& cplSiteName &

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        ADD A COMMENT
Light Reading’s Upskill U is a FREE, interactive, online educational resource that delivers must-have education on themes that relate to the overall business transformation taking place in the communications industry.
NEXT COURSE
Wednesday, October 5, 1:00PM EDT
Gigabit & Smart Cities
Joe Kochan, COO & Co-Founder, US Ignite
UPCOMING COURSE SCHEDULE
Friday, October 7, 1:00PM EDT
Gigabit & DOCSIS 3.1
Ty Pearman, Director, Access Architecture, Comcast
Wednesday, October 19, 1:00PM EDT
Securing a Virtual World
Rita Marty, Executive Director, Mobility and Cloud Security, Chief Security Office, AT&T
Friday, October 21, 1:00PM EDT
Security: Evolving the Data Center
Rasool Kareem Irfan, Head, Telecom & Infrastructure Security Practice, Tata Communications Transformation Services Ltd (TCTS)
in association with:
From The Founder
Light Reading today starts a new voyage as part of a larger Enterprise.
Flash Poll
Live Streaming Video
Charting the CSP's Future
Six different communications service providers join to debate their visions of the future CSP, following a landmark presentation from AT&T on its massive virtualization efforts and a look back on where the telecom industry has been and where it's going from two industry veterans.
LRTV Documentaries
From Philly, With Love

9|30|16   |     |   (0) comments


Join Alan Breznick, cable's answer to the Italian Stallion, as he runs through the highlights of SCTE Cable-Tec Expo, lumbers along in Rocky Balboa's footsteps and searches for the perfect Philadelphia cheesesteak.
LRTV Interviews
CenturyLink: SD-WAN Customers Looking for Value Not Cost Savings

9|30|16   |   5:31   |   (0) comments


At NFV & Carrier SDN in Denver, CenturyLink's Eric Nowak told Light Reading that when customers launch SD-WAN, they aren't necessary looking to save money, but instead they are looking for more value from what they're spending. He also shared some unique case studies and lessons learned from launching SD-WAN services.
LRTV Custom TV
Flexible Deployment Approaches for the Gigabit Services Evolution

9|29|16   |     |   (0) comments


For many operators, the gigabit evolution begins with the shift from DOCSIS 3.0 to DOCSIS 3.1. But that move represents a change not only in the protocol itself, but in the approach to architecting their entire DOCSIS delivery chain -- from the headend to the outside plant and home gateway components.

Jonathan Ruff, senior director of global technical ...

LRTV Interviews
Level 3 VP: Enterprises Need More for Less

9|29|16   |   05:27   |   (0) comments


Andrew Dugan, Level 3 group vice president of global technology and IT, says enterprises need more bandwidth and they need it faster and with greater security, but they want to spend less, if possible. They are looking to carriers to reduce their network complexity and help protect them from cyberattacks as well.
LRTV Interviews
CenturyLink: SDN/NFV Pose New Interconnection Possibilities

9|28|16   |   04:37   |   (0) comments


Network operators should develop new APIs and business processes for reselling virtual assets to each other, says CenturyLink's Bill Walker. That will enable them to build digital business portfolios that help them avoid becoming commodity transport providers.
LRTV Interviews
Level 3: Overcoming Terror of Being Supplier, Integrator & Developer

9|28|16   |     |   (0) comments


At Light Reading's NFV & Carrier SDN event in Denver, Travis Ewert of Level 3 Communications said there is terror in becoming supplier, integrator and developer, but it can be overcome and be cost effective.
LRTV Custom TV
Introducing IoT World News

9|27|16   |   01:43   |   (0) comments


Self-driving cars, medical sensors, smart cities... and refrigerators. In order to address the huge scope of IoT, KNect365 has created a unique online community that will help businesses to understand and monetize the opportunities that live within the IoT market. We look forward to welcoming you to IoT World News -- your gateway to a better connected future.
LRTV Interviews
AT&T: Reusable Functions Next NFV Key

9|27|16   |   06:03   |   (0) comments


The next generation of NFV has to break functions down into reusable software chunks, making everything much more cloud-like.
LRTV Interviews
Masergy on Security: Attackers Gaining Upper Hand

9|27|16   |   5:10   |   (2) comments


At Light Reading's NFV & Carrier SDN event in Denver, Ray Watson, vice president of Global Technology at Masergy, says that because of the growth in virtualization, the threat landscape is shifting in favor of the attackers. As a result, service providers need to think beyond just defending the perimeter and take a more holistic approach to security.
LRTV Interviews
Verizon Takes Next Step on Biz Virtualization Journey

9|26|16   |   4:38   |   (2) comments


At September's NFV & Carrier SDN event in Denver, Light Reading sat down with Victoria Lonker, director of Product and New Business Innovation at Verizon, to chat about where the carrier is with delivering virtualized services to business customers.
LRTV Interviews
Global Services: The $40B Face-Off

9|26|16   |   05:53   |   (1) comment


More service providers than ever before are battling it out to win a slice of what is now a $40 billion global communications services pie, explains Ovum Principal Analyst David Molony.
LRTV Documentaries
MEC Congress: The Key Takeaways

9|22|16   |   03:25   |   (3) comments


Three key takeaways from the Mobile Edge Computing (MEC) Congress in Munich, Germany.
Upcoming Live Events
November 3, 2016, The Montcalm Marble Arch, London
November 30, 2016, The Westin Times Square, New York City
December 1, 2016, The Westin Times Square, New York, NY
December 6-8, 2016, The Westin Excelsior, Rome
May 16-17, 2017, Austin Convention Center, Austin, TX
All Upcoming Live Events
Infographics
Hot Topics
Eurobites: Telefónica Taps Juniper for Network Security
Paul Rainford, Assistant Editor, Europe, 9/26/2016
Powell Kills the Cable Show
Mari Silbey, Senior Editor, Cable/Video, 9/29/2016
Telstra Sees Quadrupled Data Capacity by 2020
Carol Wilson, Editor-at-large, 9/28/2016
Open Source Getting on My Nerves
Carol Wilson, Editor-at-large, 9/26/2016
Google, Facebook Gaining Network Equipment Clout
Patrick Donegan, Chief Analyst, Heavy Reading, 9/26/2016
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
Light Reading CEO Steve Saunders and UXP Systems CEO Gemini Waghmare discuss the strategic importance of digital identity for operators in the midst of transformation.
Join us for an in-depth interview between Steve Saunders of Light Reading and Alexis Black Bjorlin of Intel as they discuss the release of the company's Silicon Photonics platform, its performance, long-term prospects, customer expectations and much more.
Animals with Phones
There's Nothing Like Missing a Full Minute of Pokémon Go Click Here
Live Digital Audio

A vital part of increasing the number of women in comms is transforming the ways companies can support and empower women. While progressive company policies that support both men and women in achieving work-life balance are a step in the right direction, creating a company culture that supports those policies can at times be more challenging.

During this show, we'll talk to Lynn Comp, Senior Director of Industry and Sales Enabling (ISE) in the Network Platforms Group at Intel, about why those challenges exist and how companies can overcome them. She'll provide insight into how Intel has worked to create a culture that supports work-life balance, and provide steps and guidance for other companies wishing to do the same. We will also leave plenty of time to get your questions answered live on the air.