Actually JNPR is, I believe, the only competitor that has actually taken market share from CSCO in any market. However you have to remember two things. First, CSCO had 100% market in the high end router until JNPR's entrance so any penetration is lost share for CSCO. Of course this is not neccessarily a bad thing for CSCO and in fact it may be exactly what CSCO wanted. Why? Well, second, JNPR provides a strong #2 which may help demonstrate to the heavy handed DOJ that CSCO is not a monopoly... furthermore CSCO would much rathar have JNPR in thier with their narrow focus than a more broadly positioned competitor like a NT or LU. The real question now is how much further will JNPR penetrate and grow their business and what is the number? Right now the estimated CY2000 market is about $2.5B. JNPR has what... 15% market share - $375M of it.... and a market cap of nearly $70B.... Um,..... OK. That math looks OK. Yeah... sure..
Another way to look at this. Outside of high end routers Cisco is in low and mid range routers, DSLAM/modems, Cable head-ends and edge, Optics, Dial/Wireless and other Access, Content switching, ethernet switching, ATM/Frame Relay WAN, IP voice, and more that I can't even remember. JNPR... has 3 routers targeted at a <$3B market. JNPR has a backward PE of 2340!
JNPR's revenues are 1/75 that of CSCO's
JNPR's earnings are 1/100 that of CSCO's
yet
JNPR's cap is only 1/7th that of CSCO's
Do the math.... this makes no sense. Yes, JNPR is growing faster as a percentage. JNPR nearly doubled revenue sequentially in 6/00 adding a whopping $113M to the top line. CSCO is growing slower as a percentage but top line sequential growth is was $436M - four times that of JNPR and probably more than JNPR's annual revenues.
SO, yes.. JNPR is a great company and I don't mean to suggest otherwise but what I am attempting to share is that the multiples don't play out. The market - at even a bloated estimate of $3B doesn't justify a near $70B cap. If JPNR OWNED the core router market and the market was growing at 40% from here to forever (which it won't according to Gilder) it would take JNPR 7 years to just generate $70B in revenues. Of course JNPR only owns 15% of the market... assuming that this grows to 1/2 the market it'll take them 10 years or more to get to a one time revenue model - that's assuming 40% market growth. It's just way out of whack.
OG |
