Juniper is an interesting bellwether of networking trends. They’re a major player in the data center and WAN markets for enterprises, operators, and cloud providers, and because they’re second to Cisco in the space, they are under more pressure to be aggressive and innovative. Juniper’s quarterly call on Wednesday showed a beat on all the relevant financial metrics, but Wall Street is still a bit cautious. Is this just financial angst, or are there some issues Juniper needs to face?
Before I get into analysis, let’s be clear about something here. With the M&A, Juniper has what I believe is the strongest product portfolio of all the significant vendors in the networking space. They have a unique set of tools to address unprecedented changes in networking at all levels. They may, in fact, be the only vendor who could field a product strategy that would lead buyers into the future with optimum technology. They should, by all rational standards, be a big winner in 2021.
Now, let’s return to their numbers, and why the Street didn’t respond as positively as one might expect to Juniper’s quarter. One possible indicator is the fact that while both cloud and enterprise revenues were up strongly (30%), service provider revenues were off slightly. Cloud provider spending has been strong in part because lockdown generated a lot of interest in creating new front ends for core business applications to support work-from-home and virtual access to applications by customers and partners. Enterprise spending has been somewhat constrained by COVID fears, which are now subsiding because of the vaccines. Service providers, with the longest capital cycles of the group, have seen less impact from COVID and were thus neither being buoyed by it nor constrained particularly. Juniper’s numbers, in short, almost surely reflect a general recovery in network spending.
Another reason for caution is Juniper’s guidance, which is largely in line with Street expectations. Juniper says their visibility into their channels’ performance is high, so that means that their expectations are modest not because of uncertainty but because they’re not seeing a strong indication of a beat in their numbers for the rest of the year. If Juniper believed it was on the verge of a big strategic win, wouldn’t you expect them to raise their guidance?
Juniper’s caution, and its positioning overall, is a bit surprising to me, since Juniper has made a number of acquisitions that it could exploit. As CEO Rami Rahim said on the call, “We’re seeing good early interest in Apstra, 128 Technology and Netrounds, which are not only strengthening our position in several attractive end markets, but also enhancing the success of the broader Juniper portfolio.” I agree that all three of these companies should boost Juniper’s technical portfolio considerably. Why then hasn’t “good early interest” turned into “expected increased sales?”
I don’t think that strategic supremacy is the reason Juniper beat Street expectations this quarter. I don’t think their modest forecast for the rest of the year reflects an expectation of potential market dominance. That could mean they don’t realize how good things could be, or that they realize it but don’t know how to execute.
Their latest strategic announcement, the “Cloud Metro” announcement I blogged on in mid-April, would have been a great jumping-off point for Juniper to showcase its full inventory of solid newly acquired technology. Obviously, it came after the quarter just reporting closed, so you could expect it to be a signal of how Juniper would position its assets to maximize revenue for the rest of 2021. They failed to bring out what I think were obvious connections, and in fact I don’t think that they’ve done a great job of talking up the symbiosis between the stuff they’ve acquired and their own current product line, much less the way that symbiosis could play in a big win for Juniper this year.
I’m far from convinced that Wall Street understands the technology issues even at this level, so I don’t think Street uncertainty over Juniper’s prospects is driven by my kind of thinking. I think that what the Street is responding to is uninspiring positioning in general. The majority of the statements made on the call are poster-children for conservative positioning, which doesn’t gain you market share or exploit future opportunities your own M&A has created.
Rahim makes an interesting statement here: “So you can’t sell an AI-driven enterprise solution without actually also selling a meaningful software component along with it. That is what is driving the momentum especially in off-box software offerings like Mist.” You can argue that all of Juniper’s M&A got them off-box software, at least off the traditional box. That is the only revolutionary statement that’s made on the whole call, and it’s in a response to a question from a Street analyst.
This is the statement that should have been Juniper’s lead, and that should have guided all of Juniper’s 2021 announcements, both to the Street and to the media and analysts in the tech market. Why? Because you can’t sell enterprise equipment without a credible operations automation strategy. In fact, you really can’t sell equipment at all, without operations automation. AI is surely a credible way to get it.
Our notion of services, even for enterprises, has risen above the simple connections of the past. That’s what Juniper has implicitly recognized with its M&A. Scattered through the call transcript are references to things like “Experience-First networking” and “our investments in automation technologies, such as Netrounds…” in the service provider space. It’s almost like a treasure hunt; find the reasons we’ll be great. Telling us why would be more effective. A lot of dry facts that users have to dig out and assemble is more an education than a sell.
Treasure-hunting for value propositions is not how things are supposed to work, especially when the sum of the Juniper strengths seem to be aimed at providing the technology drives a critical shift in the vision of what a network is supposed to do. Services aren’t just connections, it’s the experience overall that counts. Netrounds and Mist offer Juniper a great opportunity to get a handle on that higher-level service. 128 Technology is the best branch connection, experience policy management, and experience security strategy on the market. Why settle for buyer education, listing stuff and waiting for people to make the connection? How difficult should it be to make all of that exciting?
The networking market doesn’t need to be educated any longer, it needs to be inspired. Every trend Juniper talks about is real, and every one is also a proof point that grizzled network routing and switching veterans aren’t driving the bus these days. In my surveys, the average age of a network planning decision-maker in the cloud space is five years younger than in enterprises, and in the enterprise it’s eight years younger than in the service provider space. The people weaned on the Internet expect not only fast reactions, but also interesting and powerful positioning.
This is frustrating to me, because I know well how difficult it is to build the right technology to support a revolutionary future. It’s even difficult to acquire it, but once you have it, it’s not difficult at all to sing pretty about your new virtues. Juniper has done all of that, except the singing.
Competitor Cisco can position so as to make a firefly to look like the sunrise, Juniper. You need to work harder on your own story.