Cisco nemesis facing a mixed quarter?

Juniper's enterprise business tracking in-line, while carrier business may face lingering challenges

Juniper's enterprise business is tracking well but the compnay still may face some challenges in 2012 as four major new products ramp. For Cisco, this is good news - enterprises are spending, which means they'll buy Cisco stuff as well as Juniper's - and its rival's product transition may also open up some opportunity.

Based on checks with 26 of Juniper's US and European channel partners, Oppenheimer & Co. says Juniper's recently closed December quarter - which they report in mid-January - is tracking in-line as far as enterprise sales go. Businesses at the end of the year typically flush their budgets on upgrades, and Juniper's benefitting from that, according to Oppenheimer.

Juniper is expected to grow its enterprise business 7.6% from the September quarter. About a third of those 26 channel partners interviewed by Oppenheimer believe that they will, while 15% expect a sequential decline in the enterprise business.

That might be due to slowing momentum in switching. Oppenheimer believes switching sales may have been flat sequentially in the December quarter due to balanced demand among all products (vs. sales of a group of high revenue offerings). Channel partners noted an improved product mix in the fourth quarter though, with more demand for EX 4200/4500 platforms vs. the lower-end 2200. This may have also stabilized the average selling price of switches and switch ports, another positive indicator for Juniper, Cisco and their switching competitors.

And Oppenheimer does detect "solid interest:" in Juniper's new EX6200 "Simply Connected" campus modular switch, which debuted early last fall. The 6200 is a modular, 10-slot chassis-based system with the ability to support up to 432 PoE+ 10/100/1000Mbps Ethernet ports. It's designed to go up against other "simple" network infrastructure product lines from Cisco, HP and Extreme.

Says Oppenheimer on the interest in the EX6200:

We believe the EX6200 is well positioned and has the potential to reach a $20M-$25M quarterly revenue run rate exiting 2012.

Enterprise looks to be tracking as expected for Juniper in the March quarter as well, Oppenheimer notes. The real key will be the company's carrier business, which has a strong backlog that could transition into revenue. The collapse of the AT&T/T-Mobile merger could also unlock some spending among carrier customers - AT&T is a 10% revenue customer of Juniper's.  All of this could translate into a rebound in Juniper's carrier business in the first half of this year, Oppenheimer notes, which was impacted last quarter by some of those four new product transitions - the T4000 core router, the PTX packet/optical transport system and the MobileNext enhanced packet core for mobile operator networks.

The fourth is the QFabric line for data centers.

Says Oppenheimer:

Overall, we expect a bumpy road in 2012 as Juniper faces rising competition and ramps multiple new products while facing macro headwinds...competitive pressures are rising and multiple new products are ramping in the face of macro headwinds. Thus, we see high execution risk.

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