Light Reading

Is There More to Juniper's Earnings Miss?

Craig Matsumoto
News Analysis
Craig Matsumoto
1/12/2012
50%
50%

Most analysts are chalking up Juniper Networks Inc. (NYSE: JNPR)'s weak fourth quarter to political posturing by AT&T Inc. (NYSE: T). But one is saying it's the first sign of a long-term shift in router demand.

The rise of packet-optical transport systems (P-OTS) and of carrier-owned content delivery networks (CDNs) is going to dilute the need for more service-provider routers, believes ACI Research analyst Ed Zabitsky.

Juniper announced Monday afternoon that fourth-quarter earnings would be even lower than the company had warned in October due to weakness in router sales, particularly in North America. (See Juniper's Q4 Got Even Worse and Juniper's Getting Stalled on Revenues.)

Most analysts concluded that AT&T was at fault. As the T-Mobile US Inc. deal unraveled, the carrier curbed its spending to try to "turn the equipment vendors into lobbyists," wrote analyst George Notter of Jefferies & Company Inc. in a note earlier this week.

Zabitsky sees something bigger going on, though. Since early in 2011, he's been saying that router demand, particularly core routers, is going to be in trouble.

The rise of P-OTS, for example, is a way to accommodate growth without using so many core-router ports; "router bypass" is a favorite phrase around this topic. Then you've got CDNs, which let carriers cache content locally rather than reaching across the network to get it -- call it "network bypass," if you will. Both effects will dampen the demand for routers, Zabitsky thinks.

One key point of his argument is that Juniper's T-4000 core router began shipping in the fourth quarter and doesn't seem to have kicked off a wave of orders. That would be unusual. "Every new major product, when it comes out, comes with huge orders from existing customers," Zabitsky says.

But Juniper's bookings in the fourth quarter were about on par with its sales -- a book-to-bill ratio of about 1.0, as the company announced Monday. The fact that Juniper didn't say the book-to-bill was greater than 1.0 means it probably wasn't, Zabitsky says, and that's an indication that sales aren't growing in the immediate term.

Even with router revenues down, the T-4000 should have had an impact on Juniper's bookings, he says. To him, it all means that core-router demand might be down inherently.

Whether Zabitsky is right probably won't be settled when Juniper announces earnings on Jan. 26. (And because it's in that pre-earnings zone, Juniper declined to comment for this story.)

Most analysts expect a pretty big 2012 from Juniper. It's got four new product lines to ship -- the T-4000, the PTX, the QFabric super-data-center platform and the MobileNext evolved packet core. Analysts seem a little less certain about MobileNext, but they've been pretty jazzed about the other three.

Here's some more about Juniper's troublesome quarter:



— Craig Matsumoto, West Coast Editor, Light Reading

(12)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View
Page 1 / 2   >   >>
digits
50%
50%
digits,
User Rank: Light Beer
12/5/2012 | 5:45:53 PM
re: Is There More to Juniper's Earnings Miss?


Isn't it a bit early to be attributing core router sales weakness to next gen packet-optical and CDN deployments? Maybe not but that feels like more of a 2013/4 trend than one that would impact late 2011... 

Pete Baldwin
50%
50%
Pete Baldwin,
User Rank: Light Beer
12/5/2012 | 5:45:52 PM
re: Is There More to Juniper's Earnings Miss?


That's what I asked Zabitsky.


He's convinced the CDN effect has already started and is manifesting itself in carrier behavior.


For packet-optical... It may be early, but he was saying back in March (when the PTX was announced) that he expects some carriers to hold off on T4000s while they wait for the PTX. So, that effect is possible.


 

digits
50%
50%
digits,
User Rank: Light Beer
12/5/2012 | 5:45:49 PM
re: Is There More to Juniper's Earnings Miss?


I guess it might be a few more quarters before we find out if he is on to something as it's possible a lot of AT&T suppliers might get a nice bump in Q1 that will skew any actual trends...

photon2
50%
50%
photon2,
User Rank: Light Beer
12/5/2012 | 5:45:48 PM
re: Is There More to Juniper's Earnings Miss?


