Juniper Revenues Slip in 3Q14

Juniper CEO admits the company had a disappointing quarter, but there is reason to be optimistic for the road ahead.

By Sean Michael Kerner | Posted Oct 24, 2014
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Juniper Networks is continuing to try and streamline its business, though the third quarter of 2014 was a challenging one.

Juniper reported its third quarter fiscal 2014 earnings on Oct 23, with revenue coming at $1.13 billion for a five percent year-over-year decline.

"We are disappointed with our revenue performance this quarter," Shaygan Kheradpir, Juniper's CEO, said during his company's earnings call. "The primary driver was lower-than-expected demand and slower ramp-up of new projects from service providers, particularly in the U.S. "

Juniper CFO Robyn Denholm added that U.S. carrier spending was worse than expected, and Web 2.0 switching revenue was lower than anticipated as well. Looking at specific categories, Denholm noted that routing product revenue was $533 million, down 12 percent year-over-year. The declines were driven by weakness in the carrier market, while enterprise routing was healthy.

Another down product category for Juniper was security, with product revenue coming in $121 million for a 16 percent year-over-year decline. Switching product revenue, on the other hand, was $155 million, a bright spot for Juniper with an increase of five percent year-over-year.

While routing was a challenging product category for Juniper this quarter, Rami Rahim, EVP and GM of the Platform Systems Division at Juniper, sees a light at the end of the tunnel.

"When I look at the routing fundamentals, obviously the first thing you're going to look at is traffic," Rahim said. "And all our indication is that traffic continues to grow across all of our customer base, whether it be the Web service providers, telcos, cable operators."

As traffic is growing, so too is the use of virtualization and Software Defined Networking (SDN) technologies for network automation. Rahim said he sees virtualization and SDN as being complementary to Juniper's strategy.

"It's very, very difficult to virtualize the kind of product, or I'd say impossible, to virtualize the kind of product that solved the performance necessary to deal with capacity growth," Rahim said. "So this is why I'm confident in the long term."

On switching, Rahim is also very confident for a number of reasons.

"If you take a look at what we've done in switching in terms of research and development over the last couple of years, is we have realigned the organization," Rahim said. "We've focused it on a new strategy and product roadmap, and we're now just starting to see the results of that strategy in terms of new products."

That alignment is also a question of focus and making sure that Juniper is not selling products that it is not investing in. In July, Juniper sold its Pulse mobile security business for $250 million. Rahim said that the Pulse business was not a bad business, but rather it was a business that Juniper could not invest in, given all the other things the company needs to get done.

"The last thing I will say is now that all of R&D is in a single organization. One of the fundamental tenets, if you will, of our engineering principles is to leverage, is to make sure that all of our technology components across silicon systems and software are highly leveragable across all of our product lines," Rahim said. "This is something that we're very much executing towards."

Sean Michael Kerner is a senior editor at Enterprise Networking Planet and InternetNews.com. Follow him on Twitter @TechJournalist.

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