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Analyst: Juniper Faces Tougher Times

Craig Matsumoto
1/9/2006
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Juniper Networks Inc. (NYSE: JNPR) shares slipped nearly 5 percent today after an analyst note this morning cast clouds over the company's growth prospects.

Prudential Equity Group LLC analyst Inder Singh downgraded Juniper to Neutral Weight from Overweight, citing concerns about the company's long-term growth potential. Singh expects Juniper will keep its No. 2 position in the router market, but he isn't sure the market's long-term outlook favors Juniper.

Juniper shares were down as much as $1.63 (7.3%), to $20.43, today. The stock closed down $1.01 (4.58%) at $21.05.

Singh sees core-network equipment growing roughly 20 percent this year and next, compared with 30 to 40 percent during the past two years, as service providers emphasize metro and edge buildouts. At the core, Juniper can sell itself as the technological alternative to Cisco Systems Inc. (Nasdaq: CSCO). But that advantage dissipates as the view shifts to the network edge, where "other competitors stand well-positioned to grow market share," Singh writes.

Alcatel (NYSE: ALA; Paris: CGEP:PA) and Redback Networks Inc. both number in that camp, particularly given their attention to IPTV deployments during the past year. (See Alcatel Router Revenues Surge and How Redback Won BellSouth.)

Singh has concerns about Juniper's core network offerings, too, noting that the T-series routers were introduced in 2002, while Cisco trotted out its CRS-1 core router in 2004. "More frequent market refresh is needed to maintain a lead in customer mind share and avoid a potential increase in pricing pressure over time," Singh writes. "In addition, we believe an aging core product portfolio might make it more difficult for Juniper to pull in business further towards the edge of the network as carrier spending increases in this area."

Juniper has tried to expand its territory via acquisitions. Last year, the company picked up VOIP equipment provider Kagoor and traffic engineering startups Peribit and Redline, and in 2004 it forked over $4 billion for security firm NetScreen Technologies. (See Juniper to Acquire Kagoor, Juniper Takes Two: Peribit & Redline, and Juniper Buys NetScreen.) But Singh isn't convinced Juniper is ready to knit the parts into a cohesive whole.

"We do not believe these newer businesses will be sufficient to offset the slowing growth of Juniper's core products," Singh wrote.

Singh's comments include some questions that have been asked about Juniper for some time. (See Juniper's Slow Shopping Trip and Juniper's Marketing Mystery.) And he's not the only one questioning Juniper's growth prospects.

"The bigger issue for Juniper is that '06 may mark the year when the company may not grow significantly faster than the market," says Mark Sue, an analyst with RBC Capital Markets . That would be significant, given that the past two years saw growth coupled with marketshare gains, he says.

On the plus side, Singh believes Juniper's reseller agreement with Siemens AG (NYSE: SI; Frankfurt: SIE) is intact, even though Siemens is rumored to have purchased routers from Beijing Harbour Networks Co. Ltd. (See Will Siemens Sail with Harbour?) That deal is probably aimed at the Chinese market and shouldn't affect the Juniper-Siemens relationship, at least in the short term, he writes.

Juniper officials declined comment, citing a policy not to comment on any given analyst report.

— Craig Matsumoto, Senior Editor, Light Reading

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belakinabale
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belakinabale,
User Rank: Light Beer
12/5/2012 | 4:09:54 AM
re: Analyst: Juniper Faces Tougher Times
Why has the analyst not mentioned about riverstone networks which has a good offering at the metro edge and has quite a few deployments?? !!!
falsecut
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falsecut,
User Rank: Light Beer
12/5/2012 | 4:09:54 AM
re: Analyst: Juniper Faces Tougher Times
It would appear that Juniper ought to concentrate on their product lines rather than the LR messageboards. If they need to grow, they need to expand outside the core.
lilgatsby
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lilgatsby,
User Rank: Light Beer
12/5/2012 | 4:09:52 AM
re: Analyst: Juniper Faces Tougher Times
This OTC has about run its course. Notes are due this year & funds are insufficient - especially at current burn rates and the need to nearly double revenue to break even. Two words, distance yourself.

Best they can hope for is to get taken out by JNPR or taken private like their sister co., Enterasys. Call Kevorkian - a mercy killing is needed.

cheers,
lg

------------------------------------------------
Why has the analyst not mentioned about riverstone networks which has a good offering at the metro edge and has quite a few deployments?? !!!
lightstick
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lightstick,
User Rank: Light Beer
12/5/2012 | 4:09:50 AM
re: Analyst: Juniper Faces Tougher Times
. . . the answer to my own question is "yes". Just found this article.

--

Juniper says changes management, hires Cisco exec
Tue Jan 10, 2006 9:36 PM IST

NEW YORK (Reuters) - Communications equipment maker Juniper Networks Inc. on Tuesday said it has hired a nine-year veteran of rival Cisco Systems Inc. and announced a series of promotions and departures in its executive ranks.

Juniper, which makes routers and switches for telecommunications providers and businesses, named Paulette Altmaier as executive vice president of its Application Products Group.

Altmaier previously served as a vice president and general manager at Cisco, where she led the creation of Cisco's integrated services router portfolio, Juniper said.

Altmaier succeeds Jef Graham, who is leaving Juniper to run a privately held company, Juniper said.

The management changes come as analysts sound mostly upbeat notes about Juniper. Citigroup's B. Alex Henderson rates the company a "buy," though in a note to analysts said Juniper could face increased competition in some parts of the router market from companies such as Alcatel and Tellabs Inc..

Juniper also said that Eddie Minshull will become the company's executive vice president of Worldwide Field Operations, taking over from Jim Dolce, who is leaving to pursue personal interests. Minshull ran Juniper's Europe, Middle East and Africa division.

Also leaving the company is Carol Mills, executive vice president and general manager of the Infrastructure Products Group. Taking her position is Kim Perdikou, a member of that group and former executive at Reader's Digest.

Jeff Lindholm will take on the role of chief marketing officer after leading the company's worldwide sales organization for more than three years, Juniper said.

Dolce's departure is "not a positive" for Juniper because investors appreciated his insights into the market, said Stephen Kamman, an analyst with CIBC World Markets.

Still, he said, the changes are "growing pains from a company that's going from being a tight, focused router company to a much broader entity."

Juniper shares were down 12.9 cents, or .61 percent, to $20.92 in early Nasdaq trade.

lightstick
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50%
lightstick,
User Rank: Light Beer
12/5/2012 | 4:09:50 AM
re: Analyst: Juniper Faces Tougher Times
Did Jim Dolce leave Juniper? He used to be listed on their website, but is no longer there:

http://www.juniper.net/company...
http://www.juniper.net/company...
futureisbright
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futureisbright,
User Rank: Light Beer
12/5/2012 | 4:09:46 AM
re: Analyst: Juniper Faces Tougher Times
because it is a pink sheet?

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