Juniper's Kriens: RBOCs Are Ours
Kriens gave the keynote address this morning at the UBS Warburg telecom conference. Unlike his rival, John Chambers, CEO of the No. 1 routing firm, Cisco Systems Inc. (Nasdaq: CSCO), his words did not sound likely to move the market. Chambers's keynote yesterday helped boost the Nasdaq composite and helped inflate his company's stock (see Chambers Fires Up Market). Still, investors at the conference were hoping for any information on Juniper’s progress with U.S. incumbent carriers.
During his talk and the question-and-answer session that followed, Kriens noted the importance of winning U.S. incumbent carrier business in the near term. He cited figures stating that, in aggregate, U.S. service providers are likely to spend about $117 billion in capital next year. Worldwide, this figure is about $150 billion. The regional Bell operating companies (RBOCs) are expected to generate a large amount of this spending, he said.
“I’m not here to predict the death of the CLECs or say that there won’t be any competition,” he said. “But the incumbents make up the majority of the top 25 spenders in capex. They’re looking to migrate their networks to an IP infrastructure and they need integrated solutions to get them there.”
He went on to explain that service providers are looking more closely at the gear they are purchasing, a trend that should play in Juniper’s favor.
“One of the silver linings is that scrutiny around spending is getting more intense. It’s harder to justify spending more money on legacy equipment when you know that your destination includes next-generation technology.”
Juniper seems to be making some progress in the RBOC market. On its last earnings call it announced BellSouth Corp. (NYSE: BLS) as a customer; and the company has been rumored to be one of two vendors supplying routing gear for the Verizon Communications Inc. (NYSE: VZ) contract (see Juniper's Good News Fails to Impress). Verizon’s recent announcement detailing the buildout of its nationwide IP network helped drive Juniper’s stock up earlier this month (see Verizon Talk Stokes Stocks). But now there are rumors floating around that the deal between Juniper and Verizon may not be so certain. Buckingham Research Associates (BRA) told investors earlier this week that the deal could be in jeopardy due to interoperability issues.
When asked about the Verizon contract, Kriens declined to comment.
As for developments with other incumbents, Kriens also fell short of discussing any specifics. He was vague about the timing of deployments and revenues from these carriers, and he gave little insight into the potential seasonality of the fourth quarter.
“It’s dangerous to predict seasonality. The best we can do is look at our history and what’s already happened.
”Our business has to run successfully regardless of what these big carriers do,” he continued. “If guessing the future is how you plan to succeed you’re in a bad spot, because there’s very little visibility into the timing of these things. Obviously, the sooner it happens the better, but we are prepared either way.”
Juniper stock was trading up this morning $0.32 (5.01%) to $6.71.
— Marguerite Reardon, Senior Editor, Light Reading