Light Reading
Q1 looked OK, but as Juniper brings out its new core router, packet-optical switch and data-center fabric, a good 2012 is not a slam dunk

How Is Juniper Sizing Up for 2012?

Craig Matsumoto
News Analysis
Craig Matsumoto
4/25/2012
50%
50%

So, did Juniper Networks Inc. (NYSE: JNPR) deliver good news or bad news Wednesday?

Juniper's first-quarter earnings turned out better than the company's glum predictions. But opinions about what's in store for the rest of 2012 range from New York Yankees optimism to Chicago Cubs defeatism, as analysts try to gauge how quickly Juniper's new products can bring the company back to growth mode. (See Juniper's Rookie Products Get Called Up.)

On the sunny side, some analysts say it's unmistakable that carrier capital spending is back -- a prediction that analyst George Notter of Jefferies & Co. Inc. , in particular, has been preaching quite loudly. (See Carrier Capex Could Rebound Quickly and 4G (Finally) Starting to Boost US Capex Spend?)

In the first quarter, service providers spent 21 percent of their planned 2012 budgets, Juniper CEO Kevin Johnson said during Tuesday's call. That would seem to reflect a return to normal spending patterns, where a slight majority of the spending happens later in the year.

That means the "worst may be over" in terms of revenues and margins, writes analyst Mark Sue of RBC Capital Markets , in a note published Wednesday. "After numerous quarters of lackluster activity, Verizon Communications Inc. (NYSE: VZ) and we believe AT&T Inc. (NYSE: T) for that matter returned."

Revenues and margins could both be boosted later this year as Juniper's new products -- the T4000 core router, the PTX packet-optical transport node and the QFabric data-center fabric -- start to deliver more significant revenues. (On Tuesday's earnings call, Juniper didn't even mention the fourth new product-- the MobileNext evolved packet core -- and no one seems to be counting on it for big 2012 revenues.)

"We believe JNPR's gross margins are artificially low today driven mostly by weaker product mix (i.e., depressed core router sales)," writes analyst Brian Marshall of ISI Group Inc. Juniper's gross margins fell to 62.6 percent in the first quarter, way down from 67.9 percent a year ago.

What's not to like?

For one thing, Juniper's new products are all big. They take months of customer qualification. The PTX and T4000 have barely started shipping, so substantial sales are multiple quarters away.

"The 2012 contributions for all new products likely fall short of our prior $70 million to $120 million estimate," writes analyst Simon Leopold of Raymond James Financial Inc. (NYSE: RJF). He expects the new products to trigger some growth in 2013, with Juniper enduring a flat 2012 in the meantime.

"We are not yet convinced [of] a meaningful turnaround in the business. ... We would like to see evidence that product upgrades can abet share loss in core switching, routing and security," writes analyst Joanna Makris of Mizuho Securities USA Inc.

Then there's the theory that router growth has already seen an across-the-board shift downward, driven by carriers' increased use of content delivery networks (CDNs). Ed Zabitsky of ACI Research floated the idea last year.

He thinks it's proven out in Juniper's router sales -- which were $479 million in the first quarter, down 21 percent from the previous year. On a quarter-by-quarter basis, router sales have fallen in four of the past five quarters, Jefferies's Notter notes. He attributes it to the transition to the T4000, with customers waiting for the product to ramp.

But Zabitsky thinks the PTX is flat-out cannibalizing T4000 demand. The PTX converges MPLS switching and optical transport, and it's meant in part to decrease the use of core-router ports -- a cheaper way of getting immense traffic through the core, in other words.

That implies that a PTX customer would buy fewer core routers than it would have in previous upgrade cycles. Zabitsky even thinks this pattern could cause Juniper's carrier customers to delay upgrading to the T4000, since the T1600 would be good enough for a longer time. NTT Group (NYSE: NTT) -- which has given testimonials for both the PTX and the T4000 -- confirmed that opinion at OFC/NFOEC in March, he says.

— Craig Matsumoto, Managing Editor, Light Reading

(0)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View
Flash Poll
From The Founder
It's clear to me that the communications industry is divided into two types of people, and only one is living in the real world.
LRTV Huawei Video Resource Center
Interview With Rick Talbot, Principal Analyst, Current Analysis

10|31|14   |   2:12   |   (0) comments


At the NFV Open Cloud Forum 2014, Rick Talbot shared his positive feedback about the holistic and open approach that Huawei adopts for SDN and NFV. He also found the open sharing at the event valuable as it features different perspectives from Huawei experts, telecom operators, industry analysts as well as security experts.
LRTV Huawei Video Resource Center
Interview With David Snow, Principal Analyst, Current Analysis

