Juniper Runs Tepid
That's partly because of the obvious: Service providers represented 68 percent of revenues in the first quarter, which ended in March. But it's also because Juniper's enterprise business is growing, in a sense, putting the burden on the service provider side.
Sure, Juniper's first-quarter enterprise sales were 16 percent lower than the previous quarter's, but they were up 13 percent compared with the previous year, and Juniper officials took that as good news during yesterday's earnings call. To them, it's a sign that the effort put into platforms like the EX line of data-center switches is paying off. (See Juniper Sees Q1 Stabilize and Feature Story: Juniper's Enterprise Vision.)
Juniper's service provider business, on the other hand was down 14 percent in the first quarter compared with the previous year, and down 18 percent from the previous quarter. It's hard to picture Juniper getting healthier without these numbers improving.
Analysts have been saying all year that service-provider spending has been cautious. Juniper says things have "stabilized" now that its customers have finished their recession-year budget debates -- but Juniper also refuses to equate that with imminent growth, and rightfully so. As analyst Andrew Schmitt of Infonetics Research Inc. pointed out to me via Twitter, a guy falling without a parachute also "stabilizes" when he reaches terminal velocity. That's not really a good thing.
Even if carrier spending has reached the bottom -- more like terminal deceleration than terminal velocity -- it's possible carriers will stay cautious and keep laying low for some time. When might spending bounce upwards? A hint of the answer came up when one analyst asked whether the service provider slowdown came mostly in the core or the edge network. "When you look at network utilization, typically there's less excess in the core," CEO Kevin Johnson said. "Therefore, the question is: How hot are the edge routers running in these networks?"
I still think carriers -- the big ones, anyway -- will let those networks run blistering hot, in the name of saving capital costs. Juniper is right to be cautious about predicting growth, because it could be quite a wait.
— Craig Matsumoto, West Coast Editor, Light Reading