Juniper looks beyond core routers

Juniper Networks' plan to extend from the Internet backbone into new markets is an ambitious attempt to tap alternative sources of revenue as it faces an increasingly tough battle for market share in core routers.

The company was founded in 1996 with financial backing from several of Cisco Systems' established competitors and a mission to take on Cisco's dominant Internet core routers with its own high-powered devices.

The gamble has had some initial success: Juniper beat Cisco to market with a core router greater than 80G bit/sec of capacity and captured 94 percent market share with this class of product in 2000, according to Dell'Oro Group. In routers with between 10G bit/sec and 79G bit/sec of capacity, Juniper again started out fast, increasing market share from 15 percent in 1999 to 25 percent in 2001, according to Dell'Oro.

But Juniper's quarter-over-quarter share in this class of product has been dropping steadily, from a peak of 32.7 percent in the second quarter of 2001 to 23.2 percent in the fourth quarter. And in 80G bit/sec-class systems, Juniper surrendered half its market share to Cisco in 2001, Dell'Oro Group Inc. says, after Cisco began shipping 10G bit/sec OC-192c interfaces for its 12000 series Internet Routers.

Cisco also has leapfrogged Juniper in the "speeds-and-feeds" public relations contest. Cisco says its current high-end system, the 12416 Internet Router, has a total switching capacity of 320G bit/sec. That beats Juniper's fastest box, the 160G bit/sec M160, but Juniper is expected to unveil a 320G bit/sec-capable system later this year.

However, Juniper didn't wait for these recent warning signs before diversifying its product portfolio and target markets.

In 1999, the company began reworking some of its original technology to offer service-provider edge routers, a market that includes Juniper's 10G bit/sec to 79G bit/sec devices, and 1G bit/sec to 9G bit/sec systems.

In 1G bit/sec to 9G bit/sec routers, Juniper ranks third with 5.5 percent share in 2001, compared with Cisco's 82 percent and Unisphere Networks' 9 percent share, according to Dell'Oro.

Last year, Juniper formed a joint venture with Ericsson to develop routers to link mobile wireless infrastructures with IP data networks. And in November, Juniper acquired Pacific Broadband Communications and expanded into the cable modem termination system (CMTS) business, another Cisco stronghold.

The company explains its plan as a multipronged attack on network bottlenecks.

"The strategy of the company is to focus on problems of scale and reliability in building the new public infrastructure. One does not get [there] by focusing only on the core," says Pradeep Sindhu, CTO and founder of Juniper.

When Juniper was founded, the bottleneck in carrier networks was at the core. Now the core has been built out, and the systems at the edge need to be improved.

A plus for Juniper is that if those bottlenecks are cleared, traffic and demand for core routers will increase, Sindhu says.

Observers view Juniper's Pacific Broadband buyout not so much as an entry into the CMTS market as it is a strategy to sell more routers. Juniper already missed one big CMTS opportunity last year when cable network operator Excite@Home went bankrupt, according to industry analyst Michael Harris, of Kinetic Strategies.

The collapse of Excite@Home forced several cable operators to build their own networks to replace its infrastructure.

However, Juniper's CMTS time may come once all the standards are in place for offering voice services over cable modems - probably about a year from now. Operators will dive in to upgrade their systems for these potentially lucrative services, Harris says.

Meanwhile, the company's mobile initiative through a joint venture called EJN Mobile IP, which is based in Boston, appears to be a bold move into a new product category. But it, too, should yield more core and edge router sales.

EJN's first gateway for mobile IP services brings together the functions of a General Packet Radio Service (GPRS) gateway with the Juniper M20 router. Called the AXB 250 06 Gateway GPRS Support Node (GGSN), it sets up data sessions for mobile customers and routes the packets they send and receive.

"The wireless world is getting more and more IP-based," says David Berndt, a wireless analyst at Gartner. "Juniper definitely has the background and the tools to take advantage of that evolution."

Some operators today use different backbones for different services, but the industry eventually is expected to converge on IP. Juniper is intent on selling more routers to these operators as the infrastructure to support their 3G mobile wireless services.

From core routers to edge routers to CMTS and GGSNs, Sindhu declined to speculate what Juniper's product lineup will look like in two years, but he says its new businesses are likely to show higher growth rates in the near term than its more mature core business. As for expansion into yet more sectors, Sindhu says the company has identified the key segments for its strategy for now.

"Because mobile and cable are expected to be fairly strong components of the telecom infrastructure, they're not something Juniper can ignore," Sindhu says.