& 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   >   >>
Educational Resources
sponsor supplied content
Educational Resources Archive
From The Founder
Cisco's Conrad Clemson, recently promoted to head up the company's Service Provider Apps & Platforms developments, talks to Light Reading's Founder and CEO Steve Saunders about how he's bringing cloud video, mobile and virtualization together to empower network operators.
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 Interviews
Heavy Reading: The Web-Scale View

1|18|17   |     |   (0) comments


At Light Reading's 2020 Vision Executive Summit in Rome, Heavy Reading's former chief analyst Patrick Donegan shared insight from the recent web-scale operators report, which featured research on how web-scale operators view the market, the best web-scale companies to ...
LRTV Custom TV
Cisco's Cloud Scale Networking: Automation, Virtualization & Simplification

1|18|17   |     |   (1) comment


Cisco's Sanjeev Mervana outlines the latest innovations in networking technology at CES 2017 in Las Vegas.
LRTV Custom TV
ADVA Talks Innovation & the Future of Networking

1|17|17   |     |   (0) comments


Ray Le Maistre and Christoph Glingener, CTO of ADVA Optical Networking, discuss the current state of the industry, cooperation and collaboration, open innovation and the future of networking.
LRTV Custom TV
Cisco's Infinite Video Platform

1|17|17   |     |   (0) comments


Cisco's Infinite Video Platform allows service providers to deliver broadcast-quality video over IP networks. Infinite video supports many devices, from 4K TVs to tablets to game consoles. Join Cisco's Rajeev Raman for a brief tour and live demo.
LRTV Interviews
Masergy: Ability to Adapt Key for NFV

1|16|17   |   6:40   |   (0) comments


Speaking at Light Reading's 2020 Vision in Rome, Masergy's VP, Global Technology, Ray Watson, said agility is key to providing the mix and match NFV-based services that are driving business for the managed service provider today.
LRTV Interviews
Equinix: The Data Explosion

1|13|17   |   4:16   |   (0) comments


At Light Reading's 2020 Vision in Rome, Eric Schwartz, president of EMEA, Equinix, talked about how Equinix is helping its customers manage the influx of data today, and how it's preparing for a future filled with millions of connected IoT devices.
LRTV Interviews
Heavy Reading: The Changing Data Center Landscape

1|12|17   |   6:05   |   (1) comment


At Light Reading's 2020 Vision event in Rome, Heavy Reading's Senior Analyst Roz Roseboro talks about how virtualization is impacting data center evolution and how that evolution is affecting the relationship between service providers, data center operators and public cloud providers.
LRTV Interviews
Boingo: Prepping for Millions of Devices

1|12|17   |   5:07   |   (1) comment


At Light Reading's 2020 Vision in Rome, Boingo's CTO Derek Peterson discusses how wireless operators will address the needs of low-bandwidth and high-bandwidth apps at the same time, the need for more MHz, the impact of IoT and more.
LRTV Interviews
Comcast Shows Off Gig Gateway at CES

1|11|17   |     |   (1) comment


With its largest presence at CES in years, Comcast took the wraps off its long-awaited gigabit gateway and a new platform for managing the home WiFi network. Light Reading Senior Editor Mari Silbey sat down with EVP Chris Satchell to discuss the latest Comcast advance, and met with VP of Product Strategy and Development Andrea Peiro to walk through a demo of the ...
LRTV Interviews
Colt: End-to-End Key for 2017

1|10|17   |   6:21   |   (0) comments


At Light Reading's 2020 Vision Executive Summit in Rome, Nico Fischbach of Colt said having a multi-carrier, end-to-end service proposition is going to be key for 2017 -- and SD-WAN is instrumental in making it happen.
From the Founder
Cisco's Clemson on Mobile Cloud Video

1|9|17   |     |   (1) comment


Cisco's Conrad Clemson, recently promoted to head up the company's Service Provider Apps & Platforms developments, talks to Light Reading's Founder and CEO Steve Saunders about how he's bringing cloud video, mobile and virtualization together to empower network operators. "If you think about where we're going… whether it's a mobile application, or a video ...
LRTV Custom TV
VMware Telco NFV Solutions – Preparing for 5G & IOT

1|9|17   |     |   (0) comments


Shekar Ayyar, EVP & Corporate Strategy/General Manager of Telco for VMware, discusses VMware's Telco NFV solutions role and foundation for the Imminent Arrival of 5G & IOT.
Upcoming Live Events
March 21-22, 2017, The Curtis Hotel, Denver, CO
May 15-17, 2017, Austin Convention Center, Austin, TX
All Upcoming Live Events
Infographics
With the mobile ecosystem becoming increasingly vulnerable to security threats, AdaptiveMobile has laid out some of the key considerations for the wireless community.
Hot Topics
A Women in Comms Glossary
Sarah Thomas, Director, Women in Comms, 1/18/2017
Is Cable One Beefing Up for Slaughter?
Alan Breznick, Cable/Video Practice Leader, Light Reading, 1/20/2017
Google Security Lessons for IT
Curtis Franklin, Security Editor, 1/18/2017
Nokia CTO: 2017 Is the Year 5G Gets in the Field
Dan Jones, Mobile Editor, 1/19/2017
TV's Paradox: No HDR Without 4K
Mari Silbey, Senior Editor, Cable/Video, 1/17/2017
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
Light Reading founder and CEO Steve Saunders chats with Sportlogiq CEO Craig Buntin about sports data analysis.
Eyal Waldman, CEO of Mellanox Technologies, speaks to Steve Saunders, CEO of Light Reading, for an exclusive interview about the 100 GB cable challenge, cybersecurity and much more.
Live Digital Audio

Playing it safe can only get you so far. Sometimes the biggest bets have the biggest payouts, and that is true in your career as well. For this radio show, Caroline Chan, general manager of the 5G Infrastructure Division of the Network Platform Group at Intel, will share her own personal story of how she successfully took big bets to build a successful career, as well as offer advice on how you can do the same. We’ll cover everything from how to overcome fear and manage risk, how to be prepared for where technology is going in the future and how to structure your career in a way to ensure you keep progressing. Chan, a seasoned telecom veteran and effective risk taker herself, will also leave plenty of time to answer all your questions live on the air.