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Closing Bell: Leapfrog Enterprises


Juniper Networks (JNPR) CEO Scott Kriens will no longer just amble along the comeback trail. After restoring profitability in 2003 and overseeing a 500% increase in Juniper's stock price over the past 16 months, Kriens on Feb. 9 paid $3.5 billion for NetScreen Technologies (NSCN), a maker of network security products. The deal, which marks Juniper's first big effort to sell gear to corporations, heats up a long rivalry with Cisco Systems (CSCO). "It's time for us to lead," he says.

It's likely the first of several moves aimed at Cisco's bread-and-butter market, which includes 70% of enterprise routers worldwide, according to researcher IDC. Kriens insists Juniper will focus on building its own technology. But considering Juniper's R&D budget is 6% the size of Cisco's, acquisitions will be vital for Juniper to build on its enterprise beachhead. "Juniper will have to do a whole lot more" to compete in this market, says IDC analyst Paul Strauss. Thriving in Cisco's shadow, however, is something Kriens has almost always done well. Its profits were milked by bad investments in the troubled Italian dairy giant, Parmalat, but American International Group (AIG) still managed to post a fourth-quarter net profit of $2.7 billion on Feb. 11. The New York-based insurer can thank long-lived customers and a lack of terrorist activity as factors in boosting profits and revenues, which rose 27%, to $22.2 billion. Both life insurance and property-casualty coverage enjoyed strong growth, although Chairman Maurice R. "Hank" Greenberg said property insurance rates had leveled off. Still, with 2003 profits up a record 68%, to $9.3 billion, AIG is almost certain to face increasing pressure from customers to rein in premium costs. Has the final domino in independent music retailing toppled? With the Chapter 11 bankruptcy filing by Tower Records' parent company, MTS, on Feb. 9, it looks like the end of an era. Squeezed between discounters such as Wal-Mart Stores (WMT) and the rise of digital downloads, the 42-year-old music icon has been losing money for years. It aims to survive by reducing debt from $110 million to $30 million, paying bond-holders with 85% of its shares, then resuming a search for a buyer. Industry sources say likely bidders are investment firms such as Sun Capital Partners, which bought the Sam Goody chain from Best Buy (BBY) last year. But with the demise of the brick-and-mortar CD retailer almost certain, the outlook is grim. A last-minute phone call on Feb. 7 between President George W. Bush and Australian Prime Minister John Howard successfully concluded months of talks over a U.S.-Australian free-trade agreement. Free-trade advocates are disappointed that the pact continues protections for the U.S. sugar, dairy, and beef industries. They say that hurts U.S. consumers and encourages other politically powerful industries to seek similar protection in future deals. To protect U.S. farmers, the Administration had to back off its demands for foreign-investment guarantees and free access to Australia for U.S. pharmaceuticals, although the U.S. market remains protected from Australian drug exports. The U.S. expects annual exports to increase by $2 billion to Australia. The Justice Dept. took a step closer to interceding in Oracle's (ORCL) $9.4 billion hostile takeover attempt of rival software maker PeopleSoft (PSFT). On Feb. 10, Justice lawyers recommended that the deal be blocked for antitrust reasons. While the decision was a big blow to Oracle's plans, it doesn't mean the government is sure to step in. The final call, expected early next month, will ultimately be up to Assistant Attorney General R. Hewitt Pate. Oracle execs were quick to say that the battle isn't over. Maybe so. But landing PeopleSoft just got a whole lot tougher. -- A new SEC rule forces mutual-fund firms to report expenses in dollars semiannually.

-- Intel (INTC) announced a chip prototype that could slash telecom-equipment costs.

-- Coca-Cola (KO) reported flat net profits on weak sales and restructuring charges.


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