I'm looking into Juniper as a potential LT investment. So far they seem to be at the forefront of Nextgen networks with router speed. Recently read an article which determined Juniper had already captured 15% of the router market...this is extraordinary if it is true, and makes me wonder about the future of my Cisco shares.Can anyone direct me to where this information can be gleaned from? Is there any way for the individual investor to track Juniper's penetration into Cisco's marketplace w/o relying on overall revenue #'s?The last question I have is in regard to Gorilla potential. How do the techies onboard feel - is Juniper's nextgen routers so superior to Cisco's that a discontinuous innovation could occur? What about Cisco protocols...if I understand this correctly Cisco's protocols help maintain the gorilla position. Will the next generation networks have an inherrent need for Cisco's protocols, and if not, is the door wide open for Juniper's superior product to storm thru?Thanks in advance. I'm doing my best to digest a complex subject.Dan
After reading a New York Times article about Junipers new high speed router, I am also concerned. Are we seeing the decay of a long time gorilla?Does Cisco have enough other business to keep it at such a high value? Comments appreciated from those with more detailed knowledge of Cisco. I have a hard time keeping track of all the areas Cisco has entered and the impact these new ventures have on the bottom line.
I haven't finished this but if you forgive any mistakes and the lack of details on the competition then feel free to read. I use Multex a lot if you take it for read they'll put their company in a good light then try to fill in the missing bits by search the usual tech pages plus relevant company home pages. Coalesce the two together add knowledge from critical fools and we should get a reasonable overview.( If anyone knows more about the competition let me know)To reiterate.Light on Competitors.Light on understanding on the dynamics of what will happen when a superior competetor comes in.Will companies forgive JNPR loss of speed for a stable product. Or will CSCO loose share and JNPR be relatively unbothered?Juniper (JNPR)Introduction - A Switch is not a RouterAs networks started to be built out it soon became apparent that switches could not handle all of the infinite possible paths data might need to flow. We needed a device that not only directed packets but could also route them anywhere in the Internet world. If you have almost limitless data end points and route options, any of which can change moment to moment we need a new device. That device was the router. And this is what Juniper makes.Cisco has dominated the router market but the success of the Internet has led to a data flow ( increase of 2-3% a week!) which led to routers becoming one of the bottle necks. The call for a new generation of wire speed routers ( routing packets at the speed they come in ) has been answered by a number of companies. Foremost among these companies is JNPR.Juniper is focused on making high end routers. This JNPR web page will give you a great overview - it's quite humbling and puts me off writing any technical stuff. If you want to know JNPR area - read it. Frankly, I've seen at least 1 analyst report just rip this page off.http://www.juniper.net/techcenter/techpapers/backbone-routers.htmlA must read - CSCO still looking like it's at a disadvantage ( March 21st 2000)http://www.lightreading.com/document.asp?doc_id=289Market EvaluationRevenuesSequentially ( thousands )1998..Q4.....3,8071999 Q1....10,044 (+163%)1999 Q2....17,556 (+75%)1999 Q3....29,564 (+68%)1999 Q4....45,442 (+54%)Q4 Results - http://biz.yahoo.com/bw/000118/ca_juniper_2.htmlI won't do Y/Y because it won't tell us anything useful.But what about JNPR Market Share ?Market share in the high end router market has steadily increased..............PercentQ4:98...-....7Q1:99...-...11Q2:99...-...13Q3:99...-...15Q4:99...-...18Juniper customer concentration.In 1999 - Only UUNet and Cable & wireless are worth over 10% - JNPR has 56 customers - 15 new in 4Q. The customer base is broadening.Ryan Hankin Kent estimates the Internet router market will rise from $2 billion in 2000 to $8.5-15.5 billion in 2003. Needless to say these estimates have been steadily increasing.We can say that since Juniper revenues are tied to the build out of the Internet infrastructure we should expect to see a strong increase of revenue for the foreseeable future. The inevitable conclusion is for the company to gain a high valuation.Note these ignore the following revenue streams:1).JNPR has introduced the M20 router. This is aimed at the edge of the Internet. However we will only see their effects in revenue in the next quarter. We should expect a fast ramp up but smaller margin.2).JNPR is bringing out a new router class - M160.Barriers to entry for a new routerThe only thing I can see which can spoil the router party being thrown in the Juniper offices would be the introduction of a new superior router. However it faces a number of barriers of entry.1) Software - the software must