This is merely a cycle that comes around eveytime bandwidth increases, and core routers need to handle more, the fact is technology around the core increases and gets deployed to keep core routers down.  This happened in the late 1990's, and CDN's are proving to do an even better job now.  Fact is, this will affect any core router vendor, not just Juniper.  I think it has little to do with the POTs segment.


P2

jggveth
50%
50%
jggveth,
User Rank: Light Beer
12/5/2012 | 5:45:48 PM
re: Is There More to Juniper's Earnings Miss?


I think he's onto something here with his JNPR call but is there a single stock he doesn't have a Sell Short rating on? 

photon2
50%
50%
photon2,
User Rank: Light Beer
12/5/2012 | 5:45:47 PM
re: Is There More to Juniper's Earnings Miss?


Now THAT is insanely true!  LOL.


P2

jggveth
50%
50%
jggveth,
User Rank: Light Beer
12/5/2012 | 5:45:47 PM
re: Is There More to Juniper's Earnings Miss?


Lets not forget the most important take away here. Vendors that want to sell to carriers should not hire MSFT execs. 

desiEngineer
50%
50%
desiEngineer,
User Rank: Light Beer
12/5/2012 | 5:45:44 PM
re: Is There More to Juniper's Earnings Miss?


Shouldn't you wait for more router vendors to say the same before declaring this as a general problem, rather than a single vendor problem?


I believe all the router vendors are also investing in CDN infrastructure, so when does that pick up lagging core router sales?


-desi

alr
50%
50%
alr,
User Rank: Light Beer
12/5/2012 | 5:45:43 PM
re: Is There More to Juniper's Earnings Miss?


According to one Cisco exec, they see no problems. We should know in a month when Cisco reports.


 


http://www.forbes.com/sites/er...

Pete Baldwin
50%
50%
Pete Baldwin,
User Rank: Light Beer
12/5/2012 | 5:45:42 PM
re: Is There More to Juniper's Earnings Miss?


> Shouldn't you wait for more router vendors to say the same before declaring this as a general problem, rather than a single vendor problem?


Possibly. Depends on how gutsy a call you're trying to make.


Regarding Cisco not seeing effects -- Juniper does have the handicap of having the T4000 just now coming out. The transition might give customers an extra reason to hold off on buying.


It occurs to me, too ... on the packet-optical side, Juniper will see business move to the PTX. For Cisco, though, some of that business will stay in the "router" category, since they're offering the CRS-3 as their massive core MPLS switch.


Tying the two threads together: It will be interesting to watch both companies during the course of the year. Maybe it's an industrywide effect that Cisco is just a little later in encountering. Maybe it really is all Juniper-specific. I don't know.

Page 1 / 2   >   >>
Flash Poll
From The Founder
Networks of the future will rely on "white box" switches and servers rather than proprietary hardware and that's going to alter the shape of the communications industry. Who says so? John Chambers.
LRTV Custom TV
The Benefits of HyperScale Clouds for NFV

3|27|15   |   01:50   |   (0) comments


Hyperscale cloud has been developed by the Internet giants to support the creation and delivery of software-based services at blistering speeds, and at the lowest possible cost. The original ETSI NFV vision was to adopt hyperscale cloud architecture and practices. This vision has become somewhat obscured along the way, due to misunderstandings about the hyperscale ...
LRTV Huawei Video Resource Center
eLTE Rapid Meets the Need for Speed

3|26|15   |   4:45   |   (0) comments


Designed especially for emergency and dedicated ad hoc local mobile communications coverage, Huawei's eLTE Rapid solution can deliver trunked voice, video and data coverage for multiple users over a 6km range and be set up in just 15 minutes, explains Huawei's Norman Frisch.
LRTV Huawei Video Resource Center
On Videos: Challenges & Opportunities

3|26|15   |   5:56   |   (0) comments


Most everything is now connected. And along with 4K and 4G technologies, everyone could be creating and broadcasting video contents. Users are expecting better video experience with any screen, anywhere and anytime. Operators will meet new challenges, but also see some big opportunities.
LRTV Custom TV
JDSU: Delivering Dynamic Networks for a Personalized Experience

