Summary:
Juniper is a leading provider of networking solutions and communication devices. The company has outperformed the broader market over the last six months. Moreover, estimates have been stable lately ahead of the company's Q4 earnings release. We also note that the company has positive record of earnings surprises in recent quarters. Juniper’s frequent product launches, cost reduction initiatives and improving execution are encouraging. Additionally, the company’s expansion into the software
defined network segment should strengthen its position in the networking space.
Further, customer wins like Telefonica will continue to drive top-line growth in the near term. However, an uncertain global macro environment and potentially weak investment patterns among customers are the major headwinds. Moreover, stiff competition and ongoing consolidation in the telecom market remain concerns.
Why will you buy JNPR ??
Juniper’s networking architecture runs on a single open source operating software named Junos. A common platform spanning across all the routing, switching and security areas reduces complexity in increasingly complex data centers. Juniper also offers a Software Development Kit (SDK) to its partners and customers to allow additional customization. Leveraging the operating system, Juniper introduced several products and enhancements over the last few years. We consider this to be a real differentiator, which gives Juniper a competitive advantage.
Juniper is set to capitalize on the growing demand for data center virtualization, cloud computing and mobile traffic packet/optical convergence. The company is offering its new suites of products such as the T4000 core router, QFX data center platform, ACX and PTX packet/optical solution among others. With the growing usage of smartphones and tablets, mobile data traffic has gone up. This has resulted in growing demand for advanced networking architecture, in turn leading service providers to spend more on routers and switches. Juniper is expected to benefit from the higher spending pattern among carriers to upgrade their networks to support the incremental growth in data traffic. Increased spending from AT&T and Verizon — Juniper’s two large customers — are expected to aid its top line, going forward. We believe Juniper’s new products will be able to meet the escalating needs and thereby find easy acceptance among customers.
Juniper entered the Software Defined Networking (SDN) space with the acquisition of SDN start-up Contrail Systems (Dec 2012). According to IDC, the SDN space is expected to generate $3.7 billion in revenues by 2016. Juniper is optimistic about its SDN products and believes that the technology is increasingly attracting customer attention. The company has expanded its SDN product portfolio with new software and hardware offerings such as Junos Fusion, NorthStar Controller and CSE2000 Carrier Services Engine. These products help customers to build high-IQ networks and cloud-based architectures. However, SDN technology is relatively new and may take some time to catch on. With gradual demand growth, we believe that Juniper is well positioned to generate steady revenues from this area.
Juniper has been successful at developing global channel partners and strategic reseller relationships with Ericsson, International Business Machines Corp. and Nokia Siemens Networks. In addition, Juniper has worked with more than 9,000 channel partners to reach customers globally. The company created the J-Partner program for its preferred reseller and alliance partners. The company has also developed partnerships with market leaders, such as Avaya Inc., Microsoft Corporation, NEC and Symantec Corporation. Apart from this, Juniper and IBM entered into an Original Equipment Manufacturer agreement, according to which IBM will provide Juniper’s Ethernet networking products and support as part of its data center portfolio of products. Recently, Juniper collaborated with VMware to provide private cloud-based solutions across the APAC region. Through this collaboration, Juniper will combine its MetaFabric architecture with VMware’s NSX network virtualization platform that provides private cloud-based services. These partnerships will enhance its networking technology ultimately helping companies to transfer an enormous amount of data through
different networks. These partnerships will help Juniper to enhance its reach and expand the customer base.
Juniper in 2014 devised a strategic Aggressive Capital Return Plan under which it has targeted to return $4.1 billion to shareholders by 2016-end. Since 2014, the company had returned approximately $3.91 billion. These initiatives will not only boost earnings per share but also instill shareholders’ loyalty.
