Weak cloud and service provider sales continued to hurt Juniper Networks’ bottom line in the fourth quarter of 2018. Juniper CEO Rami Rahim admitted that he was “disappointed” and warned investors that sluggish cloud sales will likely hurt the company’s first quarter 2019 results.
“Wins and new use cases will be needed to drive cloud growth,” he said. “We are laser-focused on capturing these opportunities and view the 400-gig transition as an inflection point that will present opportunities for us to take share starting later this year.”
Juniper hopes to be the first of the major telecom vendors to offer 400-gigabit Ethernet within its routing and switching portfolio and plans to roll out these new products during the first half of the year.
The company ended the fourth quarter of 2018 with $1.18 billion in revenue, below the low end of its guidance and a 5 percent year-over-year drop. For the full year, net revenues declined 8 percent year over year to $4.65 billion.
Service provider revenue fell to $516 million in the fourth quarter, down 15 percent year over year, and down 5 percent compared to Q3. And cloud revenue dropped 8 percent year over year and sequentially to $238 million.
Routing product revenue declined 16 percent year over year to $1.8 billion. Switching product revenue hit $934 million, down 3 percent year over year.
Security Business Growth
The company’s enterprise vertical, its security business, and software revenue, however, were bright points in Juniper’s latest earnings. Enterprise revenue hit $427 million, up 14 percent year over year, and up 13 percent sequentially.
Its security business grew 34 percent quarter over quarter, and 18 percent compared to last year. Security also surpassed $100 million in quarterly revenue for the first time in several years boosted, in part, but Juniper’s new high-end firewall line card. Rahim said this product “helped drive a high volume of deals greater than $1 million,” and added that the company expects to see continued security business growth in 2019.
Juniper’s software business also grew 32 percent year over year, and accounted for more than 10 percent of its total fourth-quarter revenue. Its Contrail software sales increased more than 100 percent in the quarter, and more than 200 percent in 2018.
New Products on the Horizon
Rahim also laid out a plan for turning around its struggling cloud business. The company made changes to its sales strategy and plans to roll out “several new products” during the next few quarters, he said. This includes a new MX line card targeting carrier 5G deployments, a new 400G platform, additional features to its Contrail Enterprise platform, and new silicon photonics capabilities. “We believe the 400-gig upgrade cycle, 5G deployments, and enterprise multi-cloud initiatives each represents large opportunities where we are well-positioned to benefit over the next several years,” he said.
Rahim expects his company to return to year-over-year growth during the second half of 2019.