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How Did Juniper’s Routing Business Unit Perform in 1Q16?

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Revenues flat YoY

Juniper Networks’ (JNPR) Routing Business Unit revenues for 1Q16 were $504 million. They were flat YoY (year-over-year) and fell 22% QoQ (quarter-over-quarter). The company’s YoY growth in its Cloud and Cable Providers segment was offset by a decline in the telecom market. The QoQ decline was primarily due to the decline in the telecom and cable markets, partially offset by the growth in cloud providers.

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Juniper’s CEO (chief executive officer) Rami Rahim stated, “In routing, we saw solid growth from our cloud customers, as they continue to build out their networks to cope with significant IP traffic growth. Our PTX ExpressPlus product, which began shipping late last quarter, are already seeing strong interest from a number of customers, including several going through beta cycles, as well as several important design wins.”

Competition in core routers

Historically, Cisco Systems (CSCO) and Juniper Networks have controlled the core router space with a combined market share of more than 80%. But this scenario changed with the re-entry of Europe’s Alcatel-Lucent (ALU) into this segment.

At the same time, Alcatel-Lucent’s market share in edge routing has grown to 24%. The company edged out Juniper Networks (JNPR) to become the number-two vendor in this segment in 2010, despite entering the market in 2003. Alcatel-Lucent can use this platform as leverage to increase its market share in the core router space as well. Notably, Alcatel-Lucent was acquired by Europe’s (EFA) Nokia (NOK) in 2015.

A router is connected to a minimum of two networks. It basically decides which way to send each information packet, based on the understanding of the networks. A router is located at a gateway and is generally part of a network switch. An edge router interfaces with an ATM (asynchronous transfer mode) network.

Next, let’s see how Juniper’s data center growth drove its switching revenue.

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