Juniper Networks (NYSE:JNPR) reported third quarter fiscal 2011 earnings this week, showing an increase in revenue but a decline in net income. Juniper’s results come as the company gears up for the availability a number of critical service provider and enterprise networking products.
For the third quarter, Juniper reported net revenue of $1.1 billion, which is a 9 percent year-over-year increase. Non-GAAP Net Income came in at $149.8 million or $0.28 per share which is a 13 percent year-over-year decline.
Juniper’s CFO Robyn Denholm said during the company’s earning call that the financial performance was in line with the guidance provided by Juniper during the second quarter. Moving forward, Denholm provided guidance for the fourth quarter of 2011 for revenues to range between $1.160 billion and $1.220 billion.
Juniper’s CEO Kevin Johnson noted during the call that the macro environment remains challenging, with many economic indicators becoming more volatile in the recent weeks.
“In the near term, this environment may make certain customers more cautious in their CapEx spending,” Johnson said. “However, we believe our broader market opportunity continues to be strong, driven by the two key trends of mobile Internet and cloud computing.”
Juniper is currently on track to deliver its QFabric technology which accelerates cloud delivery with a low-latency high performance networking. QFabric was formally announced in February of this year, after years of development and $100 million of investment from Juniper.
The company is also gearing up for the availability of their big service provider gear, including the T4000 core router and the PTX Converged Supercore switch. The PTX can scale up to 3,800 terabits of switching capacity. The T4000 is Juniper top-end router, delivering up 4 Terabits per second of routing capacity in a since half rack chassis.
“I think we’re in a position where we’ve got the strongest product portfolio we’ve had in the history of this company,” Johnson said.
While the product pipeline is strong, Juniper is facing renewed competition in the market from Cisco and other networking vendors. During the call, Johnson was asked about switching revenues, which is an area where vendors like Cisco have been hit in recent months with declines. Johnson said that Juniper’s total switching product revenue, including the wireless LAN, has grown by 30 percent on a year-on-year basis. He added that if you look at the analyst reports, through Q2, the addressable market for Ethernet switching declined by 6 percent for the year-to-date.
“So we’ve grown 30 percent in a market, where the addressable market has declined by 6 percent,” Johnson said.
As to why the addressable market declined by 6 percent, Johnson commented that the number of ports shipped through Q2 have increased, but the revenue per port has declined.
“And so then you say, okay, well, there must be some pricing action that’s taking place in the switching addressable market,” Johnson said. “And what we see happening is really a bifurcation of that Ethernet switching market.”
That bifurcation is coming by way of customers for campus and branch deployments deciding to settle for a good enough type of switch.
“A good enough type of switch might be acceptable to them and you have competitors like an HP or Huawei entering the market with a lower gross margin and lower price,” Johnson said. “Now the second part of that bifurcation is the higher end segment of the market where innovation really is differentiated and that’s the segment that we play in.”