Juniper Looks to NFV for Growth

Vendor's stocks bounced high in after-hours trading following strong second-quarter results.

Mitch Wagner, Executive Editor, Light Reading

July 23, 2015

4 Min Read
Juniper Looks to NFV for Growth

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.

Find out more about Network Functions Virtualization on Light Reading's NFV Channel.

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.

— Mitch Wagner, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profileFollow me on Facebook, West Coast Bureau Chief, Light Reading. Got a tip about SDN or NFV? Send it to [email protected].

About the Author(s)

Mitch Wagner

Executive Editor, Light Reading

San Diego-based Mitch Wagner is many things. As well as being "our guy" on the West Coast (of the US, not Scotland, or anywhere else with indifferent meteorological conditions), he's a husband (to his wife), dissatisfied Democrat, American (so he could be President some day), nonobservant Jew, and science fiction fan. Not necessarily in that order.

He's also one half of a special duo, along with Minnie, who is the co-habitor of the West Coast Bureau and Light Reading's primary chewer of sticks, though she is not the only one on the team who regularly munches on bark.

Wagner, whose previous positions include Editor-in-Chief at Internet Evolution and Executive Editor at InformationWeek, will be responsible for tracking and reporting on developments in Silicon Valley and other US West Coast hotspots of communications technology innovation.

Beats: Software-defined networking (SDN), network functions virtualization (NFV), IP networking, and colored foods (such as 'green rice').

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