Most financial industry speculation is aimed at NSN, whose numbers seemed to show more product sales erosion than others in the market. At NSN’s analyst event, there was a sense that professional services were the name of the game, though of course they could never sustain a business of that size. Furthermore, nobody knows how much of the professional services business NSN could get without a strong equipment base. In short, NSN needs to sell gear.

The Nortel stuff would bring them a much better North American presence, one of the problems NSN is contending with. It may collide with the Juniper/NSN joint venture, however, enough to reduce its overall value. We don’t think NSN could up the Ciena bid more than about $250 million without paying so much the Street would trash its stock. We also wonder whether more low-OSI-layer assets will really help.

Our feeling: leave Nortel alone.

The Cisco CEO also talked about the opportunity he sees for Cisco and about Cisco’s ability to bring off a host of acquisitions, ventures and new offerings that combine to create a fairly radical shift in company direction. Chambers says orders are picking up and suggests this is a result of the “we-can’t-wait-any-more” mindset. Here we have to disagree; buyers could in fact wait for quite a while longer.

Cisco’s results are primarily the result of the release of 2009 budget money we reported in the spring. Our surveys showed that slightly more money was spent in the last quarter, but most of the line budgets are now spent (only 3% remains for Q4) and further spending growth will rely on Cisco getting a piece of project budgets. That’s likely to happen, but our research shows that buyers often juggle project spending between IT and networking gear in Q4. So it’s not possible to predict just what Cisco will get. We think that the next 2 quarters could prove more challenging depending on retail behavior in this quarter.

The “product” is a set of Vblock Infrastructure Packages that are essentially ready-to-install combinations of software and hardware to support security, virtualization, networking, computing and storage. Acadia will sell, install and sustain this as the customer requires, and we’re hearing they have their first contracts in the bag in Asia and the EU, with one in the U.S. likely coming within 45 days.

The concept is also targeted at both private and public clouds, and in this aspect it could be the basis for something highly interesting to service providers and even somewhat competitive as a service-layer technology. So far none of the players seem to be positioning Acadia as a generalized solution for the service layer, and we can’t find any indication of new products other than element management for the Vblocks, but the value of the package concept is considerable for users whose needs fit in the framework of the three Vblock configurations.

Professional services and a developer ecosystem are also provided; the latter may be where service-layer technology comes into the picture. We think that a service-layer extension to the VCE concept could put a lot of pressure on other network vendors. Ericsson has no real announced strategy, Alcatel-Lucent and NSN have strategies they’re not really opening up on, and Juniper has just announced a major service-layer innovation. All of these would need to accommodate whatever positioning Cisco might make.

We are of the view that separation like this is not likely to succeed at its objectives and in fact is more likely to compromise them. In addition, it would clearly undermine the value of Telstra’s shares, which have been sold off to the public for some time through yet another government program. To take steps to devalue them now is not likely to create confidence in any new government process, including NBN.

Then there’s a very important truth, which is that competition always lowers price and always creates overbuild and thus always lowers net industry ROI. There are situations where that is reasonable; some geographies have ample demand density. Australia doesn’t appear to be one of them, according to our model.

If the government’s goal is to create competition in the interior or service portion of the network by making the access network into a shared utility, it should have clear indicators that the ROI in that service portion is sufficient to create real opportunity. Without that, there could be a lot of future failures in the center, which would undermine the profitability and sustainability of the new edge—whatever it turns out to be.

The real issue with wireless, guys, is that you need a radio network. Through its close relationship with NSN (including metro, which after all is the “core” of Enhanced Packet Core, through its joint venture), Juniper has direct linkage with the radio network. NSN and Juniper actually make a pretty credible total mobile solution provider, stronger than either Tellabs or Cisco, providing that they can make the joint venture work effectively in that light.

NSN also adds professional services, which virtually all LTE deals are likely to mandate. All of this, to us, means that the real question is whether the Juniper/NSN joint venture will work effectively. While both companies blow kisses at the joint venture in their public comments, we’re still waiting to see substantive cooperation emerge.

