Alliances usher in new era of rivalry in networking gear market

Two major alliances announced last week could hasten the inclusion of more security components in technology projects and heat up competition in the network equipment market, analysts said.

Silicon Valley neighbours Juniper Networks and NetScreen Technologies last week agreed to merge via a stock-for-stock transaction worth about US$4 billion. The merger will enable networking gear maker Juniper to square off with more firepower against market leader Cisco Systems.

The deal is expected to close in the second quarter. Some experts noted that Juniper has agreed to pay a large premium - 57 per cent - to acquire network security appliance vendor NetScreen.

'The premium demonstrates the high value the market places on solutions similar to ours,' said Ker Gibbs, Asia-Pacific vice-president at network security appliance vendor Secure Computing.

Research firm Gartner said: 'Security concerns are now pervasive in every aspect of networking, and the combination of a leading networking provider and a trusted firewall vendor should prove appealing to many enterprises.'

Forrester Research said the merger also gave the combined Juniper and NetScreen 'credibility and strong sales delivery channels in both the service provider and enterprise markets'.

Juniper derived more than 95 per cent of its revenue last year from routing and switching sales to service providers. In contrast, sales to enterprise clients accounted for 70 per cent of NetScreen's revenues.