Juniper's New Products Pay Off in Q1

Networking vendor's new switching and routing platforms help drive revenues and profits as enterprise IT recovery momentum continues.

By Sean Michael Kerner | Posted Apr 21, 2010
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Juniper Networks (NYSE: JNPR) is growing its revenues on the backs of new networking platforms for both service providers and enterprise IT customers.

This week, Juniper reported its first-quarter 2010 financial results, showing traction for its switching, routing and service gateway platforms as prospects for future growth continue. Juniper reported revenues of $912.6 million, a 19 percent year-over-year increase, while income came in at $163.1 million, or $0.30 per share. Wall Street had expected revenue to come in at $906 million, according to Thomson Reuters, while its earnings beat the Street's consensus estimates by a penny after one-time charges.

"At a global level, demand for high-performance networking continues to grow and we are seeing good momentum in critical areas of the business," Juniper CEO Kevin Johnson said during the company's earnings call. "Particularly, with the traction we are gaining in new products and our efforts to expand routes to market." Moving forward, Juniper gave second-quarter revenue guidance of $930 to $970 million.

One of the areas in which Juniper has grown is its EX switching business. Juniper entered the switching business in 2008 and has been expanding its products and revenues ever since.

"EX revenue grew to $77 million, more than double the revenue level of the prior-year quarter and a 4 percent sequential increase," Juniper CFO Robyn Denholm said. "The momentum we are seeing from our EX switch business continues to drive good results as we expand our market penetration and build our installed base."

Growth in the EX segment is coming from both enterprise deployments as well as service providers that are using the platform for managed services deployments.

Juniper's service provider business revenues were up by 17 percent on a year-over-year basis as spending from carriers began to pick up. In the fourth quarter of 2009, Juniper reported that AT&T was a significant customer, representing more than 10 percent of Juniper's revenue for quarter. In the first quarter of 2010, Juniper executives did not mention AT&T as having spent as much with Juniper, though rival carrier Verizon represented 10 percent or greater of Juniper's first quarter 2010 revenue, they said.

"This was driven by the expansion of multiple ongoing projects, as well as new design wins," Johnson said. "We are very pleased with our strong relationship with Verizon."

Johnson noted that AT&T remains an important customer for Juniper, however, though rival networking vendor Cisco named AT&T as a key customer for its own new CRS-3 core router in March.

Focus on core capacity, mobile and edge routers

While Juniper did not announce a new core router to compete against the Cisco CRS-3, Juniper did announced a new silicon upgrade for its T-series routers that will provide up to 4 terabits per second of capacity.

Juniper has also been beefing up its mobile technologies during the quarter, with new security and routing capabilities.

On the acquisition front, Juniper recently acquired Ankeena Networks to help improve content delivery.

"The strategy that we are on, in many ways, is driven primarily by the organic R&D that we are doing around the platform," Johnson said. "That said, we will complement that organic R&D strategy with strategic acquisitions where they make sense."

Johnson added that Ankeena had intellectual property related to video that complements Juniper's edge routing.

"We will clearly look at ... other M&A opportunities that align strategically with the agenda that we've outlined at the Analyst Meeting," Johnson said. "And I think this is just representative of one of those that fit that model."

Sean Michael Kerner is a senior editor at InternetNews.com, the news service of Internet.com, the network for technology professionals.

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