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Juniper Continues to Grow Confidently

Posted on Monday, Jan 28th 2008

Juniper is probably my favorite company in the networking equipment segment.

Yesterday, Juniper (NASDAQ: JNPR) reported its results for Q4 and fiscal 2007 that ended December 31, 2007. Q4 revenue was $809.2 million, up 36% y-o-y and 10% sequentially. GAAP net income was $122.9 million or $0.22 per share on a diluted basis, up 73% y-o-y and 44% sequentially.

For the fiscal year 2007, revenue was $2.84 billion, up 23%. GAAP net income was $360.8 million or $0.62 per share on a diluted basis, compared with a GAAP net loss of $1,001.4 million, or $1.76 per share for 2006. Its headcount increased by 218 employees to 5,879 compared to Cisco’s 63,050. I like it that they grow without hiring ridiculous numbers of people.

Segment-wise, in 2007, infrastructure segment grew 24% to $1.8 billion, Service Layer Technologies (SLT) segment grew 20% to $574 million, and services segment grew 24% to $509.1 million. In Q4, infrastructure revenue was $500 million, a strong growth of 42% y-o-y and 8% q-o-q, led by strong sales in T, M, and the MX series. SLT finally attained its profitability target with a profit of almost $8 million on product revenues. SLT revenue was $168.4 million, up 29% y-o-y and 19% q-o-q. Service revenue was $140.4 million, up 25% y-o-y and 9% q-o-q.

Region-wise, Americas accounted for 47.5% of total revenue in Q4 versus 47% in Q3. EMEA accounted for 33.6% revenue, compared to 32.5% in Q3. Asia Pacific accounted for 18.9% revenue, lower than 20.5% in Q3. It had 54.6% share of the Taiwan carrier-class core router market in Q3 07, up from 45% last year.

The growing Internet traffic and the online video trend have seen Juniper as well as Cisco doing well in 2007. According to a recent Synergy Research Group report, it gained 1.7% share in 3Q07 in the Carrier Ethernet market while Cisco’s share grew by only 0.6%. Although Cisco dominates the router market with 66% share and Juniper has just about 15%, it is nevertheless a significant gain for Juniper. In the core router market in which Juniper has 30% share and Cisco 60%, Juniper gained 16% compared to the last quarter. Wow!

Juniper is phasing out its DX product line over the next five years. Also, there is speculation that Juniper will soon be launching it’s first-ever enterprise Ethernet switch. Cisco leads in the enterprise Ethernet switch market with 71% market share and ProCurve is second with 10%. Enterprise switching would be an important addition to its portfolio to get further in its competition with Cisco.

For 2008, Juniper expects revenues between $3.4 and $3.55 billion with EPS between $1.08 and $1.13. For Q1, revenue is expected between $810 and $820 million and EPS between $0.24 and $0.25.

Its shares have increased about 30% in 2007. Its stock is currently trading around $27 and its market cap is around $14 billion. In the conference call, Chief Executive Scott Kriens seemed unfazed by economic slowdown citing that spending on strategic IT projects is not likely to be reduced.

Juniper Networks, Inc. (JNPR)

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So based on the most recent quarter Cisco had $14,652 better productivity per employee than Juniper. Not bad for such a big company.

Juniper needs more people to build their new switches but they have high turn over and that they only netted 218 employees. As a result feature development on the WX is slow and they killed the DX.

9,600,000,000 63,050 152,260 Rev/Emp Cisco
809,000,000 5,879 137,608 Rev/Emp Juniper
14,652

Michael Tuesday, January 29, 2008 at 11:37 AM PT

And what does that prove, Michael?

Sramana Mitra Tuesday, January 29, 2008 at 4:11 PM PT

You are saying that Juniper is growing the company with out hiring “ridiculous” numbers of people compared to Cisco, but Cisco has better productivity than Juniper as measured in revenue per employee which is the benchmark, not the total number of people.

I am also saying that Juniper should have even more people to support their products but they lose people so fast that the have slow development on the WX and they killed the DX products so their net add was only 218 but that does not represent the whole story.

Michael Wednesday, January 30, 2008 at 4:26 PM PT

Michael,

You should track what’s happening with Cisco in the emerging market to see how they’re doing. As long as you are playing in the high margin business, it is okay to have a bit of fat. In the low margin businesses that Cisco needs to be in, they cannot afford this luxury.

Sramana

Sramana Mitra Wednesday, January 30, 2008 at 6:18 PM PT

That may be true but at this point Juniper has $14,652 more fat per employee that Cisco.

Michael Wednesday, January 30, 2008 at 9:15 PM PT