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Juniper Recaptures Market Share

Fourth-quarter core router market share numbers are starting to come out, and it looks like Juniper Networks Inc. (Nasdaq: JNPR) made some gains, for a change.

According to Synergy Research Group Inc., Juniper increased its market share roughly 40 percent from the previous quarter. It came in with 25 percent of the overall market, up from 18 percent last quarter, according to Synergy. Back in early 2001, the company peaked at around 30 percent market share.

The latest numbers add drama to the largely two-horse race, reversing the recent trend of market leader Cisco Systems Inc. (Nasdaq: CSCO) padding its lead. After almost two years of steady declines or flat growth in the core router market, Juniper may be recapturing some of the ground it has lost.

Nevertheless, Cisco still has a comfortable lead: It saw its market share decline from 80 percent in the third quarter to 73 percent in the fourth quarter, according to Synergy.

"Overall, Cisco maintains a strong leadership position in total router sales with 85 percent market share for the year," says Martina Moscone, a Cisco spokesperson. "The Cisco 12000 Series continues to win key franchises in the core networks worldwide including SBC, Japan Telecom, and Vodaphone."

The numbers also show that the market may finally be stabilizing after two years of freefall. Overall the core router market declined only about 1 percent in the fourth quarter of 2002, generating $289 million. In the prior quarter it had declined about 9 percent (see Cisco, Juniper Rule Routers). The fourth-quarter decline is the smallest this sector has seen in quite some time, says Susana Vidal, an industry analyst with Synergy.

“It definitely looks as though Juniper has taken market share directly away from Cisco,” says Vidal. “It will be interesting to see what happens in Q1 of 2003.”

Avici Systems Inc. (Nasdaq: AVCI; Frankfurt: BVC7) did not gain any market share in the fourth quarter, remaining flat at around 2 percent of the market. The company is expected to increase sales in the first quarter of 2003 as it starts to recognize revenue on its smallest, most compact product, the QSR (see Avici's Incredible Shrinking Router).

Juniper, during its earnings call in January, had already reported that sales had picked up in the fourth quarter (see Juniper's Back in the Black). Marcel Gani, the company’s chief financial officer, said that slightly more than half of the company’s quarterly revenue of $155.3 million came from sales of core routers.

The company, which has traditionally generated most of its revenue within North America, also had success in Europe and Asia in the fourth quarter. Much of this can be attributed to its reseller sales from LM Ericsson (Nasdaq: ERICY) and Siemens AG (NYSE: SI; Frankfurt: SIE), says Synergy’s Vidal. According to Juniper resellers, including Ericsson and Siemens, make up about 70 percent of the company's overall sales.

The company also started generating more revenue from its high-margin T-series routers. Specifically, Juniper sold T640's to several carriers, including BellSouth Corp. (NYSE: BLS), China Telecommunications Corp. (NYSE: CHA), KT Corp., and Telia International Carrier (TIC).

Juniper also seems to be reaping the benefits of having a full suite of products, following its acquisition of Unisphere. For example, China Telecom bought not only the T640, but some ERX edge routers as well. The ERX has also been sold along with M160 routers, adds Vidal.

"We had a lot of success cross-selling into our current customer base," says Christine Heckart, vice president of marketing for Juniper. "Edge customers bought core gear, and vice versa." As for Cisco, CEO John Chambers commented during the company’s second quarter earnings call earlier this month that orders for the GSR 12000 core router series were up slightly (see Cisco Profits Up, Outlook Down). However, the company was not able to translate that success into increased core router revenue. Part of the explanation could be that about half the GSR 12000 routers sold actually go into the edge part of the network, explains Jennifer Liscom, a principal analyst with Gartner/Dataquest. Her firm had not published its fourth quarter numbers by press time, but she said that Gartner/Dataquest's figures follow the same trend as Synergy’s.

It may be too early to say that the core router market is making a comeback, but the current numbers are encouraging. Juniper CEO Scott Kriens cautioned investors on the earnings call in January that the core router market is often lumpier and more irregular than the edge market. Chambers also commented that the service provider market still looks soft going forward.

"It's hard to make a call on the bottom," says Heckart. "We feel good about our business. Other companies might be suffering as a result, so it's hard to say that the entire market is turning."

