytics for Intelligent SDN Orchestration

7|25|16   |   03:09   |   (0) comments


Packet Design CEO Scott Sherwood discusses how real-time network telemetry and analytics are enabling a new breed of SDN orchestration applications.
From the Founder
The Russo Report: Driving Disruption

7|25|16   |   07:44   |   (2) comments


In the first episode of a four-part series, Light Reading Founder and CEO Steve Saunders and Calix President and CEO Carl Russo drive around town discussing the disruptive mega-changes in the communications industry and where hope lies for service providers to meet the escalating demands of the cloud.
LRTV Custom TV
NetScout: Maximizing Enterprise Cloud for Digital Transformation

7|20|16   |   04:53   |   (0) comments


Light Reading Editor Mitch Wagner talks to NetScout CMO Jim McNiel about maximizing the benefits of enterprise cloud and digital transformation while minimizing potential pitfalls with a proper monitoring and instrumentation strategy.
Upcoming Live Events
September 13-14, 2016, The Curtis Hotel, Denver, CO
November 3, 2016, The Montcalm Marble Arch, London
November 30, 2016, The Westin Times Square, New York City
December 1, 2016, The Westin Times Square, New York, NY
December 6-8, 2016, The Westin Excelsior, Rome
May 16-17, 2017, Austin Convention Center, Austin, TX
All Upcoming Live Events
Infographics
Hot Topics
Google Fiber Can't Be Called a Failure
Carol Wilson, Editor-at-large, 8/26/2016
FirstNet: A Billion-Dollar Boondoggle?
Dan Jones, Mobile Editor, 8/26/2016
WiCipedia: Should Men Be Included? & Olympians Face Discrimination
Eryn Leavens, Special Features & Copy Editor, 8/26/2016
Is There No Stopping Huawei?
Iain Morris, News Editor, 8/26/2016
600MHz Auction Climbs Over $22B
Dan Jones, Mobile Editor, 8/29/2016
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
Light Reading CEO Steve Saunders and UXP Systems CEO Gemini Waghmare discuss the strategic importance of digital identity for operators in the midst of transformation.
Join us for an in-depth interview between Steve Saunders of Light Reading and Alexis Black Bjorlin of Intel as they discuss the release of the company's Silicon Photonics platform, its performance, long-term prospects, customer expectations and much more.
Animals with Phones
Live Digital Audio

Bridging the tech skills gap is a major challenge for service providers and suppliers alike today – and the challenge is two-fold when it comes to increasing the number of women in the comms space. Level 3 Communications has made it a priority to overcome both challenges by implementing several unique programs focused on building the right candidates from within – in addition to filling the funnel by supporting STEM and other education programs. During this radio show, you’ll learn about these programs from Mary Beth McGrath, SVP of Global Talent Management at Level 3, and the best ways to bridge your own skills gap so that you are motivated and equipped for change. Plus you’ll have the chance to ask Mary Beth your questions live on the air.