Juniper's QFabric Could Expand its Switching Market Share

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Juniper's ( JNPR ) shares have risen significantly since the company's previous earnings release unlike Cisco ( CSCO ), which have trended in the opposite direction. This could imply that investors are more excited about Juniper's upcoming products relative to Cisco's. One of these is its new data center technology previously called Project Stratus, which is now being branded QFabric. Besides Cisco, Juniper also competes with HP ( HPQ ), Alcatel-Lucent ( ALU ) and Huawei-3Com in the network equipment business.

Our price estimate for Juniper's stock stands at $32.59 , which is roughly 23% below the current market price.

Tech Analysts Weigh in on QFabric

During the launch Juniper stated that traditional network architectures include multi-layer processing so that in each layer of a network, data needs a certain amount of processing before they are transported further. QFabric disrupts this approach as it requires the processing to be done once and then transferred anywhere. This system essentially cuts down the layering process needed enhancing speed, performance and scalability.

In the words of Juniper's founder and CTO Pradeep Sindhu:

QFabric looks like a single large flat logical switch and a single switch that has industry standard interfaces.

Juniper states in its press release that:

Juniper's QFabric architecture is up to ten times faster, uses 77% less power, requires 27% fewer networking devices, occupies 90% less data center floor space, and delivers a nine fold reduction in operating resources than the nearest competitive offering.

If the company claims stand up, the product offering certainly looks enticing and is something that might give enterprises something to think about as far as their networking vendors are concerned.

What do some of the reputed research firms have to say about this?

Mark Fabbi, Gartner's technology analyst, states that Juniper's new data center technology is one of the most innovative approaches that he has seen in the switching market for several years. Another analyst from Forrester believes that Juniper's product launch puts it back in the data center race amongst competitors like Cisco, Brocade, Avaya etc. and that it brings the value of simplicity.

Juniper's Opportunity

Juniper has very low market share in the bottom layer switches market and this presents significant opportunity to expand. We estimate that Juniper's share in this arena stood just under 5% in 2010. Given that the data center is a fast growing segment within the switches market, if Juniper can leverage its new technology to expand further and gain share, it could drive value gains leading to upside to our price estimate.

You can modify the driver below to see how change in bottom layer switch market share can impact Juniper's price estimate. Given the difference in our price verses that of market, one factor could be that investors expect Juniper to gain much higher market share than we currently forecast.

Nevertheless Juniper will have to break through the vendor relationships that enterprises have established with big players like Cisco. It may not find it easy to do so.

See the full analysis for Juniper's stock here.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks , US Markets

Referenced Stocks: ALU , CSCO , HPQ , JNPR

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