Juniper Networks Inc. (Nasdaq: JNPR) stock got hammered today as investors reacted to news that core routing rival, Cisco Systems Inc. (Nasdaq: CSCO) was gaining market share at Juniper’s expense.
The company’s stock was trading down $1.75 (13.45%) to $11.26 this afternoon.
According to a report published by the market research firm Dell'Oro Group, Cisco gained 5 percentage points of market share in the core router market in the fourth quarter of last year (see Dell'Oro Looks at Router Dip). As a result, Juniper, the only other competitor in what has been a two-company market, suffered a 5 percent decline. For 4Q01 Cisco had 72 percent market share, up from 67 percent in 3Q01, says Dell'Oro. Juniper’s share dropped to 28 percent down from 33 percent in Q301.
Cisco has been gaining back market share in core routing since the first quarter of 2001. Cisco has gained 11 percentage points since the first quarter of last year when it had 61 percent of the market, according to the Dell'Oro numbers. Juniper had climbed to 39 percent of the market in 1Q01 before it started slowly losing its momentum throughout the year.
Cisco’s comeback is due in large part to its new GSR 12016 product, which began shipping last year. Cisco also introduced its own OC192 (10 Gbit/s) line card. For a while, Juniper had an edge, as the only router vendor with a 10-Gbit/s card. Cisco's upgrade erased that edge.
Both Juniper’s and Cisco’s recent earnings announcements also hinted at Cisco’s gains in the core. Cisco reported last week on its earnings call that it expects January 2002 revenues to be up slightly (see Cisco Beats Street; Growth is Flat). Juniper execs, on the other hand, indicated on the 4Q01 call in mid-January that they expect flat growth for the next few quarters at least (see Juniper Meets Lowered Expectations).
Of course, signs of Cisco's resurgence here have been evident for some time, and Cisco's addition of the 10-Gbit/s line card may have been the first writing on the wall (see Cisco Ships OC192).
“We do not believe that the market will view this news as a major surprise,” wrote Nikos Theodosopoulos, an analyst with UBS Warburg in a research note he published yesterday.
So why is the market reacting so negatively to this seemingly old news?
Sam Wilson, an analyst with Merrill Lynch & Co. Inc. says that he thinks some people were surprised at how much market share Juniper had lost.
”The recent Ciena miss may have renewed concern about core networking,” he says. “Even though this is not dramatically new news, I’m not surprised to see the stock go down -- and I think it’s appropriate. Juniper stock isn’t cheap.”
The best hope Juniper has in the short term is the long anticipated announcement of its next-generation core router, code-named "Gibson" (see Juniper Mum on Core Router... ). Savageaux says this could help give the stock a small kick as the company fights to regain some of the share it has lost over the past year.
”This could be the catalyst for the stock to go north,” he says. "That’s where they can strike back and gain market share. This won’t be an announcement like from Lucent, where the product will come out six months to a year later. Juniper will have a customer and revenue when the news comes out.”
"Their [Mahi] OTSR story is not working, so now they decided to position it as a point product, only as various, differnet point products. What an insult to the carriers! And here they are:
- A "Ciena CoreDirector Killer", oh please, what a joke.
Everybody knows that Mahi was never even really in the game. The company was a total optical startup scam. Now it is nothing more than a VC dead pool.
It is said that "a fish rots from the head", Mahi is a classic example. The people leading Mahi had and have no clue what they were doing.
The Mi7 used to be a an Optical Transport Switch Router (OTSR), "GOD" box. Their lead VC and acting CEO, Chris Rust, said at an MIT lunchon last year that God boxes are dead -- and he founded Mahi! (what a dick)
Their OTSR story is not working, so now they decided to position it as a point product, only as various, differnet point products. What an insult to the carriers! And here they are:
- A "Ciena CoreDirector Killer", oh please, what a joke.
Is this just an ugly rumor being started by those who harbor ill-will to Maple or is it real? I thought they were in the process of getting organized not looking to close the doors. Anyone have real information on this?
Had lunch w/ a few jnpr guys and apparently they are biting their fingernails hoping that the stock price will slide further. Juniper completes repricing it's incentive options on May 28 and since 95% of everybody's options are underwater, they're all praying that the stock will continue to slide so they can lock into the low price for their options and employee stock purchase plans.
These guys were pretty fatalistic; they didn't seem to think that their luck would hold. Bet they're happy how things have gone this week!
Also, Juniper canned most of their marketing folks last June -- a late product that nobody knows anything about. Not a good sign at all.
Politically, things have to be a mess with all the new "talent" from Lucent etc. Cronyism raised to an art form. Historically, lots of reorgs means lots of problems and lack of direction.
I actually never remember any significant marketing activities coming from Juniper. When they appeared on the stage people were dying for an alternative to Cisco so it was pretty easy for them.
It's a much different climate now that they really have to compete with Cisco.
What new talent are you referring to? The Lucent folks (Bisson and Sturgeon) are well removed from engineering (Finace and Support respectively) and Carney (from Nortel) is too recent to have messed up Gibson. These are just the people on the "Corporate Heads" page. If there are other baddies at lower levels in engineering, then it is very easy to see how they could be experiencing some pain.
Juniper market share slide - is it real? you ask. I say it is. Is it permanent? Probably not. Really depends on what Gibson is all about. But let's face it, Gibson was due out last August and these delays suggest to me that engineering is not what it used to be. Also, Juniper canned most of their marketing folks last June -- a late product that nobody knows anything about. Not a good sign at all.
Politically, things have to be a mess with all the new "talent" from Lucent etc. Cronyism raised to an art form. Historically, lots of reorgs means lots of problems and lack of direction. I dumped all my Juniper stock a long time ago and don't think I'll come back any time soon.
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