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Optical/IP

Juniper's Ethernet Strategy Emerging

(Nasdaq: JNPR) is trying to shore up its Ethernet positioning with a product that provides density and a Layer 2 focus, industry sources say.

The project, so far unannounced, is reportedly spearheaded by brothers Kumar and Apurva Mehta, engineers recruited to Juniper from Riverstone Networks Inc. (OTC: RSTN.PK). Riverstone has confirmed the Mehta brothers have left the company. Several sources have confirmed they are at Juniper, though it's not clear when they started. (Rumors that the pair had joined Juniper and then left for a startup have turned out to be false.)

Sources are split on whether the project is a card or an entirely new switch/router. The card theory has it that Juniper wants to add more Ethernet density and/or virtual private LAN services (VPLS) to its flagship M-series routers.

The switch/router theorists murmur darkly that Juniper has a new box in the works, possibly something akin to the Foundry Networks Inc. (Nasdaq: FDRY) IMR 640, a high-density system built to pack lots of Ethernet connections cheaply. (See Foundry Strikes at the Core.) Of course, Juniper could create such an animal by loading an M-series router with nothing but Ethernet cards, so it's possible both theories are correct.

Either way, critics have long said Juniper needs a stronger Ethernet story, with products focused on higher density and less Layer 3 functionality. Target customers would include carriers that are putting more Ethernet into their networks and don't necessarily want to pay for the IP functionality they wouldn't need. "To do these MPLS links, you don't need an all-singing, all-dancing router," says Steve Kamman, an analyst with CIBC World Markets.

The result could give Juniper a product pairing similar to that of 's (NYSE: ALA; Paris: CGEP:PA). Alongside the 7750 Service Router acquired with TiMetra Networks, Alcatel offers the 7450 Ethernet Service Switch, an Ethernet-focused alternative that sells at a lower price. Alcatel's triple-play and IPTV pitch focuses on selling both boxes in a two-tiered arrangement. (See Alcatel Pushes Ethernet-Over-MPLS and IPTV Alters Network Landscape.)

The goal, then, is for Juniper to "have a Layer 2 story to compete with Riverstone, TiMetra/Alcatel, and Cisco," says one industry source requesting anonymity.

Juniper officials declined to comment.

For years, the industry has tried to wed Juniper to Ethernet, saying it's the best vehicle for combating (Nasdaq: CSCO) in the enterprise market. Recurring rumors say Juniper wants to acquire Extreme Networks Inc. (Nasdaq: EXTR), Force10 Networks Inc., or Foundry -- or more recently, Atrica Inc. -- and while sources insist such talks are more than superficial, no deals have been consummated. (See Would Juniper Go to Extremes?, Extreme Thoughts, and Juniper Shopping for Atrica?.)

Ethernet connectivity is gaining in importance. IPTV efforts will likely rely on high densities of Gigabit Ethernet feeds shunted around the network. And carrier-class Ethernet has become a hot topic in general, with the Metro Ethernet Forum (MEF) launching certification programs as a first step toward interoperability among vendors. (See MEF Rubber Stamps Ethernet Gear and MEF Adds Carrier Certification.)

Carrier Ethernet could be what's motivating Juniper. An August Heavy Reading report, "Carrier Ethernet Equipment Market Outlook," notes that Juniper offers the M320 router as a multiservice edge platform but lacks a corresponding carrier Ethernet switch/router. Juniper so far has been "more than happy to partner" to fill that gap, teaming with (NYSE: SI; Frankfurt: SIE) and its Ethernet switches, or with (Nasdaq: ERICY) or (NYSE: LU), which resell switches from other vendors, analyst Stan Hubbard writes. (See Carrier Ethernet Forecast: Extended Heatwave.)

The catch is that Ethernet could be a millstone on Juniper's gross margins. CEO Scott Kriens has said he doesn't want Juniper embroiled in the price wars commonly associated with Ethernet -- an argument that he's used to try to defuse those acquisition rumors. (See Juniper Spikes M&A Rumors.) Any Juniper foray into Ethernet, then, would likely be a carefully managed effort.

"A lot of this business is going to companies that are willing to compete on price for these aggregation devices. Juniper is not willing to compete on price. They're one of these companies that's willing to walk away from business" if prices drop too low, says Mark Seery, an analyst with Ovum-RHK Inc.

— Craig Matsumoto, Senior Editor, Light Reading

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jasanz 12/5/2012 | 4:05:37 AM
re: Juniper's Ethernet Strategy Emerging How true what Valleguy said one year ago. "Juniper will lose its momentum just when Cisco is finally vulnerable and losing the final few strong, smart, hard working people they have. Too bad to see a great opportunity wasted."

Beginning of 2006. I have never seen so many Cisco boys leaving CSCO. I meet a new one every week! However... JNPR is appearing more vulnerable than CSCO!

