Light Reading

Analysts Still Have Doubts About Juniper

Craig Matsumoto
News Analysis
Craig Matsumoto

Juniper Networks Inc. (NYSE: JNPR) could escape the carnage that's socked recent earnings reports, but some analysts remain skeptical about the company's longer-term prospects.

Juniper reports earnings this Tuesday, following repeated warnings about carrier spending being weak when it comes to wireline networks.

The results have held up in earnings reports and previews from Alcatel-Lucent (NYSE: ALU), Adtran Inc. (Nasdaq: ADTN), Acme Packet Inc. (Nasdaq: APKT), Calix Networks Inc. (NYSE: CALX), Ericsson AB (Nasdaq: ERIC) and notably F5 Networks Inc. (Nasdaq: FFIV) -- the latter being a company that's doing pretty well. F5 didn't disappoint with second-quarter earnings, but it also said that the economy will dampen its third quarter.

The problem has been the economy, with vendors expecting carriers to stay stingy in the near term. That's translating into an even stronger emphasis on wireless networks -- where the traffic and revenue growth are perceived to be.

For Verizon Communications Inc. (NYSE: VZ), in particular, to spend money on wireline gear, "the equipment in question has to be tied directly to incremental new revenues," wrote analyst George Notter of Jefferies & Company Inc. , in a report earlier in July.

So, why should Juniper be any different?

For one thing, its sales don't rely on older, declining products. The downward slope of the DSL business is one thing that affected Adtran's earnings, Notter points out.

Notter also argues that Juniper is coming off a quarter that saw strong sales with Verizon. And he believes routing, like optical transport, is "more closely tied to new traffic growth (and new revenue) for the operators," as he phrased it in a recent report following Adtran's earnings.

In other words, he thinks the carrier spending patterns that have hurt other companies won't hit Juniper as severely. (On the optical side, he similarly thinks Ciena Corp. (NYSE: CIEN), which has a fiscal quarter ending in July, should be OK.)

Other analysts don't necessarily disagree. In April, Juniper predicted second-quarter revenues of around $1.03 billion and non-GAAP earnings per share of 16 cents; the consensus reported by Thomson Reuters has stayed near those figures.

The question is what happens after that.

Juniper had an unusually good first quarter with Verizon. And AT&T Inc. (NYSE: T) "appears to have reduced its 2012 core network spending intentions over the past quarter with the next significant upgrade now pushed to 2013," writes MKM Partners analyst Mike Genovese, in a report published Monday morning.

Juniper is also counting heavily on new products to ramp up late this year, including the T4000 core router, the QFabric data-center fabric and the PTX packet-optical element that's part of Juniper's converged supercore. Juniper expects that in the year ending December 2013, the new products will produce revenues of around $150 million per quarter, which could be 17 percent of the total.

So, your take on Juniper's chances probably depends on how much you believe in these products -- and not everybody believes.

"We are not convinced that new products can drive sustainable long-term organic growth," Mizuho Securities USA Inc. analyst Joanna Makris wrote in an early July report on Juniper. "We think Juniper should aggressively pursue targeted acquisitions that align with its switching and routing business -- specifically in areas of mobility and cloud computing."

In fact, Makris thinks Juniper might lower its forecasts even more. Juniper recently said it expects year-to-year revenue growth of 9 percent to 12 percent through 2015.

Genovese doesn't see much market interest in the full QFabric switch fabric (although sales of the related QFX-3500 top-of-rack switch have been promising). And while he considers the PTX supercore to be a potential hit, it's not likely to generate sizable revenues until the second half of 2013.

For more

— Craig Matsumoto, Managing Editor, Light Reading

(1)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
User Rank: Lightning
12/5/2012 | 5:26:54 PM
re: Analysts Still Have Doubts About Juniper

Will be interesting to see the split in earnings spread across Carrier and Enterprise.. With Juniper entering into Enterprise business - it will be a good piece of info to see what is the split and what is the increase in Revenue and Net Income in that side of the Island ..

