Juniper Weathers Hypercloud Storm, Says CTO Koley

Mitch Wagner
2/27/2018

BARCELONA -- MWC 2018 -- Changing infrastructure demands from hypercloud providers are clobbering Juniper's bottom line, but that storm will peak this year and Juniper will emerge from it strong, chief technology officer Bikash Koley tells Enterprise Cloud News.

"It's an architecture change that is going to go on for another few quarters," Koley said in a one-on-one interview at Mobile World Congress on Monday. "We knew this, we expected this. In the process we are growing our footprint and once we are on the other side it's going to be a great space for us to be in."

In quarterly earnings reported this month, Juniper Networks Inc. (NYSE: JNPR) saw revenue declining a painful 10.5% to $1.24 billion, and the company reduced expectations for the coming quarter drastically. The company blamed the decline on hypercloud providers changing network architecture, from "scale up," where the providers buy big, expensive networking equipment, to "scale out," using large quantities of smaller, less expensive switches.

The problem from Juniper's perspective is that the price-per-port of the "scale out" architecture is lower than "scale up" switches.

Juniper CTO Bikash Koley
Juniper CTO Bikash Koley


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Hypercloud providers began reconfiguring their networks to scale out architecture about three years ago, and the trend accelerated over the past 12-18 months, Koley said.

The good news for Juniper is that it's strong in scale out, Koley said. Hypercloud providers are heavily invested in Juniper architecture, and the company's PTX series core routers pioneered scale out architecture, he said.

Koley is no stranger to the hypercloud. He joined Juniper as CTO in the summer, from Google (Nasdaq: GOOG), where he worked for nearly a decade, finishing as distinguished engineer and head of network architecture, engineering and planning. He designed, built and operated Google's network infrastructure, including data center, backbone, optical and content edge, with a focus on making the network programmable. (See Juniper Hires Google's Koley as CTO.)

Hypercloud providers are staying with Juniper as they make the transition to new architectures, although the change is hurting Juniper's bottom line, Koley said.

"Our rate of growth for ports is extremely high," Koley said. "But the ASP [average selling price per port] compression has been faster than the growth of ports. Once you are on the other side of this change, the ASP compression remains the same and the port rates continue to grow."

At the time Juniper announced earnings, Jefferies & Co. Inc. analyst George Notter expressed skepticism that the problems were attributable to changing demands by hypercloud providers, and that the difficulties would be temporary. Hypercloud providers have been making the transition for a while, and Arista Networks Inc. remains strong despite the transition, Notter noted. (See Enterprise Leads Blockbuster 4Q for Arista – but Wall Street's Not Impressed.)

Also, Cisco Systems Inc. (Nasdaq: CSCO) recently reported a return to revenue growth after a two-year slump. (See Cisco Returns to Growth, With Help From Network Automation.)

So why is Juniper different?

Koley says Juniper has a footprint in hyperscale cloud backbone networks that Cisco and Arista don't have. Cisco supplies edge routers, and Arista provides data center spines. Arista does that "very well. I give them credit. But that is not the core," Koley says.

Enterprises will make the same transition to scale-out architecture that hypercloud providers are making, which expands Juniper's potential market, Koley said. "It allows us to go after the enterprise in merchant silicon. If it's scale-out, you're not looking at massive boxes. You are looking at small-footprint boxes. The real investment will be in software."

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— Mitch Wagner Follow me on Twitter Visit my LinkedIn profile Visit my blog Follow me on Facebook Editor, Enterprise Cloud News

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kq4ym
kq4ym
3/8/2018 | 9:50:01 AM
Re: Juniper's clock is ticking...
The ten percent decline doesn't look good, and I would agree that a merger might be in the cards for Juniper. But, things can change and predicting the future is not always an exact science in a fast changing industry with developments ocurring at regular intervals.
mhhfive
mhhfive
3/6/2018 | 3:28:52 PM
Juniper's clock is ticking...
The downward trend at Juniper has been going on for several years now... it'll be impressive to see it bounce back, but I assume we'll see a merger or acquisition that fuels Juniper's second life (if it doesn't just die off completely).
Ariella
Ariella
2/27/2018 | 9:49:14 PM
Re: juniper
@Michelle absolutely, any business plan has to account for the downturns in the market, particularly when they are that predictable and inevitable.
Michelle
Michelle
2/27/2018 | 9:44:44 PM
Re: juniper
Heh, that seems like it should have been part of the planning stage. 
Ariella
Ariella
2/27/2018 | 3:12:44 PM
juniper
<The problem from Juniper's perspective is that the price-per-port of the "scale out" architecture is lower than "scale up" switches.> But shouldn't they have anticipated this impact and adjusted expectations accordingly?
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