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Juniper Collaborates with VMware; Expands in Asia Pacific

Networking solutions provider, Juniper Networks (JNPR) and VMware, Inc. (VMW) recently collaborated to provide private cloud-based solutions across the Asia Pacific (:APAC) region. VMware is an industry-leading virtualization software company.

Through this collaboration, Juniper will combine its MetaFabric architecture with VMware’s NSX network virtualization platform that provides private cloud-based services. This would make the cloud-computing environment more secure, simple, flexible and efficient.

The partnership also involves Juniper’s VMware NSX L2 Gateway integration and VXLAN routing products that enable connection within a data center and between data centers and speed up the transition to software-defined networking (SDN.V). Considering VMware’s market position and customer clout, the partnership should help Juniper Networks expand its customer base in APAC.

The increasing complexity in cloud infrastructure has led to growing demand for SDN solutions. These solutions increase the flexibility of the infrastructure and reduce costs for companies. It is expected that the lower-cost proposition will lead to quicker adoption of SDN technology, which bodes well for suppliers such as Juniper.

The VMware NSX network virtualization platform will be of immense importance since the joint effort will ward off difficulties while setting up a mature virtualized cloud-based infrastructure. This is turn will help Juniper to expand its existing networking-based infrastructure with the benefits of the VMware NSX network application.

The partnership will also enable Juniper to offer an efficient and improved hybrid IT environment to drive performance.

As per a study conducted by technology research company, TechNavio, the worldwide private cloud computing market is expected to record a compound annual growth rate of 22% from 2013 to 2018. Cloud computing leads to increased service and elevated security requirements for the companies that use them and Juniper’s product portfolio is well positioned to benefit.

Additionally, the company’s expansion into the software defined network segment is expected to strengthen its position in the networking space. We also believe that the interoperability of Juniper MetaFabric and the VMware NSX Suite will help customers accelerate their transition to the cloud.

However, we remain cautious on the stock as the company delivered tepid third-quarter of fiscal 2014 results. Juniper’s third-quarter 2014 revenues went down 5% to $1.13 billion from the year-ago quarter. Total revenue was impacted by weaker-than-expected demand from U.S. service providers. Also, revenues from the APAC region were down 27.9% on a year-over-year basis. Adjusted earnings during the quarter came in at 22 cents, which lagged the Zacks Consensus Estimate of 26 cents.

The company also provided tepid fourth-quarter revenue guidance. Juniper expects fourth-quarter revenues in the range of $1.025 to $1.075 billion, down sequentially. The Zacks Consensus Estimate is pegged at $1.055 billion.

While the company’s new products, cost reduction initiatives and improving execution remain growth catalysts, charges related to the company’s restructuring initiatives are expected to impact near-term profitability. Competition from Cisco (CSCO) and F5 Networks (FFIV) also remains a concern. Delays in large projects also remain an overhang on the stock.

Currently, Juniper Networks carries a Zacks Rank #5 (Strong Sell).

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