If you're bullish on the cloud, the fourth-quarter earnings report from Juniper Networks, released Thursday, will have looked promising. And if your primary focus is cybersecurity, the challenges Juniper has faced will be revealing, if not shocking.
Juniper Networks reported fourth-quarter revenues of nearly $1.4 billion, an increase of 5% compared with the same quarter a year earlier. For the full year, revenues were $4.9 billion, a 3% increase over 2015.
The vendor's revenue mix provides the greatest insight into where the market action is currently and where it's headed for Juniper. In the fourth quarter, $978 million in revenues came from service providers, while $407 million was generated by enterprise customers. The service provider revenues were up by 15% compared with the third quarter, and up 5% year-on-year, while the revenues from the enterprise business declined by 5% quarter-on-quarter but grew also by 5% year-on-year.
Juniper noted that, of its ten largest customers in the fourth quarter, five were cloud providers, three were telcos, and two were enterprises. In the earnings call with analysts and journalists, CEO Rami Rahim noted that cloud transformation is a primary area of focus for the company, regardless of the customer type. In a response to an analyst question, Rahim said, "Cloud vertical and cloud transformation are the biggest drivers of strategy" at the company.
Even among Juniper's telecoms operator customers, executives said, the push to cloud is a major sales driver. As telcos shift more of their infrastructure to a cloud-based, SDN-controlled architectures, the balance of their product choice changes. "The demand for cloud services is growing rapidly and cloud customers value high performance infrastructure," Rahim said. "As telcos evolve to cloud infrastructure, they'll delay investment in traditional infrastructure." The net result for Juniper is not an increase in overall sales to telecom companies, but a dramatic shift in the products sold to that vertical.
The one area in which Juniper saw a dramatic drop in sales was security hardware. Rahim said, "Security did worse in 2016 because we mis-timed the transition [to cloud]. In the 3 year period it won't grow as well as predicted because of the slow start." In spite of that, Rahim did say that the company predicts that its security business will grow in 2017 and will continue to grow in subsequent years.
Overall, Rahim said the company is seeing solid growth in its QFX series of switches. In many customer cases, the switches are, "…still being evaluated and tested, customers are becoming more confident," Rahim said. "Some are net-new customers. In other cases they've been relying on relationships with existing customers who now have the ability to take advantage of the switch line that has the same OS and operational model as their routers."
According to Juniper, its largest customer base and sales growth remains in North America, where there is a greater concentration of hyper-scale cloud service providers than in the rest of the world. Along with telecoms, those companies are seen as remaining at the heart of Juniper's customer base for the foreseeable future.
— Curtis Franklin, Security Editor, Light Reading