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No. of Recommendations: 5
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 products

Most 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=4


2) 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=3194
I have not heard of similar fallibility in JNPR

Meanwhile 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=289

While 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 juniper

I 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 Juniper

Now 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 $125,000
Interface cards ASP - $20,000 - these actually cost more altogether than the router
Supports ATM, Gigabit Ethernet, Sonet/SDH and works with DWDM
While supporting the highest current throughput - OC-192c.


Sales announcements.
M160 + KPNQwest
http://www.juniper.net/news/pressreleases/pr-000328b.html
M160 + Cable and Wireless
http://www.juniper.net/news/pressreleases/pr-000328c.html
M160 + UUNet
http://www.juniper.net/news/pressreleases/pr-000328d.html
M160 + GTE Internetworking
http://www.juniper.net/news/pressreleases/pr-000328e.html
M160 + 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.html
http://www.juniper.net/products/dsheet/100012.html#15


Long on CSCO + SCMR + RBAK - thinking JNPR looks good.
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