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Optical/IP

Juniper Loses Ground to Cisco at Verizon

More information is surfacing regarding the coveted Verizon Communications Inc. (NYSE: VZ) IP data contract.

Word on Wall Street is that Juniper Networks Inc. (Nasdaq: JNPR) has lost a significant chunk of the business to Cisco Systems Inc. (Nasdaq: CSCO).

Sources close to Juniper say Verizon informed the company last week that it would not be getting any of the core routing business and that it would only be receiving half of the business it had expected for its edge routers. The routing vendor has already been shipping some initial edge routing and core routing gear to the carrier.

Verizon announced its plan to build out its IP network last year (see Verizon Does Enterprise Data). At the time, talk of the contract helped boost both Cisco’s and Juniper’s stocks (see Verizon Talk Stokes Stocks). For well over a year, Juniper has been working this deal (see Juniper Still Working Verizon Deal). Some speculate that Juniper acquired Unisphere Networks last summer, in part, because Unisphere had established inroads with Verizon (see Unisphere Close to $200-300M Deal?).

According to several sources, the company had indeed won some business with the carrier. Verizon had already started deploying the ERX edge platform over the last couple of quarters. Based on the previously negotiated contract, Juniper was looking to Verizon to bring in about $15 million to $25 million this quarter, say sources. Most analysts anticipate Juniper to report $157 million to $160 million in total revenue in the second quarter.

Juniper’s loss appears to be Cisco’s gain. Originally, the companies were supposed to split the IP buildout, in a series of contracts valued at about $300 million over the next two to three years. Juniper had been expected to take half the edge and also a sizable chunk of the core business. But that has all changed, say sources.

The $70 million to $80 million core router contract will now go entirely to Cisco. As for the edge router business, Cisco is expected to eat into half of the business Juniper had expected. While analysts estimate that Verizon spent almost $10 million on Juniper gear last quarter, it’s expected to only generate about half that this quarter.

So what happened? Cisco went back to Verizon and heavily played its enterprise hand, say sources. It told the carrier that it could leverage its existing relationships with enterprise customers to help Verizon win business. The company has used this sales tactic successfully with other regional Bell operating companies (RBOCs), including BellSouth Corp. (NYSE: BLS). In an interview earlier this week discussing Cisco's recent optical win with BellSouth, Sameer Padahye, vice president of worldwide service provider marketing for Cisco, explained how the two work together (see BellSouth Chooses Cisco (and Lucent)).

“When enterprise customers are building their LAN and WAN, they are looking for certain services,” he said. “Because of our understanding of the enterprise, we can match these requirements with services available from the carrier. We also enable the carriers to identify where the demand is to drive new services.”

While not much is known about Verizon’s decision to award the core routing contract to Cisco, sources say that protocol support was a key sticking point in its choice of edge routing gear. Many enterprise customers, which also happen to be Cisco routing customers, use Cisco’s proprietary Interior Gateway Routing Protocol (IGRP) and Enhanced Interior Gateway Routing Protocol (EIGRP).

These protocols are used in large networks to learn the best routes through private and public IP networks. The latest, enhanced version, EIGRP, also provides link-to-link, protocol-level security to avoid unauthorized access to routing tables. Because the protocols are proprietary, Juniper cannot support them -- so Verizon did not select Juniper's gear to service these enterprise customers.

That said, Juniper will still be used in Verizon’s DSL network. Traditionally, the carrier has deployed SMS gear from Redback Networks Inc. (Nasdaq: RBAK) for DSL aggregation and remote access. For the last couple of quarters, however, the carrier has started deploying Juniper’s ERX platform for new buildouts.

But, according to one source, Juniper hurt its pricing position by offering a 75 percent discount on its M-series and T-series routers to win more business in the core. The plan seems to have backfired, and instead of buying Juniper’s core products, Verizon asked for the same deep discounts on the ERX edge products. This could hurt Juniper’s margins going forward.

“A lot of times when you know you’re going to lose some business, you’ll discount the products drastically,” says one source close to the Cisco sales team. “But in this case, Juniper screwed up, because they were also trying to win business in another part of the network.”

Juniper is rumored to be winning some business with another RBOC, SBC Communications Inc. (NYSE: SBC). The carrier, which has already announced a contract with Cisco for its core routers, is expected to deploy Juniper’s ERX for DSL aggregation and broadband remote access. Revenue on this contract is not expected to begin until later this year.

Cisco, Juniper, and Verizon all declined to comment for this story.

— Marguerite Reardon, Senior Editor, Light Reading

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joeshmo 12/4/2012 | 11:57:48 PM
re: Juniper Loses Ground to Cisco at Verizon As a customer of Juniper and a person close to the source, this is clearly a poorly researched article and written by a Cisco disciple. Believe me, Verizon has no plans on perpetuating a useless dinasour like IGRP in the new world of VPN's and services that work through the Enterprise and Core. Cisco's edge products can do only a fraction of what they claim and a fraction of a fraction of what Juniper's box can do. It'll be interesting to see what happens when the P.O.s start coming from Verizon. So far, Juniper has revenue from Verizon in hand and Cisco is still frantically working to grab a crumb from the leftovers.

