Morningstar | A turnaround is in progress at high-end networking player Juniper.
Juniper Networks built its name in the carrier switching and routing market, and its carrier-grade equipment is highly regarded and well entrenched with communication service providers and large enterprises. Since 2011, however, the company has been steadily losing share to competitors Nokia and Huawei in the carrier market and to numerous pure-play cybersecurity firms in the enterprise security segment. Juniper did successfully enter the highly competitive Ethernet switching segment in 2008, and this business has grown to 17% of annualized revenue.We believe Juniper has generally suffered from misplaced market focus and inconsistent execution in the past several years. First, numerous acquisitions in the wireless and application/WAN-acceleration space have failed to deliver, including the Peribit Networks acquisition in 2005. Second, we see limited evidence that the latest mergers and acquisitions in the security space helped the company with its market share or overall portfolio. Third, its software-defined networking/network functions virtualization, or SDN/NFV, strategy has been unclear as well, with NorthStar Controller, Contrail Controller, and participation on the OpenDaylight project all seemingly playing in the same field of software networking. While we consider Juniper's market share gain in Ethernet switching a success, we view these gains as somewhat of a Pyrrhic victory, as this segment is being rapidly commoditized and disrupted by software networking.Despite its challenges, we think Juniper can recover and still has gas left in its tank. Its core product segment of carrier switches and routers remains a source of strength. The appointment of insider Rami Rahim as CEO in November 2014 has been a step in the right direction, as we have seen a renewed focus on core routers and security segments. The company's SDN efforts are starting to crystallize, especially in the NFV space, but it is too early to call Juniper a winner in this highly competitive and dynamic field.Juniper Networks designs, develops and sells products and services for networks. The company sells its products in three geographic regions: Americas; Europe, Middle East, and Africa; and Asia Pacific. The company sells its network products and service offerings across routing, switching, and security technologies. In addition, the company provides its customers services, including maintenance and support, services, and education and training programs. The company's products and services address network requirements for its customers within its vertical: Cloud, Service Provider, and Enterprise. The company's portfolio addresses domains in the network: core; edge; access and aggregation; data centers; and campus and branch.
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