Q2 EX switch sales went to new customers; service provider challenges loom though
Juniper’s enterprise business rebounded in Q2 after a soft Q1 but the service provider side of the house may be challenged heading to Q3. That’s the conclusions of two analysts who have checked in with the Juniper channel before the company reports its Q2 results next week.
The Street expects Juniper to record $953.5 million in revenue, up 21% from a year ago.
Juniper’s enterprise business saw strong demand in the U.S. in the quarter, while in Europe performance was in line, reports Oppenheimer & Co. The firm interviewed 18 Juniper resellers in the U.S. and Europe.
U.S. sales of EX Ethernet switches and SRX services gateways were ahead of expectations, Oppenheimer notes. Interviewees reported the ignition of several delayed projects and sales in Europe that met expectations despite that theatre’s macroeconomic challenges.
Oppenheimer expects Juniper to gain switching share, noting that most EX sales were to new, not existing, customers. Cisco was the most common existing vendor replaced with HP/3Com a distant second, the firm reports.
The channel remained positive on the third quarter, prompting Oppenheimer to note:
This leads us to believe Juniper’s enterprise business could return to growth after stalling in 1Q10.
Service provider business hit its targets but not without a strong push late in the quarter. Oppenheimer expects Juniper to be conservative in service provider guidance heading into Q3 due to unpredictable spending among carriers.
Avian Securities notes that routers sales to service providers in Q2 was “mixed.” Verizon and AT&T leaned more towards Alcatel-Lucent for edge routers, and as a second source for Evolved Packet Core applications, Avian notes. And Huawei may be impacting edge router opportunities in Europe.
But Avian also notes that sales of Juniper’s SRX gateway into service providers has neutralized some of the lost router revenue. And those with cloud strategies – like Verizon and AT&T – show strong interest in Juniper’s 2011 Stratus data center project. Avian writes:
This may prove to be the wild card in terms of revenue growth.
But Verizon also plans to deploy a new Packet-Optical Transport/Optical Transport Switching architecture that has the potential to reduce router ports and erode Juniper and Cisco market share, the firm notes:
It is better to be cautious considering that our latest checks are expressing concern over the near term in the service provider segment which is ~67% of total revenue.
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