NSN’s greatest strength is its professional services business, and second on the list comes its credibility with operators in multi-vendor integration. The company also has a strong service-layer story, though that story is built on tools used by its consulting and professional services staff to create one-off solutions for operators and not productized (at least for now).

The value of professionals services in the U.S. today is based on the procurement zone trend, already formally in place at AT&T, and in process (we’re told) at both Verizon and Qwest, and being considered even by Sprint. This program creates what’s effectively a mandatory systems integration position in each zone, which in turn means that those with strong capabilities in that area can expect to get a prime vendor position.

The new chip is a family, the first member of which is Trio. It is based on a “Network Instruction Set Processor” model that builds software on the device using instructions customized for network behavior control rather than general-purpose instructions, as NPs do. In this respect, the chip is almost like an ASIC, but unlike an ASIC it’s programmable at the primitive NISP-instruction level, so new features can be added right down to the instruction level. It’s this architecture that accounts for the considerable improvements in performance, scalability, power efficiency, etc. that Juniper has demonstrated (through independent lab tests).

The software (Junos Space) is centered on a complete restructuring of the Juniper Junos operating system, and it extends Junos to cover not only Juniper devices but also independent software development, and even a new device client (Junos Pulse) that will provide security and identity management, VPN control, and connection control.

The software side of the announcement is the most critical because it is based on middleware to create what is, in effect, a platform-as-a-service cloud on which operators can build service features and service management components.The software there can then leverage software running on the routers through the old Juniper PSDP program, and through that could even, in theory, be linked to special “primitives” programmed into the new Trio NISP chip.

From a selfish vendor perspective, the most important thing is that Juniper ties the service layer development downward into its devices (through its router development programs like the old PSDP) and even potentially down into the chips themselves. That creates a value circle for them and it also lets operators build differentiation by linking their service solutions tightly into the network, giving better integration, operations, and performance than OTT players could achieve.

Juniper released applications for Ethernet activation, surveillance and monitoring, and problem management in the network. These are built on the Junos Space architecture. This new model is so radical that frankly it’s hard to believe it came out of Juniper, never known either for software or for making game-changing moves. This is clearly one such move, though, because it will at the minimum catalyze the whole service-layer marketplace.

Juniper also announced an expansion of its IBM OEM deal to include the SRX, which offers security control and falls under the Junos Space software umbrella at least in a development sense.

Finally, BLADE Network Technology announced it would license Junos for blade server switches, possibly the first porting of a network OS to another platform. Just assimilating all of this will no doubt create some headaches, but early indications from operators suggest they’re very interested, and there is also surprising early interest among large enterprises, particularly in the cloud computing potential.

That means network vendors need an IT hook, and Dell offers Juniper another one (Juniper has a deal with IBM). One interesting slant on this is that Dell has other deals with Cisco and Brocade, and both of those make sense given the strong position those companies have in data center and storage networking. But Juniper is a relative up-and-coming.

Since Juniper made a big deal of its Stratus fabric for the data center at its analyst event in early spring, it may be that Dell sees Juniper as having a strengthening role. Juniper is also a leader in financial applications that require low latency, which is a sector every data center player is interested in. Dell and Juniper will also partner on Data Center Bridging, an extension to Ethernet that provides the lossless transfer that’s needed for data center storage and virtualization applications. DCB is also something that some operators are looking at as a cloud data center service.

For Verizon, the net was better than Street expectations. Most encouraging were revenue gains of more than 10%, though about half of that was from the Alltel acquisition. Customer churn was up slightly in wireless, and DSL broadband subscribers continued to decline, but the latter was more than offset by broadband FiOS growth, suggesting that Verizon FiOS is attracting broadband users beyond its own DSL base.

The company promised investors that LTE would not generate a big capex surge, a relief given that the large up-front FiOS load is finally tapering down. In all, the story was good but not great. You can see that Verizon, like AT&T, is spending a ton of money on wireless and making a big bet it will be able to capitalize on that investment. We think that in the near term, that is almost certain. But the long-term viability of wireless depends on the ability of the operators to create value beyond voice and Internet.