Juniper Earnings Preview: New Initiatives And Products Can Drive Growth

January 26th, 2016 by Trefis Team
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JNPR: Juniper Networks logo
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Juniper Networks

Juniper (NYSE:JNPR) had hoped for a turnaround in its performance in the second half of 2015, and its Q3 results were very much in line with these expectations. The company is set to report its Q4 2015 earnings on January 27, and investors are hoping for more encouraging signs. Led by relatively better demand from service providers, and strong customer response to new products, Juniper achieved 11% top line growth in Q3. We expect the demand to have sustained during the recently concluded quarter, and new product upgrades to have drawn significant customer attention. A new reference architecture for cloud-enabled enterprise, innovation in security, new partnerships, upgrades in the MX series, the expansion of Contrail for software defined networking (SDN), and an expected newer version of QFX10000 switches should have complemented its growth in the fourth quarter. The expanded target market, thanks to the disaggregation of Junos from Juniper’s hardware, should have also helped the company attract some new customers.

Our $28 price estimate for Juniper is about 10% above the current market price.

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See our full analysis of Juniper Networks

Initiatives Might Have Helped A Little

Juniper has undertaken several initiatives lately with the industry rapidly evolving and adopting cloud-based solutions, and they may have played a part in driving fourth quarter growth. During the third quarter, the company launched its Juniper Networks Unite, which serves as a reference architecture for cloud-enabled customers. The architecture, which reflects Juniper’s focus on IP networks innovation, includes Junos Fusion Enterprise fabric for simplified management of large networks within an enterprise campus. Also, Juniper mentioned that AT&T selected its Contrail solution, which is a cloud networking and service orchestration platform, to provide SDN capabilities in its AT&T Integrated Cloud (AIC) infrastructure. In addition, Juniper announced some innovations for security that are expected to enable better threat intelligence, prevention and dynamic policy enforcement. With security being an area for concern for Juniper, the aforementioned initiatives may have helped the company perform better in this domain during the quarter. Juniper is also looking to expand its reach and drive top line growth by extending its partnerships. The company built on its partnership with NEC last year to provide IP transport routers to Telenor Group. [1]

New Products Likely Contributed

Juniper launched several new products across its divisions in 2015 which had a positive impact on its Q3 earnings, and we expect that to have continued in Q4. The company introduced a new router model, PTX 1000, which is in addition to its earlier launched routers, ACX500 and ACX5000, which can handle added capacity and accelerate service orchestration. Towards the end of the year, Juniper added new features to its SDN enabled router MX series 3D to allow scale and network automation needed by service providers to boost their next-gen networks. [2]

For switches, Juniper introduced new products and innovations to its QFX5100 product series last year, which contributed to the company’s Q3 growth. This is likely to supplement Juniper’s switching results this time around as well. Also, the company dissaggregated its Junos network operating system from its hardware in November, in order to make it available for white-box products. This move likely opened up more options for enterprise customers, who will be able to use Junos on third-party hardware and third-party applications on Juniper’s hardware, in addition to Junos on the company’s proprietary hardware. [3] We believe that this had a marginal positive impact on Juniper’s Q4 results.

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Notes:
  1. Juniper’s Q3 2015 Earnings Transcript, Oct 22 2015 [↩]
  2. Juniper Networks Advances MX Series Innovation With 3X Performance Upgrade and New Automation Features, Juniper, Dec 8 2015 [↩]
  3. Disaggregating Junos software for data center innovation, Juniper [↩]