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
LRTV Huawei Video Resource Center
Sales Director of INIT on Plug & Play Switch Devices

9|19|14   |   3:21   |   (0) comments


INIT Italy uses both the Huawei S5700 and S7700 series switches for the campus LAN environment. Sales Director Andrea Curti says their company chose these Huawei devices over others because of their performance, flexible scalability and plug-and-play features.
LRTV Huawei Video Resource Center
Saudi Arabia Upgrades Vocational Training System

9|19|14   |   3:31   |   (0) comments


The Technical and Vocational Training Corporation (TVTC) has 100,000 students, 150 government-owned institutions and oversees 1000 private institutes. The CIO of TVTC explains that Huawei devices have allowed them to manage multiple datacenters using just one software program, scientifically tracking the progress of students and teachers, saving them millions.
LRTV Huawei Video Resource Center
Huawei's Media Solutions Are Here to Stay

9|19|14   |   4:35   |   (0) comments


The current media revolution requires rapid upgrades in technology. New formats (HD, 3D, 4K etc.) and the subsequent explosion of file sizes demand sophisticated network and storage architecture. Social media and the multiple distribution channels require a robust asset management system. Gartner analyst Venecia Liu speaks about the current technological trends in ...
LRTV Huawei Video Resource Center
Microgenesis on Huawei's Switches

9|19|14   |   3:57   |   (0) comments


Microgenesis is a solutions and system integrator company in the Philippines whose areas of expertise include data centers, networking and security products. In this video, Executive Director Jeffrey Choa talks to us about his customers needs and they benefit from using Huawei switches.
LRTV Huawei Video Resource Center
Network Solutions Help the Philippines Jump Ahead

9|17|14   |   2:59   |   (0) comments


In the past, the Philippines has under-invested in technology. Now, the CEO of Softshell talks about how Huawei products help the Philippines jump ahead as the economy improves.
LRTV Huawei Video Resource Center
VCS Observation for Safer Cities in the Netherlands

9|17|14   |   5:20   |   (0) comments


Holland's VCS Observation has been operating for 22 years. Its main goal is to get cities safer. CEO Wim van Deijzen tells us some of the challenges his company faces and how Huawei is helping to overcome these challenges.
LRTV Huawei Video Resource Center
A Conversation With Serbia's Ministry of Interior

9|17|14   |   4:38   |   (0) comments


At HCC 2014, the Assistant Minister of the Ministry of Interior of the Republic of Serbia talks to us about his projects and corporation with Huawei. Solutions like Safe City and E-Government and services like cloud computing are just some of the areas his department is interested in.
LRTV Huawei Video Resource Center
IHS Analyst Discusses eLTE at CCW 2014

9|10|14   |   7:09   |   (0) comments


Thomas Lynch, associate director of critical communications at IHS Technology, talks about broadband in critical communications.
LRTV Huawei Video Resource Center
TCAA on Huawei eLTE: A Broadband Solution for Mission-Critical Communications

9|10|14   |   2:29   |   (0) comments


At CCW2014 in Singapore, the TCCA's Phil Kidner talks about the importance of broadband data for critical communications.
LRTV Custom TV
Spotlight on Cisco: SDN for Optical Networks

9|8|14   |   9:27   |   (0) comments


Cisco's Greg Nehib talks OpenFlow and more on the 'Software-Defined Networking for Optical Networks' panel at the Big Telecom Event in June 2014.
LRTV Custom TV
Cisco's Evolved Programmable Network (EPN)

9|8|14   |   4:05   |   (0) comments


A look at the various demos Cisco showed at Light Reading's Big Telecom Event highlighting Cisco's EPN innovation and how SDN and NFV technologies are enabling a variety of new services.
LRTV Huawei Video Resource Center
The Future of Ultra-Broadband, With Kevin Kelly (UBBF2014)

9|5|14   |   1:13   |   (1) comment


If you think the technological changes we've seen up to now are astounding, just wait until you see what the future has in store. Discuss upcoming breakthroughs with Kevin Kelly, Founding Executive Editor of Wired Magazine, at the Huawei Ultra-Broadband Forum on September 24.
Upcoming Live Events!!
September 23, 2014, Denver, CO
October 29, 2014, New York City
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
June 9-10, 2015, Chicago, IL
Infographics
A survey conducted by Vasona Networks suggests that 72% of mobile users expect good performance all the time, and they'll blame the network operator when it's not up to par.
Today's Cartoon
Vacation Special Caption Competition Click Here
Latest Comment
Hot Topics
AT&T: We'll Bundle Fixed Wireless & DirecTV
Mari Silbey, Independent Technology Editor, 9/15/2014
New NFV Forum Focused on Interoperability
Carol Wilson, Editor-at-large, 9/16/2014
NFV & The Data Center: Top 10 Takeaways
Sarah Reedy, Senior Editor, 9/18/2014
Connecticut Cities Crowdsource Gigabit Nets
Jason Meyers, Senior Editor, Utility Communications/IoT, 9/15/2014
Pics: LR's Women in Telecom Breakfast
Sarah Reedy, Senior Editor, 9/16/2014
Like Us on Facebook
Twitter Feed