Not to mention the premier support that Cisco will not be able to provide for these advanced services. Show me one study where a GSR has beat one of Juniper's products and I'll show you a test run by a Cisco sales rep. Just ask RL.
Iagojrh 12/4/2012 | 11:57:47 PM
re: Juniper Loses Ground to Cisco at Verizon as a customer you've got to know that

1) VZ revels in the thought that it could panic one vendor over the other with rumors that it might lose out on part or all of the contract. Keeps competition healthy

2) Contracts of this magnitude are rarely given based on the merits of one technology over the other, although I too, am quite partial to the ERX

3) Maggie is far from a Cisco Toadie
sgamble 12/4/2012 | 11:57:47 PM
re: Juniper Loses Ground to Cisco at Verizon I am not an expert by any stretch... But why would a carrier, who is planning on mixing vendors, make a decision like this based on a proprietary protocol by our greasy friends at Crisco?


Steve.
skeptic 12/4/2012 | 11:57:46 PM
re: Juniper Loses Ground to Cisco at Verizon These protocols are used in large networks to learn the best routes through private and public IP networks. The latest, enhanced version, EIGRP, also provides link-to-link, protocol-level security to avoid unauthorized access to routing tables.
-----------------
This is mostly wrong. EIGRP is used in older
poorly built networks. In its latest version,
EIGRP provides nothing that OSPF and ISIS don't
already provide in better ways.

I kind of doubt that EIGRP was a big factor
in the deal. Its the kind of thing that, if
its in the way, the carrier would push it to
the side and operate some amount of cisco
equipment (and probably existing equipment).

I think what really happened is that cisco
applied several points of leverage that Juniper
could not match in terms of rolling up a more
comprehensive deal (enterprise, etc) and probably
offering it on terms that Juniper can't match
financially.



ready2rock 12/4/2012 | 11:57:46 PM
re: Juniper Loses Ground to Cisco at Verizon Hey,

Are you saying Verizon is going to run EIGRP in
their core network?

GIVE ME A BREAK!!!

-ready2rock
joeshmo 12/4/2012 | 11:57:46 PM
re: Juniper Loses Ground to Cisco at Verizon lagojrh,

Points 1 and 2 taken. To point 3- reread the article if you think this article isn't heavily biased. The whole thing is written around "claims" and "sources". The one fact that we know is that Juniper is already selling into Verizon for the IP buildout. What's curiously not mentioned is that Juniper still claims they're getting the whole contract. Furthermore, every other vendor in the Verizon lab probably claims the same thing! To me, it seems that Maggie is trying to stir the pot for Cisco's benefit. Can she really believe that the deciding factor will be IGRP? I'm sure Cisco will be here for the long haul but I'll eat my hat if IGRP is what keeps the revenue flowing.

Time will tell. I'm sure Cisco won't lose this one without a fight, as this article proves. Too bad for Cisco that propaganda doesn't make network equipment perform.
skeptic 12/4/2012 | 11:57:45 PM
re: Juniper Loses Ground to Cisco at Verizon Believe me, Verizon has no plans on perpetuating a useless dinasour like IGRP in the new world of VPN's and services that work through the Enterprise and Core. Cisco's edge products can do only a fraction of what they claim and a fraction of a fraction of what Juniper's box can do.
---------------
Unfortunatly, especially at larger companies,
phone calls from Chambers and a few friends
in the right places have been able to win
business for cisco that would have lost
based on their products (and their rotten
support).

The technical evaluation says no, the
recommendation says no. But then the call
from cisco comes in and the decision is "yes".


kbkirchn 12/4/2012 | 11:57:45 PM
re: Juniper Loses Ground to Cisco at Verizon In an MPLS network the Customer router (CE) must disclose its site-to-site routes to the Service Provider router (PE). Without this information, the Provider can only deliver the Customer's traffic to a fixed destination.

Communicating this routing information requires a routing protocol such as OSPF, ISIS, RIP, IGRP, or EIGRP.

If a Customer wished to use IGRP or EIGRP, AND Verizon desired to comply with the Customer's wishes, THEN a Cisco router would be required for the PE.

CE - Customer Edge
PE - Provider Edge
neteng21 12/4/2012 | 11:57:44 PM
re: Juniper Loses Ground to Cisco at Verizon Last I knew no core running IGRP/EIGRP could make use of MPLS traffic engineering due to lack of extensions to either protocol. That can't be too helpful....
joeshmo 12/4/2012 | 11:57:44 PM
re: Juniper Loses Ground to Cisco at Verizon All the customer has to do is run a real routing protocol to the PE and redistribute it's IGP routes into it. Not a big deal, even for a Cisco router.
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