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Network World - Juniper Networks' challenges are due to timing with new product rollouts and shifts in investments from customers and channel partners.
As expected, Juniper this week announced a disappointing fourth quarter and an even more disappointing outlook for the first quarter of its 2012 fiscal year. Due to softened demand among service providers for its routers and switches, Juniper posted a 6% drop in revenues for the fourth quarter of 2011, and a 33% plunge in earnings.
"The December quarter was an atypical and unexpectedly weak finish to the year, with reduced spending by some of our largest customers," said Robyn Denholm, Juniper's chief financial officer, in a statement. "While long-term industry fundamentals remain strong, we expect the near-term environment to remain challenging. We will invest in support of our strategy while continuing our focus on execution and prudent cost management."
KEY GROWTH SEGMENT: Juniper offers fabric for high-performance clouds
At the time Juniper warned that the quarter would be softer than expected, rival Cisco said Juniper's challenges were company-specific and not endemic of the industry at large. Analysts seem to agree, and they point to shifts in spending among Juniper's customers, and in strategies among its channel partners.
"To some extent, Juniper's recent sub-par performance is simply a matter of timing," writes Scott Dennehy of Technology Business Research, in a bulletin on Juniper's results. "As service providers attempt to monetize the dramatic increase in smartphone and tablet adoption by shifting capital expenditures from the fixed to the mobile network, much of the investment is taking place in the Radio Access Network, where Juniper has limited offerings."
Dennehy also notes that OEM partner Dell, which recently acquired switching competitor Force 10, will end its relationship with Juniper this month; and that Nokia Siemens Network's move away from the fixed access market -- where the Juniper partnership is key -- to focus on mobile broadband will have "a significant impact" on Juniper's service provider business.
"Routing execution seems to be a new critical issue," states UBS analyst Nikos Theodosopoulos in his report on Juniper's quarter. "The root of the challenge is unclear and may stem from various factors: 1) capex shift to wireless, 2) share loss, 3) product transition, or 4) structural (market) changes."
The product transition UBS refers to is Juniper's introduction of four major new platforms: The T4000 core router; the PTX packet/optical transport system; the MobileNext enhanced packet core for wireless networks; and the QFabric data center/cloud switches. These have been cited as drags on previous Juniper quarters as well and they are not expected to ramp up until the second half of this year.
"We believe Juniper continues to suffer from inconsistent/lumpy service provider spending, something that is increasingly difficult to predict," notes Ittai Kidron of Oppenheimer & Co. in his bulletin on Juniper's quarter. "In addition, Juniper is at the beginning of several product cycles complicating revenue recognition and raising the execution bar."