Juniper Goes to the Edge

Juniper Networks Inc. (Nasdaq: JNPR) is going after Cisco Systems Inc. (Nasdaq: CSCO) again. Today the company announced its M5 and M10 routers, which are aimed directly at the edge router market and Cisco’s 7500 router family.

"It’s a smart move," says Doug Antaya, VP of marketing for Ironbridge Networks Inc.. "They [Juniper] see the volume in this market and they’re going after Cisco’s lunch."

Investors have been expecting something new from Juniper. With a market capitalization of $68 billion, about 300 times its 12-month revenues, it was time for the company to make a move. The company's recent success in chipping away at Cisco’s market share in the core router market (see Cisco Takes a Dip) puts it in a natural position to expand its product line.

"They have already established a decent market share," says Jennifer Pigg, executive VP for The Yankee Group. "And they have such lofty expectations that they really needed to broaden their offering to keep pace."

Beyond Cisco and Juniper, companies like Amber Networks, Riverstone Networks, and Foundry Networks Inc. (Nasdaq: FDRY) are hoping to get a piece of the edge router market.

Juniper has steadily added products around its flagship M40 router. In November 1999, a year after the M40 launched, the company introduced the M20. Six months later, it introduced the M160 core router and the new Internet Processor II application specific integrated circuit (ASIC) (see Juniper Sees Quadruple ). Now, six months later, the vendor has gone back to a smaller form factor with the M5 and M10 routers, which respectively support 5 Gbit/s and 10 Gbit/s of capacity.

Essentially, Juniper is taking the same technology it has developed for core routing and is employing it in a new market segment. For example, the modules for the M5 and M10 can also be used in the larger M20 and M40 routers. The JUNOS routing software and management software are also the same across the different platforms. And the Internet II processor, which was first introduced last spring, is used in each of the five products.

Building out the product portfolio on the lower end is practical from a logistical perspective. The development of a higher capacity product to compete in the terabit space, which is being addressed by companies such as Avici Systems Inc. (Nasdaq: AVCI; Frankfurt: BVC7) and Pluris Inc., will take longer to engineer. The M160, the largest of the Juniper routers, fits in a single telecommunications chassis, and a terabit capacity would likely require a different design.

So, what's Juniper's next big move? Some have speculated that the company might use its high-flying stock price to buy an optical networking company or two. One possibility could be Tellium Inc., an optical switch maker with which Juniper has worked on interoperability demonstrations. But there are barriers to such a plan, including the fact that Cisco owns a stake in Tellium. The company has been silent about its plans, and Juniper CEO Scott Kriens is notoriously wary of acquisitions.

-- Marguerite Reardon, senior editor, Light Reading, http://www.lightreading.com