(By
Horacio R. Marquez) Given the
lightening fast expansion that we are seeing in broadband market -
something I mentioned last week in my recommendation of
Cisco Systems Inc. (Nasdaq: CSCO), we are going to look at another strong beneficiary in the sector:
Juniper Networks Inc. (NYSE: %3Cstrong%3E%3Cstrong%3EJNPR).
Juniper Networks beat estimates by a mile in its recent earnings
report. It beat both on sales and margins expectations. However, some
analysts have raised questions about the company's strategy. And I am
one of them.
Let me explain.
While Juniper is a solid supplier to the networking market, its fairly
new initiative to try to penetrate the enterprise sector raises doubts.
The reason for such skepticism is that Juniper is going up against
Cisco systems, which I recommended last week.
You can only
get away with such a bold move by either exhibiting superior technology
or entering into a costly price war. Since the first reason is not a
compelling factor in this situation, the second strategy could possibly
work.
In a price war, the company most negatively affected is typically the
one that has the largest market share. In this case, that's Cisco by
far. But even if Juniper were to pursue such a course of action,
loyalty to Cisco's brand, well-established presence and service, and
the risks involved in switching suppliers would likely prevent many
corporate customers from taking the plunge, even if tempted with lower
pricing.
Juniper's mere 1% growth in the enterprise sector, which is well below
industry trends, points to an unsuccessful foray in this area. And the
volatile demand by the telecommunications giants also showed a weak
performance. But an in-depth analysis reveals a glimmer of hope:
AT&T Inc's (NYSE: T) share of the business has grown from 9% to 13%.