Juniper reported strong sales, with its infrastructure products up about 35% and its service-layer technology up 17%, beating Street estimates. The stock was lower in after-market trading, however. Some analysts expected even faster growth rates, and this will clearly put some pressure on Juniper for the coming quarters. Dell’Oro Group puts Juniper’s router market share at 15%, far less than Cisco’s 65% and double that of Alcatel-Lucent. However, many analysts believe that Alcatel-Lucent has targeted Juniper for market share gains, though Alcatel had a very weak quarter in contrast to Juniper’s. Juniper is benefiting from service provider NGN investment, which we believe will continue to be strong in 2008 and through at least the first half of 2009.
The key question for Juniper is the enterprise business (part of their Service Layer Technology) and there the issue is Ethernet switches. It is very unlikely that Juniper can maintain engagement in the enterprise space lacking these products, and so we believe that Juniper is indeed likely to field a family of enterprise switches either late this year or early in 2008. However good this might be for SLT, it will certainly put more pressure on Juniper’s management and strategy, particularly since Cisco is executing extremely well in the enterprise sector at this time.