be compatible with Cisco's operating systems IOS and now Juniper's JUNOS. This is not a simple matter. Cisco in Microsoft style hasn't documented all the inner workings. Plus if CSCO has any eccentricities then you will have to put them in. I believe that neonetworks has licensed Lucents to avoid this heart ache. http://www.lucent.com/press/1097/971014.bla.html2) Then you have to convince ISP's to test you're router. Why should they use you're router when a thoroughly tested one is already available? Subsequently getting into the market is more difficult while the providers have two good suppliers.3) Even if they get their router into a user it will take a while evaluating it. All you're first sales will take time until people are convinced you are selling the real McCoy. If Juniper / CSCO comes out with something subsequently then you are back to square one again.Taking pluris as an example which introduced it's router in May 3, 1999 - from the news announcements I have only seen trials and no sales. After almost a year.Investment IssuesHold, Hold, Hold - Issues that don't concern a JNPR investor1) Switches and optical switches - A switch is not a router. A switch cannot do what a router does.2) Optical Routers - what optical routers will do when the eventually get onto the market seems to be to route a wavelength of light. This is not what JNPR will do. To get routing you will have to convert from optical to electrical before knowing where the packet of information needs to go.3) High valuation - well we all have our tolerances - but a five fold increase in 3 years is the reason for the high valuationDo I sell? - Issues that do concern a JNPR investor1) CSCO - currently at a technical disadvantage to JNPR it has option of buying a successful startup (presuming one does become successful) and let there massive sales and marketing do the rest.2) Next generation startups - before you take any threat seriouslya) Real world demonstration compatibility with CSCO and JNPR systemsb) Be technically better and at least as cheapc) Access to significant sales and marketingd)Finally JNPR has a foot in the door and become primary and secondary suppliers to many ISP's anyone going into the market now will face up to less tolerance - JNPR got a lot of time to test there routers ISP's have an alternative to CSCO and give less time to new startups.e) JNPR loosing market share to them.3) Market shareJuniper's CompetitorsJuniper core router is the M40The switch fabric handles 40 Gbps and it can pass 40 million packet/s.The next generation from Juniper is meant to be called M160 so I am guessing it will handle around 160Gps/160 million packets/s but well will have to wait.Avici.................-.- Terabit Switch Router (TSR) availability????, Originally had relationship with Nortel but no more.Cisco.................-.- GSR 12000 family - my impression is that JNPR has superior router - CSCO is making up by sticking putting multiple switch fabrics together to work in parallel to match JNPR and the difference they make up in marketing.Lucent................-.GRF ( aquired Ascend ) has software issues preventing wide acceptance NS , AVLucent................-.NX 64000 through NexabitNeo Networks...-.SteamProcessor 1000 - 120 Gbps - 100 MppsNeo Networks...-.SteamProcessor 2000 - 512 Gbps - 400 MppsTellabs...............-.Everest ( aquired NetCore systems) IP routing + ATM switching architecture - NS , AVPluris.................-.TNR - 1440 Gbps switch fabric + 495 Mpps, MPLS - available 4Q 2000Unisphere..........-.Giga Packet Node - NS , AVNS = Nothing Special about SpecsAV = Available NowMpps = Million packets per secondNeohttp://neonetworks.com/Neo using Lucents OS (called Inferno )http://www.lucent.com/press/1097/971014.bla.htmlhttp://www.forbes.com/tool/html/98/may/0504/side2.htmPlurisSee their newshttp://www.pluris.com/html/corpnews3.htmlPluris is a member of ODSI - it is worth keeping an eye on ODSI because they are a band of the new networking upstarts that could produce networking giants.They are led by Sycamore ( SCMR)http://www.pluris.com/html/optical.htmlPluris producthttp://www.pluris.com/html/product.htmlJuniper Major CustomersAT&TC&WFrontierGST Network undingSprintUUNETVerioOther ReadingCSCO and JNPR wrapup - Light readinghttp://www.lightreading.com/document.asp?doc_id=103HotProducthttp://www.data.com/issue/990107/npn1.htmlhttp://www.zdnet.co.uk/pcmag/tinas/1999/41.htmlhttp://www.juniper.net/news/nikkei_awards.htmlThe Lone Routerhttp://www.techweb.com/se/directlink.cgi?DAT19990921S0001CompanyInfohttp://www.individualinvestor.com/quotes/market.asp?ticker=JNPR&report=csJNPR supply an all IP networkhttp://www.yipes.com/press_box/pr_0306.html
GorillaGorilla-Superb work. I thank you very much, and will give your research the proper due diligence.This board never ceases to amaze me for its thoughtful commentary, expert insight, and subsequent ability to identify huge market potential. It's a shame we cannot recommend boards the same way we recommend posts.FOOL ON!!!DP