Educational Resources
sponsor supplied content
Educational Resources Archive
From The Founder
The comms industry is rallying to the cause of open, independent interoperability testing.
Flash Poll
Live Streaming Video
CLOUD / MANAGED SERVICES: Prepping Ethernet for the Cloud
Moderator: Ray LeMaistre Panelists: Jeremy Bye, Leonard Sheahan
LRTV Interviews
AT&T's Chiosi on the Potential of Open Source

10|6|15   |   06:27   |   (0) comments

AT&T Distinguished Network Architect Margaret T. Chiosi talks to Light Reading's Carol Wilson about the potential for open source technology to liberate communications service providers.
LRTV Interviews
Network Security in a Gigabit World

10|6|15   |   05:52   |   (0) comments

Masergy's James Harrison talks about some of the network security and data center issues network operators need to consider as they expand their broadband services portfolios.
LRTV Documentaries
Telefónica: In Search of Virtual Simplicity

10|5|15   |   07:30   |   (0) comments

Francisco-Javier Ramon Salguero, head of Telefónica's NFV initiative, admits virtualization initially means greater complexity, but with the right abstraction layer, it is possible to create a services-driven network architecture. He explains how Telefónica's current trials and initiatives are aimed at doing that, and what his company and other carriers need to ...
LRTV Interviews
Gigabit Europe Takeaways

10|5|15   |   03:47   |   (0) comments

Participants from the inaugural Gigabit Europe event in Munich share their key takeaways from the conference.
Women in Comms Introduction Videos
Intel Urges Women to Take Advantage of Their Seat at the Table

10|5|15   |   4:27   |   (1) comment

Have inclusive and constructive conversations, attach a bigger meaning to your work and get involved in the cause, Intel's Monique Hayward advises women in comms.
LRTV Interviews
BT Updates on Plans

10|2|15   |   03:16   |   (2) comments

Peter Bell, CIO at Openreach, the access network division at UK incumbent BT, provides an update on the operator's trials and how Openreach is planning to deploy the broadband technology in its street cabinets.
Telecom Innovators Video Showcase
Sonus Shakes Up SD-WAN

10|2|15   |   7:22   |   (0) comments

Sonus CTO Kevin Riley sat down with Light Reading to discuss the trajectory of the company, its SDN ambitions and why Sonus is taking a market-disruptive approve to SD-WAN.
LRTV Interviews
CityFibre's Gigabit Vision

10|1|15   |   03:18   |   (1) comment

Mark Collins, director of Strategy & Public Affairs at competitive UK city network operator CityFibre, talks about his company's plans to help build Gigabit Cities.
Telecom Innovators Video Showcase
Automate, Scale & Create With Juniper's vCPE Solution

10|1|15   |   6:34   |   (0) comments

Join Kireeti Kompella, Juniper Networks CTO, and Steve Saunders, Light Reading Founder and CEO, as they discuss Juniper Networks' approach to NFV showcased with a turnkey vCPE solution, which demonstrates how service providers can use automation to rapidly deploy services.
LRTV Interviews
Gigabit Europe: Day 1 Takeaways

9|29|15   |   05:47   |   (5) comments

Light Reading's Ray Le Maistre and Iain Morris sup a beer and discuss some of the key takeaways from the first day of Gigabit Europe 2015.
LRTV Interviews
Gigabit in Europe

9|29|15   |   04:24   |   (0) comments

At the Gigabit Europe 2015 event in Munich, Heavy Reading's Graham Finnie talks about the availability of gigabit broadband in Europe.
Women in Comms Introduction Videos
AT&T's Band of Women

9|28|15   |   4:36   |   (0) comments

Brooks McCorcle, the president of AT&T's partner solutions divisions and a mathematician by trade, shares stats on AT&T's diversity and advice on how to create your own band of women at work.
Upcoming Live Events
October 14-15, 2015, New Orleans Ernest N. Morial Convention Center, New Orleans, LA
November 5, 2015, Hilton Santa Clara, Santa Clara, CA
November 17, 2015, Santa Clara, California
December 1, 2015, The Westin Times Square, New York City
December 2, 2015, The Westin Times Square, New York City
All Upcoming Live Events
Communication service providers realize that an ICT transformation is critical to their long-term survival, but most haven't yet committed to making it happen.
Hot Topics
Verizon's Go90 Is Live – Will Anyone Watch?
Mari Silbey, Senior Editor, Cable/Video, 10/1/2015
Eurobites: Dunroamin'
Paul Rainford, Assistant Editor, Europe, 10/2/2015
Sprint to Cut Up to $2.5B in 6 Months
Sarah Thomas, Editorial Operations Director, 10/2/2015
McKinsey: Women Less Likely to Advance at Work
Sarah Thomas, Editorial Operations Director, 10/1/2015
TiVo Takes Aim With Bolt
Mari Silbey, Senior Editor, Cable/Video, 9/30/2015
Like Us on Facebook
Twitter Feed
Webinar Archive
BETWEEN THE CEOs - Executive Interviews
With so many new and exciting communications technologies now under development, it's easy to get caught up in the industry's escalating hype cycle. That's why the ...
Last week saw a big day in the 15-year history of Light Reading when Editor-in-Chief Ray Le Maistre and I were invited to interview the Deputy Chairman and Rotating ...
Cats with Phones
Hold My Calls, Indefinitely Click Here