Previously, the_dodger wrote:
And bought CSCO in 1991 at a VERY respectable PE -- (I'm guessing at around 20) -- ...but of course, sold it like a big dummy waaaaaaay too early...I can remember thinking..."just how far could this network thing go, anyway ?!!!" So, at the time, it was probably the "gorilla" in G&K terms -- but in a very small jungle...
td
When comparing the enterprise networking technology adoption life cycle of which Cisco became the gorilla to the IP/Broadband technology adoption life cycle - I think you indeed need to keep those words in mind "just how far could this [insert IP/Broadband] thing go, anyway?!!!".
Here's a nice little FAQ put together concerning Juniper:
boards.fool.com
And here's a fun thread to read concerning Cisco vs. Juniper:
boards.fool.com
(Don't miss this one within that thread: boards.fool.com
Valuation:
“The highest-valuation Next Generation stock is not in optics, however. It's Juniper Networks, which, in our view, is fairly priced to under priced. We believe it has an extremely attractive market opportunity in core Internet routers and superb lock-in of its customers.” – Paul Johnson, co-author of “The Gorilla Game”
At the various points in the previous tornado activity for Cisco in routers, intelligent hubs, LAN switches and remote access devices - clear evidence of tornado sequential quarterly growth and y/y growth are well documented - both in our revised manual and in other sources. The recent sequential quarterly growth in the IP/Broadband "next generation network" core router growth that Juniper experienced was 77% q/q and 543% y/y . Unless I failed to uncover all the information, I don't believe Cisco ever had growth that high. They had one quarter of 73% intelligent hub q/q growth in 1989 before going public and a couple of quarters of y/y growth in the first half of 1996 in the LAN switch market that were 313% and 361% y/y.
I can't argue with most of the fundamental metrics of Juniper:
Gross Margin: 62.75%
Net Margin: 22.10%
Foolish Flow Ratio: .57
What about JNPR Market Share?
Market share for Juniper in the high end router market has steadily increased.
.............Percent
Q4:98...-....7
Q1:99...-...11
Q2:99...-...13
Q3:99...-...15
Q4:99...-...18
Q1:00...-...17.3
Q2:00...-...23.6
Some interesting comments from that thread I suggested one read concerning Juniper and Cisco by StevieJF over at the Fool. I said, interesting - not factual:
[Don't think that just because Juniper does well they are going to start hurting Cisco - not anytime soon. Consider this. The market that Juniper is going after with the M40 and M160 is only 5% of Cisco's total Revunues. Cisco outgrew the router market years ago and has quickly grown out into nearly all communication sectors. Cisco now has $12 billion in sales, and the high-end router market is only a $1 billion market this year.
Now here is the interesting twist. The high-end router market is on the verge of a boom. Estimates show the high-end router market growing to $10-12 billion by 2003-2005 (depending who you ask). Due to continued growth in it's wide market base and continued expansion into new markets, I expect Cisco to reach $60 billion in sales by 2005 (all communications markets will continue to expand at or above levels of the last few years). I expect Juniper will have sales of $5-7 billion by 2005. So Juniper will still be a small-fry compared to Cisco, but Juniper will have 50% of the high-end router market, and some of the mid-range router market. But this isn't just a matter of who is the biggest gorilla. IMO, Juniper will grow sales by 12x, while Cisco grows by 5x. Cisco's price/future-sales ratio (my favorite growth valuation method), is 9. Juniper's is 6-8. So if my estimations are right, both companies are about equally "valued" looking a few years out. But I think Juniper, since it will still be growing much faster than Cisco, will support a much higher P/S (price/sales ratio) in 2005. Probably 45-90. That would mean a 5x increase in Juniper's price over the next 3-5 years. But the future P/S seems the toughest thing to estimate. Market valuations are so unstable. Cisco had a P/S of 5-8 for 10 years, until this last year when it blew up to 30-40! Did the P/S blow up because of increased growth? No - growth slowed but Cisco began to get higher valuations because of it's long track record, and companies are being valued more and more based on thier growth potential (which I like is very in the Fool Way). In 5 year will Juniper be valued like Cisco was 5 years ago or like growth companies are valued today? Either way, given equal bets, I'll chose the higher-growth company (Juniper) for the better return.]
I just thought that I would add since that post, Cisco's overall revenue growth has indeed picked up.
Here's an article from Red Herring talking about one of the members of the IP/Broadband core router a market and valuations concerning Avici (remember there are 9 players in this space going for a piece of the pie that is projected to grow to $10 Billion by 2003 and higher as we move through time):
redherring.com
Although it has been posted here already, just to keep everything all in one post I include it:
==========
Cisco Systems Inc. (Nasdaq: CSCO) is losing ground in its fight to hold onto the IP core routing market, according to preliminary second-quarter market share numbers from The Dell'Oro Group.
After owning about 80 percent market share for the past year, Dell'Oro reports that Cisco lost six percentage points, slipping to 74 percent market share, in Q2. Who's picking up the slack? Juniper Networks Inc. (Nasdaq: JNPR), which increased its market share from 17.3 percent last quarter to 23.6 percent this quarter.
Not only has Cisco slipped in market share, but its quarterly growth didn't keep pace with the industry as a whole. The market grew at 29 percent, while Cisco only grew 19 percent, according to Dell'Oro. Juniper, on the other hand, showed phenomenal growth -- outpacing the industry with 77 percent quarterly growth (see Juniper's Revenues Rocket ).
Next quarter doesn't look much better for the routing giant. Cisco CEO John Chambers mentioned on the company's last quarterly conference call that second-quarter bookings for its GSR core routing product grew only 10 percent while bookings the previous quarter had grown 60 percent. This means that already Cisco could be down in the revenue count for the third quarter 2000 when those sales are realized as revenue (see Cisco Beats Street, Cries 'Optical' ).
The numbers also show that Juniper isn't only beating Cisco out of accounts where they're shipping OC192 interfaces, an interface that Cisco won't have ready until early next year. Juniper was first to offer OC192 commercially, but sales of those interfaces barely register on the Dell'Oro market stats for the second quarter.
Who else is in the race? Running a very distant third is Avici Systems Inc. (Nasdaq: AVCI), which had a stunning showing its first day trading on the Nasdaq a few weeks ago (see Avici and Corvis Make Stunning Debuts ). But the company can't claim the remaining 2.4 percent of the market completely for itself. It's sharing the leftover sliver with Lucent Technologies Inc. (NYSE: LU), Nortel Networks Corp. (NYSE/TSE: NT), and a handful of unidentified “others." Clearly, Cisco's biggest immediate threat is not the pack of vendors creeping up on the lower end of the spectrum, but the big dog chomping at its heels.
-- Marguerite Reardon, senior editor, Light Reading, lightreading.com
==========
All of this is not intended to say that Juniper doesn't carry a high valuation. It obviously does and has all of us scrambling to attempt to put a value on the stock. In the meantime, not that this is any indication of wisdom, institutions and funds are accumulating shares (497 own the stock and they own 35.8% of the shares).
Certainly, an investor has to make a decision to study all of the information and choose if the core router NGN game is one where you want to participate or not. Valuation is part of that process when studied from all appropriate angles. I happen to own both Cisco and Juniper, but certainly could question the valuation of both of those investments as any of my investments.
BB |
