Juniper Targets Campus Core Switching Market With EX4600

August 29th, 2014 by Trefis Team
-8.02%
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JNPR: Juniper Networks logo
JNPR
Juniper Networks

Juniper (NYSE:JNPR) launched a new line of Ethernet switches recently, targeting large enterprises in the campus aggregation space. The new EX4600 family of Ethernet switches have been built on the company’s open converged framework (OCF) and offer flexible, scalable 10/40 GbE connectivity solutions to support the BYOD (Bring Your Own Device) concept in campus environments. The new switch is capable of up to 1.44 Tbps (Terabits per second) of throughput and is part of Juniper’s High-IQ networking strategy. High-IQ networking is part of the company’s broader Integrated Operating Plan (IOP) strategy, whereby it intends to “refocus its strategy, optimize its structure, and improve operational efficiencies.” This restructuring plan, announced in the first quarter this year, also aims to return $3 billion to shareholders over three years and cut $160 million in operating costs by Q1 2015. [1] [2]

Juniper’s switching business has performed impressively in the last few years, with sales increasing 15% and 12% year-over-year (y-o-y) in 2013 and 2012, respectively. The company maintained this growth momentum in the first half of 2014 as well, with sales growing by an impressive 46% and 25% y-o-y in Q1 and Q2, respectively. The recent sales growth has been driven by growing demand for next generation data center transformation projects, cloud-building projects and 10GB/40GB Ethernet switches, owing to the rapid expansion of virtualization, big data and high-quality video.

Owing to its robust performance, Juniper managed to gain share in the global Ethernet switches market in the previous quarter, taking its total share to around 4%. Going forward, the introduction of new products and its ability to promote the open converged framework (OCF) concept should help Juniper further gain share in the global market, currently dominated by Cisco (NASDAQ:CSCO) with a share of about 63%. [3] [4] [5]

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We have a price estimate of $28 for Juniper, implying a premium of over 20% to the current market price.

See our full analysis of Juniper Networks

Global Switching Market

Market research firm Infonetics reported earlier this year that the Ethernet switch market crossed the $20 billion mark in 2013, with Cisco occupying the top spot followed by HP, Juniper and Huawei, in that order. The report also stated that growth in the market was again driven by 10G but 40G could be new high growth segment in the medium term, considering that the 10G segment was finally starting to mature after nearly 10 years of its launch. The 40G segment of Ethernet switches is expected to cross $1 billion in sales in 2014 as it gains traction with the growing data center business. [6]

Another market research firm, Dell’Oro Group, was also bullish on the Ethernet switch market in its recently published report. It expects the global Layer 2-3 Ethernet switch market to reach $25 billion by 2018, driven by growth in the data center business. The report also states that campus switch revenues might continue to decline going forward and it will be interesting to see how Juniper markets and differentiates its new switch product to compete with the likes of Cisco, HP, Alcatel-Lucent and Huawei in an increasingly competitive market. [7]

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Notes:
  1. Press Release, Juniper, Aug 13 2014 [↩]
  2. Juniper Debuts New EX4600 Switch for High-IQ Networking, Enterprise Networking Planet, Aug 13 2014 [↩]
  3. Cisco, Arista, Juniper: Router, Switch Sales in Transition, Say UBS, RBC, Dell’oro, August 27 2014 [↩]
  4. Juniper Networks’ (JNPR) CEO Shaygan Kheradpir on Q2 2014 Results – Earnings Call Transcript, Seeking Alpha, July 22 2014 [↩]
  5. Cisco maintains 62.2 percent market share in Ethernet switch market, Fierce telecom, Aug 2013 [↩]
  6. Huawei reaches #4 in Ethernet switch market, behind Cisco, HP, Juniper, says Infonetics, Infotech Lead, March 1 2014 [↩]
  7. Ethernet switch market worth $25 billion in 2018 says Dell’Oro, Lightwave Online, July 31 2014 [↩]