It is true that Juniper's latest router is better than Cisco's router. There are few things I have to point out that are in Cisco's favor.1) Most large customers like AT&T prefer a vendor that provide end to end solution rather than boxes and Juniper doesn't have an answer for that. They are very focussed in making one product right. Right now, they have 2 or 3 products that targets a particular segment. In order for Juniper to provide a wide array of products like Cisco, it is going to take a while for couple of reasons. The first reason is that the CEO of juniper doesn't beleive in acquisitions. He has made fun of Cisco acquiring so many companies. The second reason is that no company can quickly develop products as technologies evolve very fast. That's why acquisition is a solution. The acquisition and merger team in cisco is a well oiled machine. They have perfected the art of acquring new companies and successfully integrating with Cisco. Moreover, Juniper's customer are their investors. If they don't buy, who will buy their products.2) In most cases, Cisco is not the first company that comes up with a prodcut to address the customers requirments. They are usually late but once they get in they are very aggressive and get the # 1 or # 2 postion in market leadership for that particular product. 3) Juniper had to offer a convertible debt of one billion dollars to keep the company afloat. The high valuation for Juniper's stock will not help in running the company. On the other hand Cisco has 15 billion dollars in cash.4) Juniper is not able to attract talented engineers any more because they are valued so high and the stock is very volatile. Few weeks ago, when Nasdaq dipped, Juniper stock went down by 18 dolls. and Cisco's stock went down by 25 cents. I feel that the mutual funds would like to own Cisco stock over juniper.The above points doesn't mean that Juniper will not grow past 40 billion dollars. I think they have still room to go. But on a very long term, Cisco is a better stock than Juniper.This is my 2 cents.
I'm a CSCO investor and I'm not worried about Juniper (yet) because of this router development. DEC, Bay Networks, and I believe Foundry Networks have released routers faster that Cisco's in the past. - Alan
Hi there!Has it not been Cisco's policy to buy the companies that have the new technology rather than develope it themselves? Perhaps they'll buy Juniper!
When you think of technology, you should remember thatit changes so radically that the nextgen router of which you speak willl be pastgen in no time. Also whenever you hear of a new and improved technolgy you can bet that their will be an ample amount of competitors who will be positioning themselves in the doorway strategically. I am invested in a company called Micromem Technologies (OTC) (soon to be AMEX listed). They have memory chips named Magram which are being tested at Honeywell now. These chips are supposed to revolutionize the wireless handheld and eventually the PC industry. However their are other companies who are also trying to get on the bandwagon.Imagine a PC that does not require "booting" because the memory in the chips is resident always even when the power is off! If interested check their site athttp://www.magramtm.com
Thank you for you thoughtful response.1) Most large customers like AT&T prefer a vendor that provide end to end solution rather than boxes and Juniper doesn't have an answer for that. They are very focussed in making one product right. Right now, they have 2 or 3 products that targets a particular segment. In order for Juniper to provide a wide array of products like Cisco, it is going to take a while for couple of reasons. The first reason is that the CEO of juniper doesn't believe in acquisitions. He has made fun of Cisco acquiring so many companies. The second reason is that no company can quickly develop products as technologies evolve very fast. That's why acquisition is a solution. The acquisition and merger team in cisco is a well oiled machine. They have perfected the art of acquiring new companies and successfully integrating with Cisco. Moreover, Juniper's customer are their investors. If they don't buy, who will buy their productsMost large vendors like a choice of supplier. They have not always had this choice and many vendors are careful to include competing technologies at least a try out ( Qwest and Williams are good examples of multi-vendor build outs) Juniper is offering them a second source of router. It is reliable and superior to the current available models. And yes Juniper do supply AT&T as well as Sprint and IBM etc, etc. A solid gigabit router is a very strong selling point.For some of the examples you only have to look at the recent M160 announcement (see bottom for full list). UUNet has a large network and a major customer for JNPR. While Cable and Wireless is using Nortel for the backbone and Juniper for the routing."Qwest operates a multi-vendor policy on its network, using products from both Cisco and Juniper. "Having a multi-vendor strategy is really important because it gives you leverage over the vendor, which helps you to roll out services quickly," Goel says. from http://www.lightreading.com/document.asp?doc_id=103&page_number=42) In