Juniper Ups The Ante With Netscreen Purchase

In tournament poker, having a lot of chips is almost as powerful as a pair of aces. Players with the biggest stacks can dictate the flow of the game, bluffing and taking risks with the knowledge that one bad hand won't knock them out.

Juniper Networks, flush with a stock price that vaulted last month, used some of its chips to purchase security-systems specialist Netscreen Technologies today in a proposed deal that could improve Juniper's hand against Cisco Systems, the current king of the networking-market casino.

While $4 billion might seem like a steep price to pay for a company that only expected to rake in around $400 million in revenues this fiscal year, Netscreen's well-respected virtual private network (VPN), firewall and other security wares fit into a corporate-networking needs category that is only going to increase in importance in the near-term future. Should the deal go through, Netscreen's customer list will, at the very least, give Juniper entree into corporate network accounts, where it can try to sell its high-end routers that it typically sells to telecom service providers.

Whether or not the merger really pays off for enterprise customers -- in terms of integrated technologies, better support for more services, or just one less salesperson to deal with -- is a conclusion not reached anytime soon, given the uncertainty of high-tech marriages. In the short run, however, there should be some pricing leverage for those negotiating contracts with either Juniper or Cisco. Since the ante has now been increased, both players need to corral as many chips as they can before the next hand begins.