Juniper Shows Growth (& Potential) in Q2

Juniper Networks Inc. (NYSE: JNPR) wants to win back market share in the core and edge routing segments, and analysts think the company can get the job done.

Juniper, which showed strong growth across the board in its earnings report yesterday, hopes to see that momentum continue as new products help it drive revenues and pick up routing share from Cisco Systems Inc. (Nasdaq: CSCO), Alcatel-Lucent (NYSE: ALU), and Ericsson AB (Nasdaq: ERIC).

In the second quarter, Juniper recorded net income of $86.2 million, or 15 cents a share, on revenues of $664.9 million. That compares with a net loss of $1.2 billion, or $2.13 per share, on sales of $567.5 million in the year-ago quarter. (See Juniper Reports Earnings.)

Excluding special items, earnings in the second quarter rose to $116 million, or 20 cents a share, from $107 million, or 18 cents a share, a year earlier. Special items included stock-based compensation expenses and charges related to an investigation into Juniper stock option grants.

Juniper raised third-quarter and full-year revenue and earnings estimates. The company forecasts third-quarter profit of 21 cents a share, on revenues in the range of $695 million to $715 million. For the full year, Juniper raised its revenue forecast to a range of $2.73 billon to $2.76 billion. That's up from its previous range of $2.6 billion to $2.7 billion. The company expects full-year earnings of either 82 or 83 cents a share. Earlier it was expecting either 80 or 81 cents a share.

Several analysts believe the best could be yet to come. Goldman Sachs & Co. analyst Brantley Thompson upgraded Juniper to Buy from Neutral, raising the company's price target to $36. Robert W. Baird & Co. Inc. analyst Ken Muth upgraded the company to Outperform from Neutral, and raised his price target to $32. Other analysts, such as those at Credit Suisse , Lehman Brothers , and UBS AG , kept their ratings of the company the same but raised price targets.

Analysts expect strong overall spending by carriers, driven by increased capacity demands and long-term trends towards next-generation networks to positively affect Juniper's growth. But they also see Juniper's product mix helping it to outpace competitors in capturing operator dollars.

Juniper is looking to recapture share in the core and edge routing markets, where its new T1600 core router and its MX960 and E120 edge products will help drive growth. (See Juniper Intros E120, Juniper Attacks Cisco's CRS-1, Report: Juniper Rethinks the Core, and Juniper Targets Core.)

On the core routing side, the T1600 should help Juniper increase its market share from 31 percent of the market in 2006 to the 35 percent level the company held in 2005, Lehman Brothers analyst Inder Singh wrote in a research note today.

"The promise of the T1600 router strengthens JNPR’s position in two ways. First, the advent of the T1600 means more customers are likely to keep buying the T640, since Juniper promises an easy eventual upgrade to the T1600. Second, when the T1600 ships, it stands to recoup some of the market share lost to Cisco's CRS-1 at the very high end," Singh wrote.

Singh points out that Juniper has seen its share of the edge routing market drop from 24 percent to 14 percent over the last two years. But analysts believe the MX960 and E-Series products could help reverse that trend and reposition Juniper in an increasingly competitive market.

The competition, as ever, isn't sitting still. Ericsson subsidiary Redback Networks Inc. , for instance, introduced its SmartEdge 1200 last month. And in his research note, Singh says he expects an update of the Cisco CRS-1 "to match [Juniper's] 100-Gbit/s port speed over the next few months." (See Redback Beefs Up Its Router and Redback Adds SmartEdge 1200.)

— Ryan Lawler, Reporter, Light Reading

materialgirl 12/5/2012 | 3:05:11 PM
re: Juniper Shows Growth (& Potential) in Q2 Analysts seem to be counting their eggs before they are hatched. The best news from JNPR seems to be a sense of organization from their new COO. They are probably hoping for a replay of HPQ.

Meanwhile, analysts seem to accept CEO Krien's complete dismissal of Layer 2 competition in the network, while also claiming that MPLS can deliver the QOS actually available from CDNs.

If MPLS is the way to go, why is LVLT deploying Layer 2 technology? At the end of the day, how many ports really need to be MPLS-enabled in an Ethernet world? These issues are being completely left out of the stock considerations.
Pete Baldwin 12/5/2012 | 3:05:11 PM
re: Juniper Shows Growth (& Potential) in Q2 I do think analysts have liked the product news coming out of Juniper lately. But you might be right about the COO factor ... this was the first conference call with Elop on, yes? Sounds like he's got his plan in motion. (Either that, or they just wanted some other voice besides Kriens on the call, since there's no CFO at the moment...)
fiber_r_us 12/5/2012 | 3:05:10 PM
re: Juniper Shows Growth (& Potential) in Q2 Level 3 has an MPLS backbone based on Juniper and Cisco gear for voice, VPRN, VPLS, PWE, and some of the Internet capacity.

Level 3 also uses Layer 3 routers with only Ethernet interfaces(L3 switches if you prefer) for major backbone connectivity between cities routing IP packets with OSPF, and BGP for the bulk of the Internet traffic (1000's of 10GE interfaces worth).

Level 3 uses Ethernet at Layer 2 only in limited, single-switch, aggregation roles (no PBT, no STP, no extended Layer 2 domains).
tsat 12/5/2012 | 3:05:10 PM
re: Juniper Shows Growth (& Potential) in Q2 What technology and equipment is Level 3 deploying at Layer 2 exactly?

Is the only downside of a Layer-3 network the cost?

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