3|26|15   |   5:59   |   (0) comments


Light Reading speaks to JDSU at Mobile World Congress 2015 about new solutions in the areas of HetNets, VoLTE, backhaul, virtualization, big data analytics, and real-time intelligence.
LRTV Custom TV
Smarter Service Chaining & New Ways to Benefit From Qosmos Technology

3|25|15   |   03:11   |   (0) comments


David Le Goff, director of strategic and product marketing at Qosmos, explains how the company has added application awareness to subscriber information to make service chaining more efficient and reduce costs for networking and infrastructure. In addition, Qosmos technology, which has been delivered as C libraries, is now also available as a virtual machine, ...
Between the CEOs
Qosmos CEO: The Changing Face of DPI

3|24|15   |   13:53   |   (0) comments


LR CEO and Founder Steve Saunders sits down with the head of Qosmos to talk about the changing state of the art in deep packet inspection technology, including its role in SDN and NFV architectures. Also, how the comms market is becoming more like the automotive industry.
LRTV Huawei Video Resource Center
FC Schalke Scores With Its Agile Stadium

3|24|15   |   6:23   |   (0) comments


Top German soccer club FC Schalke 04 has deployed a new, agile WiFi network from Huawei in its Veltins-Arena stadium and is reaping the benefits in terms of customer satisfaction and business opportunities, explains marketing chief Alexander Jobst.
LRTV Huawei Video Resource Center
Huawei’s Insights on Mobile Video

3|24|15   |   7:51   |   (0) comments


More people than ever are now watching videos on smartphones. Seventy percent of mobile traffic will be video traffic until 2018. In this video, Huawei's exports give their insights on mobile video in terms of business model, network planning and 4G network construction.
LRTV Documentaries
The Rise of Industry 4.0

3|24|15   |   02:26   |   (9) comments


Are you ready for the fourth industrial revolution? It's a big deal for influential operators such as Deutsche Telekom.
LRTV Huawei Video Resource Center
Getting Connected With eLTE

3|23|15   |   06:04   |   (0) comments


Trunked radio communications have entered the 4G LTE world, and with Huawei's eLTE solution, can now deliver a full range of data and video services as well as push-to-talk voice, explains Huawei's Norman Frisch.
LRTV Huawei Video Resource Center
Funkwerk’s on Track With Huawei

3|19|15   |   3:23   |   (0) comments


GSM-R technology specialist Funkwerk and Huawei have forged a partnership that is benefiting both parties, notes Funkwerk's Gottfried Winter.
LRTV Documentaries
How EANTC Tested Cisco's Virtualization Solutions

3|18|15   |   5:49   |   (0) comments


Carsten Rossenhövel, managing director of independent test lab EANTC, tells Light Reading founder and CEO Steve Saunders about the innovative approach his team had to take when validating Cisco's service provider virtualization and cloud solutions.
Upcoming Live Events
April 14, 2015, The Westin Times Square, New York City, NY
May 5, 2015, Hyatt McCormick Place, Chicago, IL
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
All Upcoming Live Events
Infographics
Hot Topics
AT&T Woos SMBs With Small-Scale WiFi
Sarah Thomas, Editorial Operations Director, 3/26/2015
Just Don't Say IBM Is 'Relaunching' Networking Business
Mitch Wagner, West Coast Bureau Chief, Light Reading, 3/26/2015
The Rise of Industry 4.0
Ray Le Maistre, Editor-in-chief, 3/24/2015
Google Hires Wall Street's Most Influential Woman as CFO
Dan Jones, Mobile Editor, 3/24/2015
Average US Broadband Speeds No Great Shakes
Mari Silbey, Independent Technology Editor, 3/25/2015
Like Us on Facebook
Twitter Feed
Webinar Archive
BETWEEN THE CEOs - Executive Interviews
LR CEO and Founder Steve Saunders sits down with the head of Qosmos to talk about the changing state of the art in deep packet inspection technology, including its role in SDN and NFV architectures.
Chattanooga’s EPB publicly owned utility comms company has become a poster child for how to enable a local economy using next-gen networking technology. Steve Saunders, Founder of Light Reading, sits down with Harold DePriest, president and CEO of EPB, to learn how EPB is bringing big time tech to small town America.
Cats with Phones
Interspecies Phone Love Click Here
"No, you hang up."
"No, YOU hang up."
Latest Comment