Juniper Networks on Tuesday reported respectable earnings for its first quarter of 2017, and its stock is up about 7 percent this morning.
The company reported net revenues for the first quarter of 2017 of $1.2 billion, an increase of 11 percent year-over-year. Non-GAAP net income was $1.78 billion, an increase of 25 percent year-over-year, with earnings per share for the first quarter of $0.46.
The company announced it would no longer report its business verticals in terms of the service provider and enterprise markets. But rather, it will now report on three internal vertical designations: cloud; telecom and cable; and strategic enterprise.
“We believe the biggest trend that is driving our industry and our strategy as a company today is the cloud,” said Juniper CEO Rami Rahim on the company’s earnings call. “As the industry evolves, cloud architectures are no longer the exclusive domain of the cloud providers. Customers across all verticals are developing strategies for moving to cloud service delivery models.”
Juniper’s revenue from cloud providers increased 25 percent year-over-year. The telecom and cable segment grew 10 percent year-over-year. And the strategic enterprise vertical grew 2 percent year-over-year.
Rahim added that cloud touches the other businesses within Juniper. While the cloud vertical itself comprises the cloud titans, telco and cable operators are re-architecting their networks to deliver cloud services. “And then there are those enterprises that see the value in moving workloads and applications to the cloud,” he said.
Routing and Switching
Routing product revenue grew just 3 percent from a year ago, driven by an increase in PTX and MX sales to telecom/cable and cloud customers, while revenue from switching grew 38 percent year-over-year, driven by the QFX switches for data centers and the EX switches for the campus.
“On the switching side, certainly, we’re very pleased with the performance we saw in Q1,” said Rahim. “A big driver of that performance is in the data center and has a lot to do with the deliberate focused strategy that we’ve had to the data center, which certainly applies to the large cloud providers, but also other verticals.”
In terms of routing, Rahim said it has become a “flattish type of overall market opportunity” for Juniper as well as its competitors in the routing business.
Juniper is also transitioning its security business toward new software-based products. Rahim said the company is working to “recover” and “stabilize” its security business. He said there’s growth in sales of new security products. “It’s just not enough to offset the decline in some of the older products,” he said. “I expect in the second half of the year that we can get to growth. I will just point out that the big part of the focused effort right now is on rebuilding confidence, rebuilding the channel.”
Rahim mentioned Juniper’s virtual SRX security portfolio, saying that it “is gaining good traction, but it’s still a small market opportunity for this period of time. It’s an example of innovation that we believe will help us in the second horizon of our strategy in the sort of 2-, 3-, 4-, 5-year time frame.”
But a research note from William Blair, Analysts Dmitry Netis and Steven Sarver were more measured on Juniper’s security plans. “Management maintains its hopes that security will return to growth in 2017 as it revamps its product portfolio — we are less optimistic,” they wrote.