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Technology Stocks : Juniper Networks - JNPR

JNPR 39.95

0.0%

Jul 2 5:00 PM EST

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To: Tera Bit who wrote (1775)	10/17/2000 10:19:17 AM
From: The Phoenix	Read Replies (1) of 3350

Tera, As I pointed out once before... the JNPR is already valued at 10 times the entire router market. I'm not sure JNPR's stock "currency" at these levels would be preferred over a CSCO or an NT (let's not talk about LU - LOL!). I agree that JNPR could penetrate the edge and low end router markets and gain share - not 100% share - but share... and if they succeeded at gaining all the share they would still be priced at 10 times the entire market AND at these prices the growth rate in the router market doesn't justify 10 times today's revenues. The next argument folks have is that JNPR will expand into other markets. This is a clear possibility. There are two ways JNPR can do this, organically, or via acquisition. Also markets outside of the core router market are more fragmented with more competitors and so the target is more difficult to discern (as opposed to the core router market where the battle to win share was clear - beat CSCO and you win). So let's take the two methods of penetration and look at them. Organically first: to grow organically JNPR will need to develop products that address a new market space - taking on a number (not just one) incumbent. JNPR will need to architect new products which have cost and performance advantages over incumbents that have economies of scale, trusted customers, and are continuing to innovate (I should be clear that I would not take the example of the core router market where CSCO's product in that space is now 3 years old as an example of winning against a state of the art competitor.. remember much of JNPR's success in this space is due to having OC-192.. this does not translate well to other markets where OC192 is either not required or is available). My point is that JNPR will have a far more difficult time in competing in new markets than you may beleive. They will have to create new products which out-duel a number of competitors which have incumbency and strong teams focused on success - not just CSCO. I suspect JNPR's ability to execute on such a plan would not be in JNPR's best interest as doing so would take resources away from a market that JNPR is already extremely successful in. Also, remember CSCO's GSR12000 is 3 years old now - so what happens when (I assume it has to be when) CSCO brings a next generation router to that space... JNPR will need to be able to defend - they've not been in that role before. So the questions are many and I take a different perspective than you in that I believe gaining market share in any market is hard and success in one doesn't necessarily translate to success in another. Of course there is option 2 - penetration via acquisition.. purchasing an incumbent that understands customer needs issues, has relationships, has innovative products and the engineering team to maintain a market leadership position. Who might that be??? RBAK? FDRY?....just about anyone you pick will be very very expensive - a quick way to bring in talent but an expensive way these days. Remember CSCO did most of their acqusitions on the cheap - prior to the market run up. JNPR's cost will be far higher. However that all said what's more key here is the integration of two such companies. JNPR hasn't been challenged with such a task before... JNPR hawks JUNOS as the family jewels - akin to CSCO's long in the tooth IOS. Will JUNOS be integrated into the acquired companies products? If not will JNPR begin the arduous process of maintaining multiple OS's? What about integration of the two products lines beyond simply network management. Sales staff integration... the issues of an acquisition are huge and for a company the size of JNPR it's likely that this will slow them down. All in all the answer is - yes - JNPR can penetrate new markets but the act of doing so is not a slam dunk win. There are HUGE challenges that JNPR hasn't even faced. All the while they have a market they are successful in and if they lose sight of these markets they could lose a lead there - in order to try to build a lead somewhere else... what is that adage ? "A bird in the hand?" JNPR has done an excellent job at sticking to their knitting - they know who they are and they do their jobs well. I suspect Scott realizes this and does not want to be deterred by focusing resources and attention on other markets... At the same time JNPR is overpriced for the markets they are currently in.... by a lot!!!!!! Does that fact change investor perception - absolutely not... everyone is gaga over this stock ... however does the fact that everyone is gaga over this stock mean it is fairly valued... I don't think so and I wouldn't touch this thing at these levels.

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