Juniper is seeing strong demand for NFV, particularly from service provider customers, and is looking to the technology to help drive future growth, following a strong second quarter that resulted in its stock price soaring 10% in after-hours trading.
NFV and SDN are "definitely part of pretty much every strategic discussion that we have, particularly with the service provider and sometimes in the enterprise," said Rami Rahim, CEO of Juniper Networks Inc. (NYSE: JNPR), on the vendor's second-quarter earnings call Thursday afternoon.
"Right now, it's very much an architectural discussion," Rahim said, adding that communications providers need to set up their central office and POP infrastructure to deliver next-generation services, and are using NFV for that.
For Juniper to succeed in that market, it needs to develop virtual network functions (VNFs) -- software that virtualizes capabilities previously available only on specialized hardware that makes it able to run on commodity equipment. Juniper is doing that. This quarter, it recognized its first revenue on its virtual MX edge router and its virtual SRX firewall is promising as well, Rahim said.
And, service providers need an NFV solution packaged with automation and management -- and that's where Juniper's Contrail orchestration software comes in, Rahim said. "Our goal with Contrail is simple: to make it the best networking stack for OpenStack," the CEO said.
Juniper is not alone in that goal, of course. VMware Inc. (NYSE: VMW), Brocade Communications Systems Inc. (Nasdaq: BRCD) and Cisco Systems Inc. (Nasdaq: CSCO) are all looking to tap the OpenStack market too. (See VMware Bows OpenStack/vCloud NFV, Cisco, IBM Make OpenStack Acquisitions and Brocade Upgrades VCS Fabric.)
Juniper says it saw strong demand in routing, switching and security in the second quarter. It reported net revenues of $1.2 billion, down 1% year-over-year and up 15% sequentially. GAAP net income was $158 million, or $0.40 per diluted share, down 29% year-over-year and up 97% sequentially.
In the second half, Juniper sees performance continuing to improve, including telco recovery.
For guidance on its fiscal third quarter, Juniper predicted revenues of $1.23 billion, plus or minus $20 million, and net income per share of $0.50 to $0.54 on a diluted basis. Year-ago revenue was $1.126 billion and income per share was $0.23
Wall Street was pleased. The stock was up 10% to $29.45 in after hours trading.
And Juniper was happy as well, both with the second quarter and the previous two quarters. "Overall we're pleased with the health of the business," CFO Robyn Denholm said on the call. "But we're not confused. We're still down on a revenue basis year-over-year, and we still have a lot of work to do."
Juniper is diversifying its customer base, moving beyond telcos. Of Juniper's top ten customers in the second quarter, four are telcos, two in the US and two outside; five are cloud and cable customers; and one is a large enterprise customer, Denholm said. That's one fewer telco and one less cloud and cable customer than in the previous quarter.
That said, telco customers are and will continue to be important to Juniper, Denholm said.
Diversity in other verticals offset weakness in telcos -- cloud and cable providers were strong, as were large enterprises and high-tech companies, Denholm said. Diversifying the product line is also paying off.
One issue Juniper faces in engineering is whether to use merchant silicon or its own silicon in designing switches and routers. Juniper is "not religious about it," and chooses the best silicon to solve the problem, Rahim said. Before embarking on a new silicon project, Juniper does extensive analysis to make sure the differentiation will pay off. (See Juniper Doubles Down on Custom Silicon.)
Juniper turns to merchant silicon in the cloud and access layer where pricing is an issue, but in the core where customers' needs for power efficiency, programmability, scalability and routing are greater, Juniper differentiates with its own silicon, Rahim said.