is going to spend over $300M to buy one of the leaders in WAN optimization space, NetScaler. This is the same market that Juniper spent roughly $500M
to enter with two acquisitions in April. CSCO
which already addressed this market bought FineGround about a week or so ago for $70M to enhance its optimization products. FFIV
the kingpin in this market has seen its shares steadily decline ever since the spree of acquisitions began. Other public players in the market include RDWR
, and to lesser extent FDRY
NetScaler had been rumored to be the first choice for JNPR
. NetScaler got a hefty valuation of approximately 15x revenues, which seems expensive on any reliable growth projections, hence CTXS
stock was down almost 10% on the news. As I have explained earlier, this L4-L7 (layer 4 to layer 7 of the OSI model) market is one of the fastest in the enterprise networking with Dell'Oro expecting revenue CAGR of 19% from 2004 to 2009.
I beleive that a non-enterprise networking company like CTXS
spent this much money to enter this market because the centralized application access market that CTXS
addresses is being taken over by web-based applications. To continue its growth trajectory CTXS
had to enter this market or risk long term survivability. NetScaler will also provide CTXS
load balancing capabilities to enhance its server farms efficiency. The startegy makes sense but the risk of entering new market and competing in a hotly contested market, not to mention the dilution that you get with paying a hefty premium made CTXS
shareholder little wary today. CTXS
might have a winner in its hand if the channel integration and product integration is successful.