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Juniper's $4B Buy Signals Security Push

In a blockbuster telecom equipment deal underlining the growing importance of network security, Juniper Networks will buy NetScreen Technologies for $4 billion in stock.

Under the deal, expected to close in the second quarter, Juniper will exchange 1.404 shares of its stock for each share of NetScreen. The companies' directors have approved the merger; shareholders and regulators must now sign off.

"We're only going to do what we've already been doing and do it better," Scott Kriens, Juniper's chairman and CEO said in a conference call with analysts.

Juniper, the second largest telecom equipment maker behind Cisco , makes of high-end routers that provide 24-hour, high-bandwidth connectivity for service providers including Bell Canada and Verizon .

The move is a shot across the bow of rival Cisco, and to a lesser degree Nortel Networks and Avici . A spokeswoman for Cisco's security buiness was not immediately available for comment.

The price evokes memories of the late '90s, when stock-rich companies regularly closed billion-dollar deals to gain a technological edge over competitors.

This purchase gives the eight-year-old Juniper a proven line of security and access products and bolsters its enterprise client roster. About 75 percent of NetScreen's business comes from enterprise customers in the financial services, retail and health care sectors. The firm also has a strong relationships with federal, state and local governments.

That's important because large customers -- whether they are multi-national corporations or telecom carriers -- realize that high-performance networking services must be safeguarded with security services such as firewalls and VPNs, Kriens said.

Robert Thomas, president and CEO of NetScreen, will lead the security unit of the combined company. He said his company's management team is "almost delerious" about the merger.

"We are two highly success companies. We share common competitors we have worked cooperatively, if somewhat loosely, before," Thomas said. "We have great respect for Juniper."

The companies, which are separated only by a parking lot in Sunnyvale, Calif., will work to integrate their product lines, intellectual property portfolios and workforces.

Further details about the integration, including plans for Netscreen's senior management team and 900 employees, will be detailed in a filing with the Securities and Excahnge Commission in the next two weeks. During the call, Kriens said cost-savings were not the point of the merger.

Shares of NetScreen rocketed up 32 percent on news of the offer this morning, while Juniper shares were off about 13 percent.