Juniper Recaptures Market Share
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