— Marguerite Reardon, Senior Editor, Light Reading
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BobbyMax 12/5/2012 | 12:38:37 AM
re: Juniper Recaptures Market Share The router market is totally unbalanced. This imbalance exits in spite of other vendors having better router products than Cisco. In spite of havinf 85% of the router market, Cisco is blocking Huawei from doing business in the US.
Sisyphus 12/5/2012 | 12:38:37 AM
re: Juniper Recaptures Market Share
It would be good to hear more about the methodology of some of these market studies. Is it by product, or by network deployment? The odd thing is, I believe the latter is too difficult to keep track of, and if the numbers are only per product (i.e. GSR12k, M160+, Avici) I believe they are off. I do believe that, to this day, the GSR12k has a higher than $250M/qtr run rate.
BlueWater66 12/5/2012 | 12:38:32 AM
re: Juniper Recaptures Market Share Cisco doesn't really have an equal to the T640 does it? They've been rumored to be "on the verge" of releasing an equally large system for a long, long time. But they seem to be missing the target and pushing it out. Anyone know?

From my perspective, Juniper seems to actually know how to release products. Cisco seems to be dragging on new developments. Especially in their core router group.
skeptic 12/5/2012 | 12:38:31 AM
re: Juniper Recaptures Market Share Cisco doesn't really have an equal to the T640 does it? They've been rumored to be "on the verge" of releasing an equally large system for a long, long time. But they seem to be missing the target and pushing it out. Anyone know?
-------------

Their competitive system is the HFR. They
are out talking about it to various people and
getting different reactions depending on the
customer.

There are several different stories about the
HFR. I dont know which of them to believe.
There are huge software risks in the project
since it allegedly contains the IOS replacement.

Its also supposedly been scaled back from its
original size.

The negatives I've heard are:

a) its more of the same from cisco in a bigger
form factor.
b) they still don't understand the availability
requirements of the larger service providers.
c) If this product is radically different from
IOS, how is cisco going to support it properly.

As usual the service providers where cisco owns
the management think its great. Of course "think"
may be an overstatement in that they "think"
whatever John Chambers orders them to think.
Technology doesn't matter in those places anyway.

In competitive situations, there isn't much
enthusiasm for the HFR. What cisco has going
for it are business things, not technology.


signmeup 12/5/2012 | 12:38:31 AM
re: Juniper Recaptures Market Share Or possibly they are waiting to release it when people have money to pay for such a beast....

Don't always assume that because a product is not launched it's because they missed a target. A better question to ask would be who would buy it if they released it today? You?

How many T640's has Juniper sold on average per quarter since it was released? I bet it isn't nearly enough to justify the development costs.
skeptic 12/5/2012 | 12:38:30 AM
re: Juniper Recaptures Market Share Or possibly they are waiting to release it when people have money to pay for such a beast....
--------------
No. The project is behind schedule. Indications
last summer were that they would be in a position
to start showing them or doing trials toward
december of last year. I dont know if its shown
up anywhere yet.

If they had it, they would be pushing it. The
T640, just by its existance, creates the
perception that cisco is falling behind in
technology and routers. If the T640 wasn't
released, they might hold HFR back. But its
doubtful in the current situation that they
would.

valleyguy 12/5/2012 | 12:38:29 AM
re: Juniper Recaptures Market Share So does anyone have any real info on HFR? All I've seen is speculation on this program and very few facts. 900 people, totally unfocused, been thru four general managers in five years (that's fact) they're going to scrap the program, running chaos (carrier high availability operating system which was born in the mssbu) vs ios, yadayadayada.
What's the real scoop on HFR program? And does HFR stand for huge fast router? When is someone going to call their next gen router "RSFR" or "really small but fast router?"
tsat 12/5/2012 | 12:38:27 AM
re: Juniper Recaptures Market Share
we saw Cisco buy Procket?

edgecore 12/5/2012 | 12:38:25 AM
re: Juniper Recaptures Market Share What's the real scoop on HFR program? And does HFR stand for huge fast router?

a- Still under development, but maybe someone from the team could comment further!

b- Huge (F*ck*ng) Router is the acronym

EC
sgamble 12/5/2012 | 12:38:17 AM
re: Juniper Recaptures Market Share wake up from your wet dream mon ami.


me.
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