most cases, Cisco is not the first company that comes up with a product to address the customers requirements. They are usually late but once they get in they are very aggressive and get the # 1 or # 2 position in market leadership for that particular product. I am under no delusion about the risks of any company taking on the Gorilla of networking. Nor indeed is the market which as you point out has kept it's premium valuation. If Cisco can buy the right start up optical companies then they will be set fair in the optical world. However even position number 2 in routing is enough for Juniper to maintain it's revenue growth and as discussed vendors like a solid number 2.Talking about robustness. Apparently 1/2 of the spikes in flow are caused by Cisco's router having to be reset. http://www.currentanalysis.com/publicview.cfm?reportID=3194I have not heard of similar fallibility in JNPRMeanwhile Cisco's product pre-announcements are not upping the bar. I am not seeing innovation leading to increased barriers of entry.http://www.lightreading.com/document.asp?doc_id=289While the competition is no where......"... outfits shipped products in Q3 1999: Nortel Networks Inc. (http://www.nortelnetworks.com) is selling the Versalar 15000. Ericsson Telecom AB (http://www.ericsson.com) has its Torrent IP9000. Unisphere Solutions Inc. (http://www.unisphere.cc) is selling the Redstone ERX. Sales of each product line totaled less than $5 million. Not exactly a blistering pace. "The competition will hot up but Juniper is getting a free run at the moment. This will of course change.3) Juniper had to offer a convertible debt of one billion dollars to keep the company afloat. The high valuation for Juniper's stock will not help in running the company. On the other hand Cisco has 15 billion dollars in cash.Eh? Take Sycamore for an example. They wanted to raise some cash through issuing more shares. Because there share price was higher than they expected they could reduce the number of shares they were going to issue to get the same amount of cash. They get same money we get less dilution. We are all happy bunnies because of a high share price.4) Juniper is not able to attract talented engineers any more because they are valued so high and the stock is very volatile. Few weeks ago, when Nasdaq dipped, Juniper stock went down by 18 dolls. and Cisco's stock went down by 25 cents. I feel that the mutual funds would like to own Cisco stock over juniperI always try to use % when discussing share movements. Since Juniper's share price is $267 and Cisco's is $67 we should expect a larger change in share price from Juniper. The figure you quote of $18 is a 6-7% fall ( I must admit I thought it was more than that) which sounds quite robust given that fall. But, yes high flying shares should expect a higher volatility. All investors should be aware of that. But if JNPR case this has been mainly upward volatility on the back of good news.Regarding the engineers. This is not a competitive differentiation between Juniper and Cisco but between established and startups. However they can always overpay them ( I know there are tax advantages and balance sheet advantanges for share options ). As a software engineer I can say I have no objections to being overpaid. For me overpay + good environment are a good reason for taking a job. But yes I take you're point. However as you say providing they retain their leadership positions the share prices have space to grow.But on a very long term, Cisco is a better stock than JuniperNow that's a tough statement. I think without a doubt Cisco is one of the best ( if not the best ) run companies in the world. And as you say it has a broad portfolio. From wireless to optics. However there is a great deal of competition at the moment. Companies like RBAK ,and SCMR have some great opportunities to get a segment of this expanding market. While NT looks like it has superior optical technology. So a more aggressive investor may want to buy a basket of promising companies. Sell the ones that perform poorly ( whatever you're criteria ) and keep the ones which perform well. I think there is a chance that one of these companies could become the next Cisco. Now you are right to cautious but the returns on a successful networking company will be considerable. JNPR is up 250% in the last few months. RBAK is up even more. It is all a play off between risk and reward ( or Fear and greed if you like ) and how much volatility you want to see.And finally it is a company that I think I might be able to understand better than the multi-tentacle Cisco and this is a Foolish thing. Until someone gets a competing product :-M160 Router - ASP $125,000Interface cards ASP - $20,000 - these actually cost more altogether than the routerSupports ATM, Gigabit Ethernet, Sonet/SDH and works with DWDM While supporting the highest current throughput - OC-192c.Sales announcements.M160 + KPNQwesthttp://www.juniper.net/news/pressreleases/pr-000328b.htmlM160 + Cable and Wirelesshttp://www.juniper.net/news/pressreleases/pr-000328c.htmlM160 + UUNethttp://www.juniper.net/news/pressreleases/pr-000328d.htmlM160 + GTE Internetworkinghttp://www.juniper.net/news/pressreleases/pr-000328e.htmlM160 + Deployment in National Center for Science Information Systems (NACSIS) - not interesting from a money perspective but it was the only router up to it.http://www.juniper.net/news/pressreleases/pr-000328a.htmlhttp://www.juniper.net/products/dsheet/100012.html#15Long on CSCO + SCMR + RBAK - thinking JNPR looks good.
