Rumor Mill Turns to Juniper

Many investors expect the router maker to be a buyer, not a seller.
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Merger and acquisition buzz focuses on

Juniper

(JNPR) - Get Report

, as the No. 2 Internet gearmaker faces growth challenges.

After a downgrade Monday and a

management shake-up Tuesday, the normally low-profile Sunnyvale, Calif., tech shop has become a renewed subject of deal speculation on Wall Street this week.

Among the rumors in recent circulation was talk that wireless giant

Motorola

(MOT)

had an interest in Juniper as a way to diversify its cell phone-centric business. The idea caught on briefly with investors Tuesday, sending the stock up more than 4% at one point. But the rally quickly faded after the rumor lost momentum.

Observers say the Motorola/Juniper speculation seems to have stemmed from the presumed need for the Schaumburg, Ill., giant to counter

Cisco's

(CSCO) - Get Report

purchase of set-top box maker

Scientific-Atlanta

(SFA)

. Motorola is the No. 2 set-top box maker and Juniper's router gear could help CEO Ed Zander & Co. respond to Cisco, or so the thinking goes.

But industry observers and investors say it's more likely that Juniper is pursuing its own deals rather than being pursued. After riding the surge in demand for core routers used by telcos to direct Internet traffic, Juniper needs to find other product areas to fill in when the router orders start to slow down.

For more than a year, industry watchers have waited for Juniper to pull the trigger on obvious deals like

Extreme

(EXTR) - Get Report

,

Foundry

(FDRY)

or

Enterasys

(ETS)

that would give it entry into the computer networking market for big businesses.

An estimated offer of $500 million to buy closely held Ethernet switch shop

Force10

failed to bring a deal for Juniper last year, say analysts.

Still, some analysts see plenty of deals ahead.

"Juniper will do a lot of buying this year, particularly in the area of network management," says Jon Oltsik, an analyst with Enterprise Strategy Group. In keeping with the theme of Juniper's $112 million purchase of Funk in November, Oltsik says closely held

Arbor Networks

of Lexington, Mass., would be a good fit.

Arbor Networks is one of several tech shops that seem to fill an increased need for telcos to provide network security and identify traffic for special handling. Rival Cisco has made inroads in gear designed to play the role of

traffic cop on the Net.

Analysts say telcos would like equipment that provides the ability to identify traffic and help them prioritize service. In other words, charge more for first class and shove competitive offerings like

Yahoo!

(YHOO)

or

Google

(GOOG) - Get Report

video into coach.

Juniper shares were down 2 cents to $22.22 in midafternoon trading Wednesday.