The core routing market has been a headache for
) in recent times, given extreme sluggishness in demand
(particularly in the U.S.). To make matters worse, competing
products have made it to the market with aggressive pricing
strategies chipping away at its market share.
Juniper's answer was its PTX supercore switch, which is priced
lower than some of its offerings for the core routing segment.
Based on its patented Express chipset, this packet transport switch
helps simplify the network, thereby making it denser and more
scalable, at the same time optimizing costs.
Juniper is recommending its PTX switches with its T-series core
router, which in combination is expected to modernize the network,
making it suitable for cloud-delivered services and
bandwidth-intensive applications. We believe that this product line
will do extremely well in the second half of the year, as carrier
spending improves, with incremental revenues for Juniper.
There is a downside, however. PTX will cannibalize some of its
existing higher-margin products and will therefore have a negative
impact on its margins. However, we think this is preferable to
market share losses, so we believe it is a positive
Juniper faces stiff competition in each of its market segments,
especially from industry leader
), which usually launches innovative products and charges higher
prices for these premium products. Cisco is very well positioned at
the Edge and we wouldn't be surprised to see Juniper losing some
market share in this area.
In addition, Juniper faces competition from Alcatel-Lucent,
Ericsson, Extreme Networks, Inc., as they are also launching
competitive products in the market.
New product and technology launches have always been a focus
area for Juniper. Apart from traditional networking products and
related services, the company has ventured into the security
software segment to diversify its business model and add new
revenue streams. The acquisition of Myconos Security reflects this
strategy of the company, as it will fight against hackers and help
the company expand in the security segment.
However, Juniper's investment in new products and platforms are
expected to tell on its margins.
Therefore, despite Juniper's strong product line up and
continuous deal wins, the company reported mediocre first quarter
2012 results, which missed the Zacks Consensus Estimate. Moreover,
stiff competition from industry stalwarts such as Cisco and
), as well as Juniper's European exposure could weigh on the
Currently, Juniper has a Zacks Rank of #3, implying a short-term
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