"techie" here :) (software engineer for a large networking company which shall remain nameless to protect my innocents)I wouldn't call Juniper's nextgen router (M160) a discontinuous innovention, these kinds of performance jumps (4x) are normal in this space. Juniper is however perhaps twice as good as Cisco routers in packet-per-second speed, stability, and port density. Word I've heard is that the key protocols they support are fully compatible with Cisco and may be more stable. Cisco has definitely had a strong hold on the router market right from the start, with some significant barriers to entry, but the market share Juniper has grabbed this last year proves that they have broken the barriers of entry and are now a solid contender. I believe they will continue to gain over Cisco in the high-end router market.I am long both Cisco and Juniper. It will be tough for other players to come in, and both stand to benifit greatly from the exploding data traffic growth. Some analysts have said Juniper breaking into Cisco space will open the door for other new startups to get a peice of the action too. I strongly disagree. Both the software and the hardware ability and stability in the space is nearly imposible to get right.Don't think that just become Juniper does well they are going to start hurting Cisco - not anytime soon. Consider this. The market that Juniper is going after with the M40 and M160 is only 5% of Cisco's total Revunues. Cisco outgrew the router market years ago and has quickly grow out into nearly all communication sectors. Cisco now has $12 billion in sales, and the high-end router market is only a $1 billion market this year. Now here is the interesting twist. The high-end router market is on the verge of a boom. Estimates show the high-end router market growing to $10-12 billion by 2003-2005 (depending who you ask). Due to continued growth in it's wide market base and continued expansion into new markets, I expect Cisco to reach $60 billion in sales by 2005 (all communications markets will continue to expand at or above levels of the last few years). I expect Juniper will have sales of $5-7 billion by 2005. So Juniper will still be a small-fry compared to Cisco, but Juniper will have 50% of the high-end router market, and some of the mid-range router market.But this isn't just a matter of who is the biggest gorilla. IMO, Juniper will grow sales by 12x, while Cisco grows by 5x. Cisco's price/future-sales ratio (my favorite growth valuation method), is 9. Juniper's is 6-8. So if my estimations are right, both companies are about equally "valued" looking a few years out. But I think Juniper, since it will still be growing much faster than Cisco, will support a much higher P/S (price/sales ratio) in 2005. Probably 45-90. That would mean a 5x increase in Juniper's price over the next 3-5 years. But the future P/S seems the toughest thing to estimate. Market valuations are so unstable. Cisco had a P/S of 5-8 for 10 years, until this last year when it blew up to 30-40! Did the P/S blow up because of increased growth? No - growth slowed but Cisco began to get higher valuations because of it's long track record, and companies are being valued more and more based on thier growth potential (which I like is very in the Fool Way). In 5 year will Juniper be valued like Cisco was 5 years ago or like growth companies are valued today? Either way, given equal bets, I'll chose the higher-growth company (Juniper) for the better return.Some quotes to back up the facts I've thrown around...http://biz.yahoo.com/fo/000328/mu2497.html>The annual market for so-called gigabit routers is>expected to mushroom to more than $10 billion by the>end of 2003 from about $1 billion in 1999, according>to several recent market research reports. Cisco had>an 84% share of the market last year, Juniper 16%,>according to Ryan Hankin Kent. >Service providers are clamoring for faster gear to >keep up with surging Internet traffic, which in some >cases is doubling every 90 days. ``Our traffic is >rising eight- to tenfold per year,' says Mike >O'Dell, >senior vice president of technology at UUNet. Because >of that demand, Internet carriers are willing to pay >almost any price for equipment that can unclog their >networks. >``In this market, price isn't an issue. Performance >is,' Mehta says. In its most common version, the >M160 will sell for $350,000 to $400,000, >says Juniper Chief Executive Scott Kriens. >Cable & Wireless is committed >to buying 24 boxes for North America and Europe, says >Jeff Young, the company's vice president of >engineering. O'Dell says UUNet ``is mounting a large >deployment,' but declined to give more details.
