Juniper Gains Ethernet Mojo
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