Juniper: What about us?
Juniper Networks Inc. (NYSE: JNPR) has been accustomed to playing the smaller, pesky competitor to Cisco. Its stock was hammered 5% today in sympathy with Cisco's earnings. But what's more noticeable is that Juniper's stock has fallen more than 50% in the past year -- during a rising market.
What gives? My sources say that Juniper's market cap has been knee-capped by lingering concerns about its QFabric switching product and concerns about the telecom spending environment in general. Juniper gets the bulk of its revenue from service providers, while Cisco taps mostly enterprise (or corporate) clients. Telecom operators just aren't spending like they used to on routers.
And what of QFabric? It's a massively important product, because it's part of Juniper new datacenter "architecture" -- its new design for connecting networking products. QFabric allows datacenters to "virtualize" large switches, or connect them in disparate physical locations so that they act as one large device.
After being released with much fanfare in 2011, the product has been plagued with technical issues and whispers in the networking circles that it just plain doesn't work. At the very least, it's been a rocky launch. One of my sources says this is the major issue weighing down shares, but he thinks Juniper will fix the problem by plugging the next generation of chips into the box.
What does Juniper have to say about it? As usual, it claims better performance than Cisco. Enterprise marketing director Abner Germanow told me Juniper's new line of switches will offer superior performance for datacenters, where much of the growth in networking is happening. "The compute architecture has changed -- they are virtualized. We have moved to a pooled" model of computing.
Are you cloud computing newbies looking for a translation of "pooled compute"? Computing power is moving into mammoth, centrally located datacenters than can be accessed from afar by either corporate networks or consumers. This is cloud computing. Juniper says its architecture will excel in large datacenters, because it will allow network designers to tie together big switches in a more efficient way.
It's a good story, but it hinges largely on QFabric being successful. Juniper investors should watch the progress of QFabric carefully. If it gets patched up quickly, you could see Juniper shares bounce back quickly. Just a year ago, the stock was trading at nearly $40. Today it changed hands at $18.
Citrix eyes ADC market
This discussion of cloud computing and virtualization brings to mind Citrix Systems Inc. (Nasdaq: CTXS), one of the leaders in this space. But Citrix also has an interesting niche in the application delivery controller (ADC) market. Its NetScaler networking devices help businesses speed up the delivery of applications.
With the release of NetScaler 10, Citrix is hoping to step up its efforts in the ADC market, where F5 Networks Inc. (Nasdaq: FFIV) is the leader. Citrix product manager Steve Shah made the pitch that the NetScaler business is growing fast and is underappreciated. He also called F5 Networks a "one-trick pony" -- its largest and most successful product is its ADC line, whereas Citrix has several large, growing business lines.
Shah says industry analysts put the ADC total addressable market at about $2.5 billion, and it's clear that Citrix wants to grab a bigger piece of that.
That's a wrap from Vegas, where the lines are long and the pools are cool.