C'est la vie...
valleyguy 12/5/2012 | 4:05:36 AM
re: Juniper's Ethernet Strategy Emerging Thanks Jasanz. It's nice to be right once in awhile, though it's a mixed bag as i have always liked JNPR as a company. I would like to see them succeed. But they are making some classic blunders!

Here's a nice little nuggest: now they are getting KILLED in edge routing. Is anyone left over at Unisphere or has everyone left the building? Example: IP TV. They say they are doing fine but RBAK is killing them. RBAK! left for dead! Less than $50M in cash left. Bankruptcy! Talk about a great comeback story. Turns out the Siara acquisition was a home run (inside the park, ugly, a four year trip around the basesand due to about 17 errors on the opposition) but now they can't build 'em fast enough. So Unisphere was $700M down the drain for a house of cards. Was fun while it lasted!

I predict RBAK will have a higher market cap than JNPR within a year, if not sooner.
valleyguy 12/5/2012 | 4:05:35 AM
re: Juniper's Ethernet Strategy Emerging Yeah but watch Basil and Sri. If they finally get sick of the French (hey, it happens) power base, they may bail. If they bail, Timetra goes down hard. Alcatel has an amazing knack for alienating its US management. Basil can do anything he wants, including get out of the miserable business of carrier equipment. He's gotta be fully vested by now and bored out of his mind slugging it out in this stupid, tired business. Total speculation. For all i know he's having a ball. But my point is, it all comes down to him.

Timetra was a great buy at a great price. One of the few times Alcatel's bottom feeding paid off for them. But it won't last. I'd bet on Denuccio and co. any day of the week and it's his show. He doesn't have a bunch of boneheads who are 9,000 miles away and many time zones away to report to when he goes to the men's room.
Stbl 12/5/2012 | 4:05:35 AM
re: Juniper's Ethernet Strategy Emerging
Redback is doing well in BRAS but you need to check the numbers (pick your analyst). Alcatel is the real issue for JNPR in edge routing (and for CSCO)...
kkutzler 12/5/2012 | 4:05:34 AM
re: Juniper's Ethernet Strategy Emerging Well I guess Kevin and I should be insulted that we won't bring "Timetra down hard" if we leave :}

TiMetra is successful because of Basil.
TiMetra is successful because of its engineers.
TiMetra is successful because the old world and our new world management have worked together.
But more importantly, TiMetra is successful because we have a good product that fits as a cog in a very good solution.

While I am sure Riverstone will be of great value to Lucent, I would be happy to take your bet.

BTW - Basil is far from bored
underscore 12/5/2012 | 4:05:30 AM
re: Juniper's Ethernet Strategy Emerging > Beginning of 2006. I have never seen so many Cisco boys leaving CSCO. I meet a new one every week! However... JNPR is appearing more vulnerable than CSCO!

cisco is a pretty big company and quite different though out ... which BUs are you referring to when you say "never seen so many ... leave" ?

And where are they going ?

lets hear the full gosip :-)

_
Pete Baldwin 12/5/2012 | 4:05:30 AM
re: Juniper's Ethernet Strategy Emerging valleyguy says:
I predict RBAK will have a higher market cap than JNPR within a year, if not sooner.

Literally? You're talking about a 9- or 10-fold increase for RBAK ... or, say, a quadrupling of RBAK plus a big collapse for Juniper.

It's certainly possible, but that's a heck of an eventful year.
valleyguy 12/5/2012 | 4:05:25 AM
re: Juniper's Ethernet Strategy Emerging Yeah, both will happen. JNPR will be cut in half, or worse, and RBAK will triple or quadruple. The market is fickle right now. Look at Apple and compare it to DELL as an example. Apple's market cap is comparable and DELL's balance sheet shows way more cash, plus they are about 4 times Apple's size. It's all about perceptions! The market will pay a premium for a good growth story right now. And there's no growth in sight for JNPR, whereas RBAK is hot and in growth mode again, with a clean balance sheet and no debt (right? can't recall--didn't the debt get cleared in the bankruptcy?).

The sparkle is off the JNPR star among the investment community. It's a mature company with only OK products, a massive flight of technical talent going on, and not a market share leader in a single category! Is that the model of a world class company that you just have to have in your fund?

light-headed 12/5/2012 | 2:55:13 AM
re: Juniper's Ethernet Strategy Emerging for the first wave of deployments. Even if they release product next year most of the major carriers are in the certification phase. They could get some business but they better hurry up.
laserbrain2 12/5/2012 | 2:55:12 AM
re: Juniper's Ethernet Strategy Emerging This story (and most others on the Ethernet topic herein) confuse two very different markets:

Enterpise Ethernet and Service Provider Ethernet

When analysts point out that Juniper needs an "Ethernet story" they're typically talking about the former. Enterprise switching is a $10+Bil business and Juniper has none of it.

The Riverstones and Atricas are of course metro plays and don't add that much market to Juniper's business, but maybe a nice niche.


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