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Juniper Gains Ethernet Mojo

Juniper Networks Inc. (NYSE: JNPR) has turned around its fortunes from a year ago by crafting some new product strategies, but analysts remain split on how far the company has left to go.

Yesterday, Juniper plunged whole-hog into Ethernet, adding a full set of Layer 2 features to its JunOS software and expanding its MX line of Ethernet boxes. (See Juniper Expands MX.)

Juniper can now, in effect, offer pure Ethernet switches without IP routing, mimicking the strategy behind the Alcatel-Lucent (NYSE: ALU) 7450 Ethernet Services Switch.

"It opens up new revenue opportunities," says David Boland, product marketing manager for Juniper. "The Alcatel 7450 has taken advantage of a huge area of the marketplace that we have not been able to compete in."

The software features went out last month with the latest JunOS release but weren't announced until yesterday. The new MXs, the MX480 and MX240, are smaller versions of the MX960. (See Juniper Antes Up on Ethernet (Finally).)

The MX line has been a key factor in reviving Juniper from its situation last year, when analysts and investors were afraid the company had fallen behind Alcatel-Lucent, Cisco Systems Inc. (Nasdaq: CSCO), and Redback Networks Inc. in pursuing IPTV.

The concern was that IPTV architectures were based on masses of Gigabit Ethernet links, and Juniper lacked an Ethernet box to offer into that market. (See IPTV, Alcatel Still Dog Juniper.)

It didn't help that Juniper got hit with stock options distractions, some unexpected writeoffs, and some executive departures that exposed a lack of depth in the leadership ranks. (See Juniper Dusts Off Its Eraser and Juniper Loses More Execs.)

The MX960, announced a year ago, was Juniper's answer to the Ethernet gap. Already, it's starting to tally noticeable sales. Tim Daubenspeck, an analyst at Pacific Crest Securities Inc. , had originally forecast $30 million in sales for the box in 2007, but in June, he upped that figure to $50 million.

"The MX960 is having great traction, much better than they'd expected at this early stage," Daubenspeck says. "There's excitement around Juniper -- first, because they're showing some revenue acceleration, and also around the new COO."

That last part refers to former Macromedia CEO Stephen Elop, hired as Juniper's chief operating officer earlier this year. (See Juniper Revives COO's Office.)

Thanks to a runup that began in March, Juniper's stock is trading more than 100 percent higher than a year ago, and stands at $35.72.

Cisco, which hasn't done too shabbily itself, is up just 38 percent by comparison.

Investors might be smiling, but Juniper's case still isn't airtight. "The stock price has moved a lot, but the business hasn't changed a whole lot," says one analyst, who requested anonymity.

One problem for Juniper is that the MX line doesn't fit every part of the network. Specifically, Cisco reaches deeper when it comes to customer premises equipment and Ethernet demarcation boxes, with its ME 3400 line that was introduced last year. That line was a key element in the end-to-end service level agreement (SLA) for IPTV that Cisco announced this week. (See Cisco's SLA and Cisco Touts Ethernet Gear.)

"Cisco has a far more complete story when it comes to IPTV," says Sam Masud, an analyst with Frost & Sullivan . "I still see Juniper as struggling."

Juniper also has a handicap when it comes to scale, as it can't match up in size to Alcatel-Lucent, Cisco, or Redback's new owner Ericsson AB (Nasdaq: ERIC).

"Their size is really, really going to hurt them," Masud says. "They need to muscle up," possibly by getting acquired by a stronger partner, he says.

— Craig Matsumoto, West Coast Editor, Light Reading

lightreceding 12/5/2012 | 3:49:19 PM
re: Juniper Gains Ethernet Mojo Juniper has hardly done well with the Netscreen acquisition. Enterprise BU is not profitable. Momemtum of Netscreen has dropped after acquisition. No new products developed by Juniper. Lagging in merging J-Series with Netscreen. Made interim step of building SSG that confuses their positioning. Have lost all of product management and many sales people. Lost many reseller through bungling of the merger. Are propped up by a few resellers who are still hanging on.
Pete Baldwin 12/5/2012 | 3:01:58 PM
re: Juniper Gains Ethernet Mojo LOL. Good point.

If you take Juniper's words about 'traffic engineering' at face value, the company doesn't need to compete on scale (or add an enterprise portfolio to challenge Cisco). They still want to compete on technology.

Seems to be working this year, but some people still wonder about Juniper's role long-term.
tsat 12/5/2012 | 3:01:58 PM
re: Juniper Gains Ethernet Mojo
Look how good "muscling up" worked for Alcatel-Lucent.

Bigger is always better, right?

-tsat
^Eagle^ 12/5/2012 | 3:01:56 PM
re: Juniper Gains Ethernet Mojo I do not think Juniper needs an entire enterprise line of gear.

However, I do think they need to add a good ethernet based demarc device so that Juniper's customers could offer end to end ethernet from customer demarc across the WAN or MAN and to the demarc at the other end.

This is a typical split between carrier operated network and end customer's own enterprise.

A demarc would allow Juniper to offer this kind of end to end and all the OAMP that goes with it.

sailboat
delphi 12/5/2012 | 3:01:56 PM
re: Juniper Gains Ethernet Mojo Much ado about nothing. A company with Juniper's current footprint should have been able to move $100M or more in Ethernet switching.

Cloning the past products of other companies is not innovation. If they had the sales and marketing clout of Cisco you would take this seriously.

They have no direct route to the Tier 1 carriers. Their sales are still through partners which have other agendas.
chook0 12/5/2012 | 3:01:55 PM
re: Juniper Gains Ethernet Mojo Yeah. One of the sillier comments I have seen from an analyst recently. I can't think of a single stakeholder who would benefit from one of the big solutions/services companies (ALU, NT, E///, N-S, IBM, etc.) taking over JNPR, which to my mind is at the top end of the scale of being a technology-based company and headed for solutions.

Actually, I'm wrong. The investment bankers and the lawyers would clean up.

Also can't think of anyone who could afford to buy Juniper besides Cisco (except perhaps MOTO). I imagine both the customers and the anti-trust people would have some compaints about Cisco buying Juniper. it would be like Microsoft acquiring Apple.

Actually, I'm kinda impressed that Juniper managed to get into Enet switching using its own technology. None of the other big players managed that. The fact that they have a single OS code train across routing and switching should help them in the future but it's early days yet.

--chook
Pete Baldwin 12/5/2012 | 3:01:53 PM
re: Juniper Gains Ethernet Mojo If getting bought isn't the answer, then should Juniper be looking to buy someone else? Or do they still have enough problems after Netscreen?
chook0 12/5/2012 | 3:01:50 PM
re: Juniper Gains Ethernet Mojo Personally, I think Juniper needs to continue to execute well on what they have right now. The Netscreen acquisition seems to be going well for an acquisition, but merging two comparably-sized companies takes time (years).

No doubt they will make small acquisitions to fill gaps but they can do without a big acquisition for the forseeable.

--chook
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