Light Reading

Analysts Still Have Doubts About Juniper

Craig Matsumoto
News Analysis
Craig Matsumoto
7/23/2012
50%
50%

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
^ip4g^
50%
50%
^ip4g^,
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 ..

Flash Poll
From The Founder
Then pick up your axe, put on your spandex trousers and get yourself down to Light Reading's Big Telecom Event (BTE). Kerrang!!!
LRTV Custom TV
Meeting the Demands of Bandwidth & Service Group Growth

5|1|15   |   5:35   |   (0) comments


Jorge Salinger, Comcast's Vice President of Access Architecture, explains how DOCSIS 3.1 and multi-service CCAP can meet the demands of the bandwidth and service group growth.
LRTV Custom TV
DOCSIS 3.1: Transforming Cable From Hardware-Defined Network to Software-Defined Network

4|29|15   |   03:48   |   (0) comments


John Chapman, Cisco's CTO of Cable Access Business Unit and Cisco Fellow, explains how DOCSIS 3.1 can transform cable HFC network to a more agile software-defined network.
LRTV Huawei Video Resource Center
Predicting Traffic Patterns for Quality Mobile Broadband

4|29|15   |   6:45   |   (0) comments


Accessing information ubiquitously creates complexity and creates heavy traffic onto the network, especially at large-scale events like sporting events or festivals. In this video, Huawei's Mohammad Hussain speaks to experts about how to predict traffic and improve user experience during periods of heavy traffic.
Between the CEOs
Ciena CEO: The Web-Scale Revolution

4|28|15   |   10:32   |   (3) comments


Light Reading CEO and founder Steve Saunders goes head-to-head with long-time Ciena CEO Gary Smith to discuss the impact of the web-scale players, the New IP and 'white box' networks.
LRTV Documentaries
Cox Eyes Cloud-Based Home Networks

4|27|15   |   05:30   |   (0) comments


Cox's Jeff Finkelstein explains how moving services to the cloud will let cable deliver services faster and eliminate constant hardware replacements.
LRTV Documentaries
CableLabs' Clarke Updates Cable Virtualization

4|23|15   |   05:41   |   (1) comment


Former BT exec now leading CableLabs' NFV and SDN efforts explains key role of open source and updates efforts to virtualize the home network.
LRTV Interviews
Ericsson's CTO Talks Transformation: Pt. II

4|23|15   |   08:19   |   (1) comment


In the second installment of an in-depth two-part interview, Ericsson's CTO Ulf Ewaldsson talks to Light Reading CEO and founder Steve Saunders about cultural change, network slicing and technology advances.
LRTV Interviews
Ericsson's CTO Talks Transformation: Pt. I

4|23|15   |   09:27   |   (3) comments


In the first installment of an in-depth two-part interview, Ericsson's CTO Ulf Ewaldsson talks to Light Reading CEO and founder Steve Saunders about the incredible transformation underway in the communications networking industry.
LRTV Documentaries
LTE Paves the Way for the 5G Revolution

4|20|15   |   4:20   |   (0) comments


Håkan Andersson, head of 5G product strategy of the Radio Business Unit at Ericsson, discusses the role of LTE, the US and other industry verticals in building a true 5G ecosystem.
LRTV Documentaries
The 3GPP's Road to 5G Standardization

4|17|15   |   4:43   |   (0) comments


Satoshi Nagata, chairman of the 3GPP's TSG-RAN group and a manager at NTT Docomo, explains the standardization process for 5G, as well as the biggest challenges and opportunities.
LRTV Documentaries
AlcaLu CTO Makes the Case for a New 5G Air Interface

4|16|15   |   3:54   |   (0) comments


Michael Peeters, CTO of wireless at Alcatel-Lucent, explains why 5G will require a new air interface to meet its diverse performance targets.
LRTV Documentaries
AlcaLu + Nokia: The New Uber-Vendor

4|15|15   |   2:42   |   (4) comments


Heavy Reading Senior Analyst Gabriel Brown discusses the technological and competitive opportunities and challenges if a merger between Alcatel-Lucent and Nokia comes to pass.
Upcoming Live Events
May 6, 2015, Georgia World Congress, Atlanta, GA
May 12, 2015, Grand Hyatt, Denver, CO
May 13-14, 2015, The Westin Peachtree, Atlanta, GA
June 8, 2015, Chicago, IL
June 9-10, 2015, Chicago, IL
June 9, 2015, Chicago, IL
June 10, 2015, Chicago, IL
September 29-30, 2015, The Westin Grand Müchen, Munich, Germany
October 6, 2015, Westin Peachtree Plaza, Atlanta, GA
November 11-12, 2015, The Westin Peachtree Plaza, Atlanta, GA
All Upcoming Live Events
Infographics
In its latest survey covering network operators' plans and strategies for ICT transformation, Heavy Reading asked telecom operators worldwide to identify the most important goals and objectives for their ICT transformation initiatives. Heavy Reading also asked operators about the importance of a "digital first" strategy, which enables customers to complete an interaction across different digital channels, such as web and mobile self-service and social media.
Hot Topics
Eurobites: Nokia Quashes Handsets Rumor
Paul Rainford, Assistant Editor, Europe, 4/28/2015
Verizon Builds Key Vendors Into SDN Strategy
Carol Wilson, Editor-at-large, 4/28/2015
Why Is Verizon Fighting With Programmers?
Alan Breznick, Cable/Video Practice Leader, 4/28/2015
Astellia Highlights Customer Care Disconnect
Ray Le Maistre, Editor-in-chief, 4/29/2015
T-Mobile Beats Sprint on Subs, Eyes Verizon on Network
Sarah Thomas, Editorial Operations Director, 4/28/2015
Like Us on Facebook
Twitter Feed
Webinar Archive
BETWEEN THE CEOs - Executive Interviews
Light Reading CEO and founder Steve Saunders goes head-to-head with long-time Ciena CEO Gary Smith to discuss the impact of the web-scale players, the New IP and 'white box' networks.
Many leading communications companies can claim to have undergone significant periods of reinvention during their histories, but none have been through more major ...
Cats with Phones
Working With What You've Got Click Here
"It's pretty hard to answer these things without thumbs!"