10|31|14   |   2:24   |   (0) comments


David Snow talked about his understanding of Huawei and its SoftCOM strategy at the NFV Open Cloud Forum 2014, saying that Huawei's wide approach combining IT and CT expertise, introducing big data and analytics into solutions and contributing to the OpenStack community particularly resonate with him and make the company stand out in the industry.
LRTV Huawei Video Resource Center
Interview With Roz Roseboro, Senior Analyst, Heavy Reading

10|31|14   |   3:13   |   (0) comments


Roz Roseboro commented on Huawei's data center capabilities and NFV solutions at the NFV Open Cloud Forum 2014, saying that in addition to covering all three key domains of compute, storage and networking, the company also emphasizes the importance of management capabilities and professional services, which are essential in making NFV a reality.
LRTV Huawei Video Resource Center
Interview With Michael Howard, Co-founder & Principal Analyst, Infonetics Research

10|31|14   |   5:25   |   (0) comments


Michael Howard talked about SDN, NFV, and OpenStack adoption at Huawei's NFV Open Cloud Forum 2014. Particularly, he pointed out that Virtual Enterprise CPE is the top NFV use case that operators plan to invest in over 2014 and 2015 to deliver new enterprise services through virtualized functions.
LRTV Huawei Video Resource Center
Interview With Jerry Caron, Senior Vice President, Current Analysis

10|31|14   |   3:11   |   (0) comments


At Huawei's NFV Open Cloud Forum 2014, Jerry Caron from Current Analysis said that orchestration and management are key to realizing SDN and NFV for global carriers, and the approach that Huawei is taking, with its FusionSphere Cloud OS at the core, is in the right direction to address the challenges.
LRTV Documentaries
Broadband Battles

10|31|14   |   01:39   |   (0) comments


This year's Broadband World Forum featured a number of show floor battles focused on access gear, components and coffee.
Jonestown
Mobile Backhaul: Going to the Dark Side?

10|30|14   |   2:26   |   (1) comment


Heavy Reading's Patrick Donegan shares his view on a dark trend that bubbled up at Light Reading's annual backhaul conference in NYC.
LRTV Huawei Video Resource Center
2014 Huawei Electric Power Industry Summit: Interview With CEO of SwitchCom

10|30|14   |   4:13   |   (0) comments


SwitchCom, an IT company based in Angola, recommends a variety of Huawei solutions and hardware to their customers in the energy industry.
LRTV Huawei Video Resource Center
2014 Huawei Electric Power Industry Summit: Interview With Ethiopia's Ministry of Water Irrigation & Energy

10|30|14   |   4:08   |   (0) comments


Gosaye Mengistie of Ethiopia's Ministry of Water Irrigation & Energy discusses the collaboration with Huawei in that country.
LRTV Huawei Video Resource Center
2014 Huawei Electric Power Industry Summit: Interview with Dongfang Electronics Corporation

10|30|14   |   5:46   |   (0) comments


Dongfang Electronics Corporation, headquartered in Chengdu, China, is one of China's largest manufacturers of power generators and contractors of power station projects.
LRTV Huawei Video Resource Center
2014 Huawei Electric Power Industry Summit: Interview with Zimbabwe's Customers

10|30|14   |   3:31   |   (0) comments


Representatives of Zimbabwe's Ministry of Power and Development discuss the energy needs of their country as well as new areas of improvement due to enhanced ICT capabilities.
LRTV Huawei Video Resource Center
2014 Huawei Electric Power Industry Summit: Interview With Colbún Chile

10|30|14   |   4:29   |   (0) comments


In Chile, an aging energy infrastructure was in dire need of a modern update. Claudio Valenzuela of Colbún discusses how Huawei's ICT solutions continue to provide crucial information to improve the grid and how an in-country engineer is a cricial asset.
Upcoming Live Events
November 6, 2014, Santa Clara
November 11, 2014, Atlanta, GA
December 2, 2014, New York City
December 3, 2014, New York City
December 9-10, 2014, Reykjavik, Iceland
February 10, 2015, Atlanta, GA
May 6, 2015, McCormick Convention Center, Chicago, IL
May 30, 2015, The Westin Peachtree, Atlanta, GA
June 9-10, 2015, Chicago, IL
Infographics
WhoIsHostingThis.com presents six of the world's most extreme WiFi hotspots, enabling the most epic selfies you can imagine.
Hot Topics
Microsoft's Skype Embraces WebRTC on IE
Sarah Reedy, Senior Editor, 10/27/2014
FTC Slaps AT&T With Throttling Lawsuit
Sarah Reedy, Senior Editor, 10/28/2014
Wheeler Gets Down With OTT
Mari Silbey, Independent Technology Editor, 10/29/2014
China's MVNOs Hit the Wall
Robert Clark, 10/27/2014
Let's Not Kill SDN & NFV With Silos
Francois Locoh-Donou, Senior VP, Global Products Group, Ciena, 10/28/2014
Like Us on Facebook
Twitter Feed