August 1, 2003
Juniper Networks Inc. (Nasdaq: JNPR) confirmed today that it is discontinuing its own G-series Cable Modem Termination Systems (CMTS), in lieu of a decision to partner with Arris International, one of the many companies that was formerly stomping Juniper flat in that market (see Juniper, Arris Team for Cable).
The decision signals that Juniper's decision to buy Pacific Broadband Communications (PBC) in late 2001 was probably a $200 million mistake (see Juniper to Buy Pacific Broadband). The PBC gear, which became the G-series product line, had landed only two customers in its lifetime, only one of which was a direct sale.
In July 2002, Scientific-Atlanta Inc. (NYSE: SFA), a PBC reseller, said that Sweden's largest cable operator, com hem AB, had bought a CMTS system that was based on the PBC-Juniper technology. In October 2002, Juniper said that Taiwanese service provider Yaw Jenq Technology Corp. planned to deploy the G-series systems.
The company liked to point to its recent deal with Cox Communications Inc. (NYSE: COX) as an indicator that it was having success in the cable market, but, as one industry wag put it, "Cox took one look at Juniper's CMTS and liked it so much that it bought a bunch of [Juniper] T-series routers instead."
As of yesterday, Juniper dismissed word of its CMTS bow-out as a rumor. This morning, however, the company detailed the G-series cancelation, facility closures, layoffs, and a $10 million to $15 million charge against earnings.
Some rumor, eh?
It's no surprise Juniper is canning its CMTS line. Of late, the G-series has been a subject that Juniper and its partners have been uneasy talking about. "Obviously... we still have a partnership with Juniper and they are looking into how they want to move forward in this business, and we keep looking at the landscape and deciding what to do," said Dwight Duke, a senior VP at Scientific Atlanta, during SFA's latest earnings call.
As if that weren't a milquetoast enough endorsement, Juniper, on its most recent conference call, didn't even mention the G-series once until questions about the product line's activity were put to CEO Scott Kriens. Kriens said there had been some activity, shuffled around verbally, and gave no details.
Not only was the Juniper G-series getting pummeled by competitors, but the CMTS market overall has been shrinking substantially in recent years. Arris, ADC Telecommunications Inc. (Nasdaq: ADCT), Cisco Systems Inc. (Nasdaq: CSCO), Motorola Inc. (NYSE: MOT), Terayon Communication Systems Inc. (Nasdaq: TERN), and 3Com Corp. (Nasdaq: COMS) all have products in the CMTS space. Market researcher Infonetics Research Inc. says Cisco leads the worldwide CMTS market in revenues, with Arris and ADC next in line.
Infonetics says that in the year 2002, the CMTS space was a $446 million market worldwide, down significantly from the year 2000, when it was a $745 million market.
"The CMTS business has not been a bell ringer for Juniper," says Stephen Kamman, an analyst with CIBC World Markets, who associates ringing bells with revenues, in a Pavlovian sort of way.
— Phil Harvey, Senior Editor, Light Reading
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