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IPTV, Alcatel Still Dog Juniper

Juniper Networks Inc. (NYSE: JNPR) doesn't consider itself to be on the defensive, but it nonetheless arrives at this week's Globalcomm tradeshow under attack.

The company has spent the past year trying to deflect barbs that competitors -- notably, Alcatel (NYSE: ALA; Paris: CGEP:PA) and Redback Networks Inc. -- are eating away at its market and stealing IPTV business that should have gone to Juniper. CEO Scott Kriens has done his best to respond, but investors don't seem satisfied -- neither with the explanation, nor with the stock's performance.

A glance around the stock market makes it obvious why investors are concerned. Juniper stock closed at $17.47 yesterday, down 32 percent from its price a year ago. By contrast, Alcatel and even Cisco Systems Inc. (Nasdaq: CSCO) -- which, like Juniper, has spent the last two years in the doldrums -- are up on the year. And Redback has surged mightily.

Table 1: Juniper Stock: Behind the Curve
6/1/06 price 6/1/05 price Change
Juniper $17.47 $25.67 -32%
Alcatel $13.43 $11.25 +19%
Cisco $20.50 $19.88 +3%
Redback $24.16 $5.98 +304%
Source: Light Reading




On top of all this, Juniper is facing the chagrin of Wall Street for a recent "clarification" that sent analysts scurrying to lower their 2006 earnings estimates.

Juniper said its third quarter, which ends in September, would see revenues about equal to the second quarter. Analysts had expected third-quarter revenues to reach $597 million, compared with anticipated second-quarter revenues of $567 million, according to Reuters Research . (See Analysts Jump on Juniper.)

The announcement was not a change in earnings forecasts, but a clarification of previous forecasts, Juniper officials say. Still, analysts seem to be feeling a bit stung. ("Only Juniper could call it a 'clarification,' " one scoffs.) It's true that Juniper never promised a rosy third quarter -- but the company did say to expect growth in the second half of 2006, and it let analysts assume that third-quarter growth would be a part of that. Now, it's telling them all the growth will be packed into the fourth quarter.

IPTV wars
There's not much Juniper can do about that now. The longer-term concerns still revolve about IPTV and market share.

Alcatel, in particular, has been reporting one IPTV win after another, many of them using the company's 7450 Ethernet Service Switch -- a box for which Juniper offers no direct competitor. (See Alcatel Router Revenues Surge.)

Juniper denies that it's in trouble with IPTV. Officials repeatedly point out that Juniper has routers ensconced in the top two IPTV deployments in the world -- with Hong Kong's PCCW Ltd. (NYSE: PCW; Hong Kong: 0008) and Italy's Fastweb SpA (Milan: FWB) -- and eight of the top 10. "Seventy percent of all IPTV subscribers in the world are running on Juniper's edge equipment," says Shailesh Shukla, vice president of carrier and service provider marketing. (See Juniper Looks Beyond IPTV and Juniper Defends Core Business in Q1.)

And Juniper appears to be holding its No. 2 status behind Cisco in routing, despite Alcatel's claim of significant market-share gains in certain edge-routing categories. (See Juniper Touts Ranking.)

Juniper further believes it's unfair to assume Alcatel's wins are stealing Juniper routing business.

Alcatel's IPTV-related wins have come mostly in the Ethernet aggregation space, gathering up the Gigabit Ethernet flows that will be used to carry video. Juniper doesn't even sell an aggregation product; rather, its IPTV work lies in the IP routers that lie deeper in the network, Shukla says.

"The market confuses the IPTV hype and the reality," Shukla says. "In the segments that we play in, we are the leader. And we have not shared all of the wins we have gotten in the last two years."

Analysts don't completely buy that line of thinking.

Prudential Equity Group LLC analyst Inder Singh remains unconvinced that Juniper is being used as a key video-carrying component in all of those IPTV deployments. And others note that whatever job Alcatel's systems are doing, they're taking work away from Juniper.

"I would agree Juniper does not do aggregation in a traditional sense, but Alcatel is fulfilling the role of the edge router and subscriber management," says Erik Suppiger, an analyst with Pacific Growth Equities Inc. "Alcatel is using a different architecture to address a lot of the functionality Juniper would otherwise provide."

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dav_006 12/5/2012 | 3:52:39 AM
re: IPTV, Alcatel Still Dog Juniper I just get a feeling that Juniper is being very defensive ;) Juniper a company that was supposed to be shaking the "Big bad Cisco" by grapping market share year after year, has now become a stale company.

I think they lost the innovative spirit, as they just got very comfortable with their position. I like their products and thought that this company has great potential GǪ but now think that they lacks the fire to become number 1 .. as that innovative sprit is sleeping I guess.

I just hope that they donGÇÖt try to partner with Nortel .. because that would be very funny.
gottappp 12/5/2012 | 3:52:39 AM
re: IPTV, Alcatel Still Dog Juniper More likely - they decreased the amount of their marketing budget that goes to LR...
lightreceding 12/5/2012 | 3:52:38 AM
re: IPTV, Alcatel Still Dog Juniper Juniper has hardly disappeared. What is missing are public statements about their strategy. This has been commented on by the analysts. They are well entrenched in the Service Provider market. They are breaking in to the Enterprise market. They have the #2 position in core and edge routing. They hold # 1, 2, 3 positions with security products from Netscreen. They acquired Peribit and Redline and have a major share in to the application acceleration space. Rumors are that a new switch is on the way. If anything they would partner with Motorola. They have recently appointed people to executive roles and have reorganized around the Service Provider and Enterprise segments. My guess is that they are still figuring out their value proposition and mission statement.
optobozo 12/5/2012 | 3:52:38 AM
re: IPTV, Alcatel Still Dog Juniper Consipicuous in its absense was mention of Juniper's inclusion on the S&P 500.

