Juniper Sinks in Market-Share Scare

Juniper Networks Inc. (Nasdaq: JNPR) stock got hammered today as investors reacted to news that core routing rival, Cisco Systems Inc. (Nasdaq: CSCO) was gaining market share at Juniper’s expense.

The company’s stock was trading down $1.75 (13.45%) to $11.26 this afternoon.

According to a report published by the market research firm Dell'Oro Group, Cisco gained 5 percentage points of market share in the core router market in the fourth quarter of last year (see Dell'Oro Looks at Router Dip). As a result, Juniper, the only other competitor in what has been a two-company market, suffered a 5 percent decline. For 4Q01 Cisco had 72 percent market share, up from 67 percent in 3Q01, says Dell'Oro. Juniper’s share dropped to 28 percent down from 33 percent in Q301.

Cisco has been gaining back market share in core routing since the first quarter of 2001. Cisco has gained 11 percentage points since the first quarter of last year when it had 61 percent of the market, according to the Dell'Oro numbers. Juniper had climbed to 39 percent of the market in 1Q01 before it started slowly losing its momentum throughout the year.

Cisco’s comeback is due in large part to its new GSR 12016 product, which began shipping last year. Cisco also introduced its own OC192 (10 Gbit/s) line card. For a while, Juniper had an edge, as the only router vendor with a 10-Gbit/s card. Cisco's upgrade erased that edge.

Both Juniper’s and Cisco’s recent earnings announcements also hinted at Cisco’s gains in the core. Cisco reported last week on its earnings call that it expects January 2002 revenues to be up slightly (see Cisco Beats Street; Growth is Flat). Juniper execs, on the other hand, indicated on the 4Q01 call in mid-January that they expect flat growth for the next few quarters at least (see Juniper Meets Lowered Expectations).

Of course, signs of Cisco's resurgence here have been evident for some time, and Cisco's addition of the 10-Gbit/s line card may have been the first writing on the wall (see Cisco Ships OC192).

“We do not believe that the market will view this news as a major surprise,” wrote Nikos Theodosopoulos, an analyst with UBS Warburg in a research note he published yesterday.

So why is the market reacting so negatively to this seemingly old news?

Sam Wilson, an analyst with Merrill Lynch & Co. Inc. says that he thinks some people were surprised at how much market share Juniper had lost.

Tim Savageaux, an analyst with W.R. Hambrecht & Co., says he thinks investors are reacting to a combination of bad news in the market. For instance, both WorldCom Inc. (Nasdaq: WCOM) and Qwest Communications International Inc. (NYSE: Q), two of Juniper’s biggest customers, are struggling financially (see WorldCom's Ebbers Stands Firm). Also, he says that the poor earnings announcement last week from Ciena Corp. (Nasdaq: CIEN) surprised and spooked some investors (see More Cuts at Ciena).

”The recent Ciena miss may have renewed concern about core networking,” he says. “Even though this is not dramatically new news, I’m not surprised to see the stock go down -- and I think it’s appropriate. Juniper stock isn’t cheap.”

The best hope Juniper has in the short term is the long anticipated announcement of its next-generation core router, code-named "Gibson" (see Juniper Mum on Core Router... ). Savageaux says this could help give the stock a small kick as the company fights to regain some of the share it has lost over the past year.

”This could be the catalyst for the stock to go north,” he says. "That’s where they can strike back and gain market share. This won’t be an announcement like from Lucent, where the product will come out six months to a year later. Juniper will have a customer and revenue when the news comes out.”

— Marguerite Reardon, Senior Editor, Light Reading
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optical_999 12/4/2012 | 10:56:23 PM
re: Juniper Sinks in Market-Share Scare Here is a real situation of a starup in this era. Juniper paid 200 million for Pacific Broadband (a cmts router) with stock at $25. Now the stock is less then 1/2, which equates to less then $100 Million for Pacific Broadband.

And Pacific Broadband raised more than $100 Million. It is horrific out there....

Lets see what happens to all the DWDM and MPLS startups???
docsisdude 12/4/2012 | 10:56:19 PM
re: Juniper Sinks in Market-Share Scare actually i believe PBC only raised 65 million, but you point is well taken. Anyone notice that another Raza start-up (redwave) went belly up earlier (3 weeks ago)?
new_light 12/4/2012 | 10:56:17 PM
re: Juniper Sinks in Market-Share Scare Look for news about maple networks folding soon as well.
veliccham 12/4/2012 | 10:56:17 PM
re: Juniper Sinks in Market-Share Scare Redwave - Is this the same as Redwave Networks?
kbkirchn 12/4/2012 | 10:56:16 PM
re: Juniper Sinks in Market-Share Scare 12405 & 12410... sorry, poor error correction.
kbkirchn 12/4/2012 | 10:56:16 PM
re: Juniper Sinks in Market-Share Scare The original 12000 series (12008, 12012, 12016) could only support OC48c.

The new 12400 series (12005, 12010, 12416) introduced last year support OC192c.

The 12016 is unique in that it can be upgrade to become a 12416 by replacing the switch fabric cards.
It would be interesting to see how much of this market gain was due to the smaller 12005 & 12010 chassis vs the 12416.
reoptic 12/4/2012 | 10:56:16 PM
re: Juniper Sinks in Market-Share Scare The other story was that Juniper's share of high-end market went to less than 45% in '01 from north of 90% in '00...took Cisco only 3 quarters with their 10g product to take half the market from Juniper!! And they are just getting started on campaign to take back market share. The delays on the Gibson have really hurt Juniper's competitive position, despite all the boosterism to the contrary. Perhaps $10 a share will look high at the end of '02.
opticguy 12/4/2012 | 10:56:15 PM
re: Juniper Sinks in Market-Share Scare There is rumour that this company is going to let go most of the current staff soon. They raised third round late last year so they should be able to survive until year end.
optical_999 12/4/2012 | 10:56:14 PM
re: Juniper Sinks in Market-Share Scare All of the above companies put thier money in the MPLS and DWDM space. I am not sure if either one of them will be sucessfull. Tenor is the 1st one in the gang and has a product out. All of these companies changed direction from MPLS to router-switch to switch-router, to router-QoS-Switch, to Switch-CoS-router,to MPLS-Forum-Certified-Router, to VPN-BoomBox, to QoS-is-here-Box, to We_Also-have-QoC-Box, to Cisco-please-buy-me-Box, Fire-A-CEO-Fresh-BOX, Router-With-TonyLi-Like-Team-Box, to what not.

Reality is there is not telco market acceptance for this stupid-box. And the VCs were damn greedy.

Now most of these boxes claim the Next-Gen-Routers and Tony-Li-Like team, the Routing market is shrinking and is cornered by 2 or 3 players.

So, the lesson learned is "Never belive in Hype"; Make sure the founding team is expereinced in telco space and knows "what the heck they are developing".

Ley us hope for the better good, something comes out of here.

indsavvy 12/4/2012 | 10:56:13 PM
re: Juniper Sinks in Market-Share Scare All of the above companies put thier money in the MPLS and DWDM space.

If you're going to post a statement like this, you'd better make sure that you know something about the space and the companies concerned. It's very obvious that you have no idea what you're talking about. At least two or three of the companies you mentioned are in the ATM space and others are more optical. MPLS and DWDM, nah.

Try to get some facts before posting heresay to the boards. It will be better for all concerned.
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