Equipment makers revive corp. net plans

Traditional telecom equipment vendors are increasingly targeting the enterprise network market, banking on growing demand for packet-based capabilities similar to those for carriers.

The fact that the worldwide market for packet-based enterprise communications equipment is twice as big as that for service provider equipment has not been lost on Lucent and Nortel, which are rediscovering network religion after disengaging from the market to different degrees in recent years.

Juniper, meanwhile, is itching for a fight with Cisco, the runaway leader in the enterprise network market. Juniper has begun mounting its inaugural quest in this market, an effort that will consist of buying and building technology and market share.

"There is an up and downside for Juniper in the fact that Cisco owns 90% of the router market," industry analyst Nick Lippis said in a report on Juniper's enterprise aspirations. "On the up side, taking only 10% of this market would expand Juniper's revenue by nearly 50%. On the downside, Cisco does not only own 90% of the market share; it owns perhaps 100% of the mind share, and its customers are loyal."

To continue reading, register here to become an Insider. You'll get free access to premium content from CIO, Computerworld, CSO, InfoWorld, and Network World. See more Insider content or sign in.

Traditional telecom equipment vendors are increasingly targeting the enterprise network market, banking on growing demand for packet-based capabilities similar to those for carriers.

The fact that the worldwide market for packet-based enterprise communications equipment is twice as big as that for service provider equipment has not been lost on Lucent and Nortel, which are rediscovering network religion after disengaging from the market to different degrees in recent years.

Juniper, meanwhile, is itching for a fight with Cisco, the runaway leader in the enterprise network market. Juniper has begun mounting its inaugural quest in this market, an effort that will consist of buying and building technology and market share.

"There is an up and downside for Juniper in the fact that Cisco owns 90% of the router market," industry analyst Nick Lippis said in a report on Juniper's enterprise aspirations. "On the up side, taking only 10% of this market would expand Juniper's revenue by nearly 50%. On the downside, Cisco does not only own 90% of the market share; it owns perhaps 100% of the mind share, and its customers are loyal."

But those customer loyalties could be broken, observers say. As the dominant supplier to corporations, Cisco commands premium pricing. And not all its products are best-in-breed, analysts say.

Recognizing this, Juniper made a forceful entry into the enterprise network market with February's acquisition of security vendor NetScreen Technologies, and followed with the launch of its J-Series access routers in June. Many expect Juniper to acquire a presence in Layer 3 Ethernet switching - perhaps via Extreme Networks.

Juniper had a rough third quarter in the enterprise, however. For the period that ended Sept. 30, Juniper posted security product sales of $63.4 million, about $25 million below analyst estimates and $32 million below the second quarter's results. Security products accounted for 17% of Juniper's third-quarter revenue.

Juniper has yet to recognize revenue for the J-series routers, which just began shipping.

But Juniper's not expected to stop its enterprise incursions at access routers or security. Observers say to look next year for the vendor to develop or acquire Layer 4-7 Ethernet switching and IP PBX capabilities, and and perhaps wireless LAN (WLAN) and storage networking technologies. These areas are hot in enterprise networks and targeted by rival Cisco as billion-dollar opportunities. Juniper has added 70 people to its R&D team, plus brought in 100 more sales and marketing people to help boost awareness of its efforts across all market segments.

"We see significant opportunity in expanding the corporate networking and security side of our business," Juniper CEO Scott Kriens said during a third quarter earnings conference call two weeks ago. "The opportunity is growing."

Analysts concur.

"Anything that Cisco might sell is something that [Juniper] might look at," says Zeus Kerravala of The Yankee Group.

Well, not everything, Juniper says.

"That wouldn't be a very smart strategy for this or any company," says Christine Heckart, Juniper's vice president of marketing. "For this company specifically, it would not be very consistent with what we're great at with our core competencies. Great companies build their growth strategy around their essence."

Juniper's essence is routing and intelligent packet processing. That can be applied in a lot of places, especially in some of the hotter areas of enterprise networking: IP PBXs, WLANs, storage-area networking, and Layer 3 and 4-7 Ethernet switching.

Some analysts say Juniper will move to enter some of these markets sooner rather than later.

"As we look to 2005, we expect Juniper to be more aggressive in the enterprise market, not only through the sales and marketing of the J-series products, but also the launch of a broader enterprise portfolio through internal development and through acquisitions," says Nikos Theodosopoulos, a UBS Warburg analyst, in a report on Juniper's recently ended third-quarter financials. "Technology areas we believe Juniper is working on or is seeking to acquire include Layer 3-7 switching and enterprise VoIP."