January 28, 2020
Juniper returned to growth in its fourth financial quarter, but cloud and enterprise had to carry the stumbling service provider sector.
Net revenues for the fourth quarter of 2019 were $1.2 billion, up 2% year-over-year and 7% sequentially. On the other hand, annual revenues were $4.4 billion, down 4%, according to financial results reported Monday.
"We returned to year-over-year growth during the December quarter and saw encouraging trends across various areas of our business, including record enterprise sales, double digit year-over-year growth in the cloud, solid momentum with Mist, and another quarter of strength in our services organization," Juniper CEO Rami Rahim said in a statement.
Quarterly results beat expectations for both the top and bottom line, Juniper CFO Ken Miller said.
But service provider business was a laggard, declining 5% year-over-year in the quarter, and 12% annually. "Our service provider business remains challenged ... [However], the pace of year-over-year declines began to moderate, which is a trend we expect to continue during the upcoming year," Rahim said. (Rahim's statement is the CEO equivalent of giving a kid a "participation" award when they fail at everything else.)
The service provider business will "present less of a headwind in future periods" due to the transition to MX 5G line cards, success of the Contrail telco cloud platform, high-end security updates and the availability of new edge products, Rahim said. The breadth of solutions Juniper sells into telcos is increasing -- not just the traditional routing, but also switching, security, software, cloud and telco cloud, said the Juniper boss.
Juniper does not anticipate a return to telco growth this year -- growth is expected in 2021, or beyond. But it does anticipate reduced "headwinds," Rahim said. 5G is a catalyst, driving major investment activity over the next few years, combined with metro networking and strategic partnerships with vendors like Ericsson.
But the news wasn't all bad
Other sectors helped lift overall results. Enterprise business grew for the third consecutive year, with record performance in the December quarter. Additionally, Juniper saw year-over-year growth in the cloud vertical, following a difficult product transition. Juniper's $405 million acquisition of Mist last year has proven successful, and the vendor is seeing strong software growth, Rahim said.
In the enterprise, Juniper sees "healthy traction" from its secure SD-WAN product, combining cloud management, security and WiFi. The SD-WAN product, which is still in its early days, opens the door for Juniper for other product and service sales.
Cloud grew 18% year-over-year, the third consecutive quarter of growth, and the company has been successful in both hyperclouds and second-tier cloud providers, Rahim said.
Cloud providers will begin deploying 400Gbit/s equipment in the second half of 2020, but big deployments will wait until 2021, Rahim said.
Security grew 3% year over year, services grew 2%, software grew 16% and was greater than 10% of total revenue, while routing declined 12% and switching declined 4% -- both primarily due to weakness in the service provider market.
In other words, Juniper's software and services business is growing, but its hardware business is shrinking.
During analyst Q&A, Juniper executives were asked if they have plans to disaggregate software and hardware and sell those separately, as Cisco has done with its Silicon One strategy, announced last month.
Rahim said the company has already disaggregated its software from silicon so that it can move to different silicon platforms. However, the company has no plans to sell silicon separately, due, it says, to lack of demand.
However, customers have shown interest in running the SONic open source network operating system, designed for cloud data centers, on Juniper hardware, and Juniper is working on that, Rahim said.
For the current, first quarter, Juniper expects revenue of $1.03 billion plus or minus $30 million, and non-GAAP net income per share of about $0.27, plus or minus $0.03. Analysts expected revenue guidance of $1.034 billion, and 31 cents in earnings per share, according to The Street.
Juniper traded at $24, down 1.92% after hours.
— Mitch Wagner Executive Editor, Light Reading
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