Juniper Networks reaffirmed its long-term forecast for annual revenue growth of 20 percent or more as it met with financial analysts on Thursday following two big product-line introductions.
The company remains focused solely on networking and believes it can keep taking market share from competitors by seizing on architectural transitions driven by the explosive growth in data traffic in enterprise and carrier networks, CEO Kevin Johnson said at the annual Juniper Financial Analyst Meeting in San Francisco.
Juniper kicked off the conference by introducing its PTX Series Packet Transport Switch line, a service-provider core platform that will combine packet switching and optical network components. This followed the announcement of Juniper's QFabric, a new architecture designed to reduce data-center networks to a single logical switch. Simplifying networks is at the core of the company's overall strategy, aimed at both scaling up networks and cutting costs.
Cloud computing and mobility are the main drivers of the new demand for networking, Johnson said. As carriers and companies try to scale up their networks, they will need simpler architectures, because the current model involves deploying a multiplicity of devices, he said. He compared it to a model of computing in which every type of application needs its own special server hardware.
"The legacy approach in networking is not sustainable," Johnson said. "The industry is just being crushed by the complexity of this legacy model."
One service provider that subscribes to this view is Japanese carrier NTT Communications, which in the past two years has seen the traffic on its trans-Pacific Internet backbone grow from 180G bps (gigabits per second) to 450G bps. It expects to see that grow to 600G bps by the end of this year, said Kempei Fukuda, senior director of NTT's global network, who spoke on a panel at the Juniper conference. As the traffic load grows, competition is also forcing NTT to sell bandwidth at lower rates, Fukuda said. NTT plans to move all its core network traffic from standard Internet routers to the type of converged architecture in the PTX platform over the next few years, he said.
Analyst Mark Sue of RBC Capital Markets thinks Juniper can probably achieve its long-term revenue growth forecast. The company reported 23 percent revenue growth in 2010.
"The tailwind is still behind them," Sue said. One key variable will be how quickly Juniper can begin recognizing revenue from the QFabric and PTX products, he said. They are scheduled to start shipping in this year's third quarter and next year's first quarter, respectively. Expanding its addressable market with new types of products will also be critical, Sue said.
Johnson downplayed Juniper's vulnerability to product margin shortfalls like those that recently hit Cisco Systems because of the popularity of some lower-margin switches. Cisco Chairman and CEO John Chambers on Tuesday characterized the shortfall as an unpleasant surprise. Johnson said Juniper focuses on innovative switches with added value instead of ones that are more subject to pricing pressures.
Juniper's leadership also distanced itself from Cisco by emphasizing its focus on networking. In the past few years, Cisco has expanded its purview to include consumer electronics products and server systems. Despite Juniper's claims that its new JunOS Express chipset is one of the most powerful processors in the world, including server CPUs, the company has no current plans to sell computing or storage systems, according to Pradeep Sindhu, vice chairman, chief technical officer and founder. Juniper thinks it can do more for data centers with networking gear than with servers, because as data centers get bigger, the network plays a bigger role in performance, Sindhu said.
Going into other parts of the data center would also pose the danger of offending Juniper's partners, such as IBM, Dell and NetApp, which are helping to sell the company's networking gear, RBC's Sue said.