Juniper acquires NetScreen

Juniper this week said it signed an agreement to acquire NetScreen Technologies for $4 billion in stock.

NetScreen is a developer of network security and access products for enterprises and carriers. NetScreen’s security appliances and systems are designed to provide network- and application-level protection.

The company, with revenue of $223 million and 900 employees, is considered one of the top four or five IPSec VPN vendors. In October, NetScreen bought start-up Neoteris and its Secure Sockets Layer remote access technology for $265 million.

NetScreen targets the high end of the enterprise market and recently reworked its products to appeal to midsized companies. Seventy-five percent of its revenue comes from enterprises while sales to service providers make up the remaining 25%.

Most of Juniper’s revenue comes from service providers, but the company has also been engaged with enterprises in the government, defense, financial and educational research verticals – most recently the GIG-BE win with the Defense Information Systems Agency. The NetScreen deal, Juniper’s largest acquisition, is resounding affirmation that Juniper plans to focus more intently on this market.

Indeed, the deal represents Juniper’s about-face from its pledge not to compete with its service provider customers by targeting the enterprise market like its rival Cisco. Juniper CEO Scott Kriens attempted to explain this reversal and its likely reception from service provider customers. During a conference call on the NetScreen deal, Kriens offered a rambling response about how the distinction between the enterprise and carrier markets was “blurring” or “outdated.”

“The distinction is not campus vs. carriers,” Kriens claimed. “That’s the old way of looking at the problem. It’s not physical – it’s virtual. It’s better defined by the requirement for mission-critical networks (where) the problems are important, complex and rapidly changing.”

The problems also add up to a $10 billion addressable market for the Juniper/NetScreen combination where the demand from customers is “urgent” and “immediate,” Kriens says. Juniper will address these requirements with direct and indirect sales forces from both companies.

NetScreen will form the Security Products Group within Juniper. NetScreen President and CEO Robert Thomas will head up the group and report to Kriens. Juniper has been addressing the security needs of its customers with enhancements to its routers.

Juniper stock will be exchanged for NetScreen stock at a fixed exchange ratio of 1.404 shares of Juniper common stock for each outstanding share of NetScreen common stock. The acquisition is expected to close in the second quarter and is subject to customary closing conditions, including approval by the stockholders of both companies and regulatory approvals.

Senior Editor Tim Greene contributed to this story.