I've got to say, I was really curious about all the Juniper IPTV bashing juxtaposed against LR questions about what IPTV was and how to deploy it in Handling Broadcast Content in Emerging IPTV Networks (http://www.lightreading.com/do...

Don't you first have to understand what it is and how it runs before you bash or praise a vendor's products?
Pete Baldwin 12/5/2012 | 3:52:37 AM
re: IPTV, Alcatel Still Dog Juniper dav_006 and lightreceding are on the right track.

No one's saying Juniper is in danger of collapse. But it *is* a lot of frustration with the company these days.

My take is that Juniper at an adolescent period where it's no longer good enough to be the alternative to Cisco. Juniper's technology got them this far, and now it's time to come up with a strategy for the next phase of life.

They've kind of done that with Scott Kriens' "Traffic engineering" mantra ... but that's obviously not turning investors' heads, and it didn't anticipate the rise in Layer 2 interest. Time for a new plan -- hence the clutch of folks now running marketing.

You might say it's frivolous to build a strategy around what Wall Street wants, but hey -- Cisco (IMHO) does the same thing.

Separately: It's quite fair to say that Juniper and Alcatel simply have differing IPTV architectures. For now, Alcatel's way -- based on lots and lots of GigE -- is getting a lot of attention. Maybe Juniper is betting that that architecture doesn't have legs. Some folks, though, would rather see Juniper go on the attack.
dav_006 12/5/2012 | 3:52:37 AM
re: IPTV, Alcatel Still Dog Juniper I agree that Juniper is going to start pushing their message across particularly after beefing up their marketing team. I really think that from a product point of view they really showed the user that there are ways to provide superior products with quality, and we should not take Cisco implementation as the standard. I would have expected Juniper to use the same great strategy and push out bigger and better products.

Juniper does provide the same end to end solution for IPTV like Alcatel, and I think it would be wrong to try and compare the two companies. JuniperGÇÖs products do play a big role in another part of the IPTV network.

The reason I mentioned Juniper and Nortel partnership is because Nortel named former Juniper Networks strategy and business development chief George Riedel as its own chief strategy officer. We all know Nortel could never play in the IP/MPLS space.
jasanz 12/5/2012 | 3:52:36 AM
re: IPTV, Alcatel Still Dog Juniper Reading the debate with interest, I am still strugging to see Juniper "resurrecting" from the rough patch they have gone over the last half a year... I have read people talking about Peribit and Redline... (Niche payers, WAN Accelerators)... What happened to Kagoor? Has that SBC know-how been sucked into the JNPR's portfolio?

I used to like JNPR a lot... now... I do not see their strategy so clear... Cisco and Alcatel seem to be taking some of Juniper's lunch!
paolo.franzoi 12/5/2012 | 3:52:36 AM
re: IPTV, Alcatel Still Dog Juniper
The basic issues surrounding Juniper from a Wall St. standpoint:

1 - Core Routing: Stable revenue and market share. Clearly no longer an engine for sustained growth, but a good place to generate cash on an ongoing basis.

2 - Edge Routing: Clearly Alcatel in particular is making inroads and Redback is improving. Where or where is the E320? Who is deploying it?

Both of these are the existing carrier businesses that Juniper was running.

3 Enterprise: Done through acquisition. Doing okay, but is it doing better than it was as a standalone? Was the diversification worth the loss of focus (see Edge Routing)?

So, it is not clear that Juniper is on a path that takes significant share from Cisco on the Enterprise. On top of that the old Unisphere business is not doing well at all.

Wall Street is looking for some concrete way that Juniper plans to turn around the Edge Routing Business or accelerate the Enterprise Business or both.

seven
materialgirl 12/5/2012 | 3:52:35 AM
re: IPTV, Alcatel Still Dog Juniper It seems to me that JNPR has also been caught in an architectural mess. On the service provider side, does anyone really think (as has been mentioned before) that IP-TV will become a real business, much less a real product?

On the enterprise side, does anyone think that IOS can handle rich traffic like VoIP while handling security needs? Does anyone think customers will upgrade ALL of their OS instances to get these proprietary CSCO features?

It seems as though JNPR is growing too slowly in the enterprise space relative to CTXS or even FFIV. However, the legacy security vendors are all shrinking, so there is a problem with that overall. Perhaps it is a market pause.

Bottom line, JNPR management does look too arrogant and lazy, but their markets are also in a strange sort of flux.
dashnerp1 12/5/2012 | 3:52:30 AM
re: IPTV, Alcatel Still Dog Juniper . . as to this confusion from the posters rampant on these boards as to the "reality" of IPTV. Folks its here and it ain't going no where. Its not a matter of choice anymore its a matter of competition. Maybe at the RBOC level its still creeping its ugly and painful head up the chain but in the lower tier providers its a matter of survival. They have no choice but to enter this market and get it right. Survival against the MSOs makes IPTV a reality. Otherwise the smaller telco players might as well pack up and sell now while the price is high. As for Juniper the face they put on in presentations doesn't exactly inspire confidence. Their core products are A+ but everything else they are trying to do looks piecemeal and weak. We have a lot of their products and we love the ones we got but the other strategies and innovations they keep talking about are late and unimpressive. Finally just please please please stop this nonsense about whether or not IPTV is a viable product - what is the saying - necessity and inventions or something?
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