Jumpin' Juniper

Juniper Networks (Nasdaq: JNPR), the No. 2 maker of high-performance networking gear, delivered some high-performance results yesterday.

Not only was Wall Street surprised, but so was the company. In the fourth quarter, Juniper generated profits of $15 million or 4 cents a share, up from $8.5 million or 2 cents per share the same quarter last year. Revenues rocketed from $155 million last year to $207 million in the fourth quarter (the first since 2001 that the company exceeded $200 million in quarterly revenues). This beat Street expectations by about $25 million.

CEO Scott Kriens acknowledged on the conference call that the quarter had likely benefited from a "budget flush." That's a colorful way of saying that big customers used up their remaining 2003 budgeted capital on Juniper products.

In fact, the budget flush coupled with an apparent, if nascent, pick up in telecom spending, should benefit all the big players. Ironically enough, Kriens even made a point of noting that archenemy Cisco (Nasdaq: CSCO) should also have a great quarter.

Of course, all is not perfect. Juniper recently lost out to rival Avici (Nasdaq: AVCI) on a mega deal with Nortel (NYSE: NT) -- a major disappointment, only partly offset by significant customer wins, including Global Crossing and Level 3 (Nasdaq: LVLT).

The time may be right for a little shopping. Juniper has more than $1 billion in cash and recently filed for a $1 billion shelf offering. Combine this with a surging stock valuation, and Juniper may be poised to make a deal. But don't be surprised if Juniper focuses on private companies, where one can still find solid technologies at decent valuations.

Tom Taulli is the author of six books on investing and finance, such as the Complete M&A Handbook (Random House). He is also a professor of finance at the USC School of Business.