StevieJF wrote:I expect Cisco to reach $60 billion in sales by 2005 (all communications markets will continue to expand at or above levels of the last few years). I expect Juniper will have sales of $5-7 billion by 2005. So Juniper will still be a small-fry compared to Cisco, but Juniper will have 50% of the high-end router market, and some of the mid-range router market.With the above scenario, I'm going fishing for 5 years folks. See you then...BB(Nice post StevieJF!)
StevieJF, Another point to consider is that the large network service providers that buy these high-end routers are savvy enough to want - and get - two strong suppliers to choose from. So, from that perspective alone, I agree that it will be more difficult for a third player to emerge in the space. My only concerns with Juniper are that: 1) They are competing with Cisco, a company that has a track record of beating competitors who have superior technology (Wellfleet, Bay), and 2) They are upstarts and don't have the proven track record for scaling their business, overcoming obstacles, taking a competitive blow off the chin and finding their legs again, etc. All the best,
Valid concerns brownu88, and only time will tell for sure. There is always risk, and I certainly don't want to ignore that. I've put 20% of my very sizable portfolio into Juniper, and I don't want to loose it! A year ago, I certainly wouldn't have put much on Juniper. I basically would have said what you did. They seemed to face nearly impossible odds going up against Cisco's established customer base and support reputation. (It is generally agreed that Cisco won the market larely because of thier incredible support organization). But the RESULTS Juniper has produced this last year, combined with the evidence I have heard of the quality of thier product, got my attention and my interest. Still, it wasn't until they released the M160 that I became an investor. I hope to hold JNPR for 10 years.Here is my reasoning - how I sleep at night :)I have not dug deep into the backgrounds of Juniper's management, but I feel comfortable with what I've seen. I believe they have already overcome incredible obstacles to get where they are today. They had the smarts to know that success wasn't just about speeds and feeds. They have shown a deep understanding of the business, the ability to pull together a winning team, and the ability to convince the likes of UUnet (MCI) to invest heavily and commit to their product. UUnet knows what they are doing, and they are conservative. They aren't a little upstart willing to bet their business on a newcomer - and that is what this equiptment means for UUnet - if it or the support organization of Juniper doesn't live up to thier needs, it could cost UUnet half thier business - it could ruin them! So UUnet will of course apply all the talent they have built over the many years of being the largest Internet backbone provider to making sure that Juniper won't let them down. Juniper's management had to convince UUnet that Juniper would be around for a long time to support their products. That success alone speaks volumes about the quality of Juniper to me (and to anyone that has ever sold, or tried to sell, products to UUnet).As for scaling their business, they've got it easy. They have great customer references, and a quickly growing sales force. Once they get a new customer, the product seems to be selling itself quite nicely (ie, once customers get signed-on, they are making re-purchases). On the supply side they don't have a problem, because it is outsourced to the best in the business. Their silicon is done by IBM, which is one of the top fab houses around these days, and the manufacturing is done by Selectron, which is the primary manufacture of all Cisco equipment (ironic, eh?)Thanks for the thoughtful feedback.Fool On!
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