The offer reflects Juniper's belief that "the traditional telecom market is dead and will not recover," Juniper's president and chief executive officer Scott Kriens told financial analysts in a Monday (May 20) conference call. That doesn't mean incumbent service providers will go away, Kriens said, but Internet Protocol route-centric networks must be based on platforms from companies that can provide routing from the enterprise to the network core.

"Some have been waiting for the old telecom monopolies to come back, but they're not going to," Kriens said.

The offer consists of $375 million in cash, and 36.5 million shares of stock, worth $365 million based on Juniper's Friday (May 17) closing price of $9.85 per share.

Three weeks ago, analysts wondered if Unisphere was preparing itself for a sale, after it transferred the voice switching business, including the softswitch business of Castle Networks Inc., to its parent, Siemens AG. At the time, however, Juniper was seen as more focused on core routing, while the triumvirate of Cisco Systems Inc., Lucent Technologies and Nortel Networks were considered too cash-strapped to consider a Unisphere acquisition.

While the size of the acquisition is considerable in the current economic environment, it is also an indicator of how far equity M&A offerings have fallen. Given Unisphere's 600 employees and the popularity of its ERX edge router, an acquisition offer in the late 1990s might have involved billions of dollars. With Juniper's experience in midrange core networks and Unisphere's experience at the network edge, particularly with multiprotocol label switching, it is conceivable that the focus for next-generation Internet Protocol routing may shift from Cisco to the merged Juniper/Unisphere entity.

Siemens formed Unisphere in March 1999. Siemens' first two acquisitions under the Unisphere umbrella were core router vendor Argon Networks Inc. and softswitch vendor Castle Networks. Edge-router developer Redstone Communications Inc. was acquired three weeks after Unisphere's founding, yet Unisphere now has become largely an expanded version of what once was Redstone.

Siemens will continue to play a key role with Juniper, Kriens said. Concurrent with its offer to acquire Unisphere, Juniper has signed a worldwide global distribution and marketing pact with Siemens, under which Siemens will sell all of Juniper's products.

A key factor driving Juniper's acquisition of Unisphere was the ability to combine the companies' distribution channels, and to meld those channels with Siemens' reach, said Unisphere president Jim Dolce, who will remain with Juniper to head customer support operations.

Only Unisphere's employees involved with edge routing will become Juniper employees. Nevertheless, several hundred former Unisphere employees in the voice and softswitch fields will continue to operate out of Unisphere's facilities in Massachusetts, even though they are now with Siemens. The Juniper pact with Siemens will allow this relationship to continue, and Kriens said he anticipates working closely with Siemens' packetized voice groups that were once part of Unisphere.

Both Juniper and Unisphere have been at the forefront of ASIC development for high-speed routing. Kriens said the two companies maintained tight relationships with IBM Microelectronics, and share similar design tools, process methodologies, and visions on hard-wiring advanced routing protocols, which will help speed the integration of design engineering groups at the merged Juniper.

The acquisition is expected to close in the third quarter. It will be slightly dilutive to Juniper in 2002, but is expected to be accretive by 2003. Siemens will own slightly less than 10 percent of Juniper's shares after the deal is completed.