NetScreen deal may transform Juniper

Router vendor Juniper, gaining ground against giant Cisco in service-provider data networks, is likely to try to muscle in on the enterprise network business following the NetScreen acquisition it announced this week. However, it won't change the face of that market any time soon, analysts said.

Juniper agreed to acquire NetScreen, a vendor of firewalls and VPN technology, in a stock deal valued at approximately $4 billion.

A top Juniper executive this week downplayed the notion that the deal was designed to bring Juniper into a new market, but pointedly dismissed the distinction between carrier and enterprise networks. Juniper wants to provide networks that are reliable and flexible enough to keep all kinds of fixed and mobile devices connected, said Christine Heckart, vice president of marketing at Juniper.

"The whole distinction between service provider and enterprise is very outdated," Heckart said.

"If you need a virtual resource, a network that will respond to your business needs and a network that is mission critical ... then you're in our customer base," she said. "How you classify your business is not going to determine whether or not you're a viable target customer for Juniper."

Juniper was founded in 1996 with financial backing from some of Cisco's biggest rivals, and headed for Cisco's traditional stomping ground at the core of large IP networks. Despite Cisco's head start of several years in the router industry, Juniper has made significant inroads in service provider networks. In 2003, Juniper captured 31% of the world's revenue for high-end routers, those that offer interfaces of 10G bit/sec or higher, according to Dell'Oro Group analyst Shin Umeda. That represented a gain of five percentage points from 2002, while Cisco's share declined five points to 62%.

However, Juniper doesn't make routers for enterprises and hasn't had a way to sell to those customers if they did, according to Frank Dzubeck, an analyst at Communications Network Architects, in Washington, D.C. Juniper's market share in that segment is minimal by design, while Cisco holds more than 90% of the market, according to Dell'Oro's Umeda.

The NetScreen acquisition is an attempt to change that, Dzubeck believes.

"This is Juniper's way to get into the enterprise," he said. It can take advantage of NetScreen's sales channels and save itself the time and expense of building up its own organization for that job. Over time, it also can boost the capabilities of its routers for service providers by adapting NetScreen's security technology. With it, service providers might be able to filter out viruses from e-mail and stop denial-of-service attacks, he said. Putting those services in the carrier network rather than at the enterprise would be a good idea, he said, citing the recent MyDoom virus-activated denial-of-service attack that hit The SCO Group's Web site this month.

"Why couldn't that have been filtered out before they got bombarded? There's an awful lot of things that can be done if the edge of the network and the core of the network turn out to be incredibly intelligent," Dzubeck said. Not even Cisco has the capability yet to put these kinds of functions in the core of the network.

Being able to get those kinds of protection from a service provider could be a boon to enterprises, but mostly at their branch offices, said Zeus Kerravala, an analyst at The Yankee Group. At corporate headquarters, firewall functions will probably remain in place, though they will move from specialized appliances into sophisticated routers or switches, he said.

The vision of more built-in security is shared by Cisco, Kerravala said. However, if it tries to take on Cisco in the enterprise, Juniper will face an uphill battle, he added.

"Battling Cisco, with roughly the same strategy as Cisco, in a market where Cisco has roughly 90% of the share, is going to be difficult," Kerravala said.

Over the years, Cisco has built a broad lineup of routers, switches and other devices for different sized companies and many parts of the enterprise. Juniper's history so far has taken the opposite track, as the company focused on building one type of product well. That means there's a lot of work ahead, he said.

"Juniper's just a very sharp hunting knife. ... Cisco takes much more of a Swiss Army approach," Kerravala said.

Copyright © 2004 IDG Communications, Inc.

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