WSJ summarizes Juniper's impact:
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June 28, 1999
Juniper Networks Shares
Soar on First Trading Day
By SCOTT THURM and STEPHANIE N. MEHTA
Staff Reporters of THE WALL STREET JOURNAL
Shares of Juniper Networks Inc. nearly tripled on their first day of trading, valuing the company at $4.8 billion, a first-day record for a start-up.
The success illustrates the skyrocketing value of makers of Internet-related communications gear. Juniper, Mountain View, Calif., makes superfast switches for routing computer traffic across the Internet. Two of its competitors also moved to capitalize on their technological savvy Friday: Nexabit Networks Inc. agreed to be acquired by Lucent Technologies Inc. for $891.6 million in stock, and Avici Systems Inc. said it would sever ties to Nortel Networks Corp. and pursue an initial public offering.
IPO Market Surges Toward Record Year
GlobeSpan's IPO Underscores Demand for Internet-Gear Firms (June 23, 1999)
Juniper's New-Router Shipments Kick Off Race in Internet Devices (Sept. 16, 1998)
Juniper raised $68 million by selling 2 million shares at $34 each. Other shareholders, primarily Nortel, sold an additional 2.8 million shares. The shares rocketed as high as $106 shortly after trading began late Friday morning, before settling at $98.875. More than 7.5 million shares changed hands, meaning that, on average, each available Juniper share traded 1 1/2 times.
Increased Offering Price
The 191% first-day rise was not exceptional for a hot Internet stock, partly because Juniper increased its offering price twice last week. But Juniper's market value after one day of trading was the third highest for an initial public offering, excluding spinoffs and initial listings of foreign companies, according to Securities Data Corp. Only Goldman, Sachs & Co. -- the lead underwriter of Juniper's offering -- and International Home Foods Inc. had higher market values after their first day of trading.
Juniper's ambition is clear. "Our objective is to become the primary supplier of high-performance Internet backbone" equipment, the company said in Securities and Exchange Commission filings. That would mean displacing networking giant Cisco Systems Inc., whose routers historically have handled more than 90% of Internet traffic. Juniper hopes to leapfrog Cisco technologically, by using faster custom-designed chips and more efficient software.
For now, the companies are prospering by co-existing. Verio Inc., which provides high-speed Internet access for businesses, deploys Juniper's boxes alongside Cisco's in its network. "They are very, very competitive with Cisco in performance. In some ways, they excel," said Chris DeMarche, Verio's chief technology officer.
Market researcher RHK, South San Francisco, Calif., thinks Juniper could take 20% of the $450 million market for high-speed Internet switches this year. RHK estimates the market will grow to $5.5 billion by 2003. "They are taking market share from the guy who has owned the market," said Joe Skorupa, RHK's director of switching and routing.
But Juniper is still far from a sure bet. Cisco has used its market clout to thwart potential competitors before, and companies such as Avici and Nexabit are building even faster switches. That means Juniper will have to broaden its offerings to help network operators provide services, in addition to moving bits quickly, said Craig Johnson, an analyst at the PITA Group, Portland, Ore.
Like many recent IPO companies, Juniper is still losing money. For the three months ended March 31, Juniper reported a loss of $6.7 million, on revenue of $10 million. The company has lost $50 million since its founding in February 1996, but has more than $100 million in cash after Friday's offering.
The big leap in Juniper's stock greatly enriched its principals. Chief Executive Scott Kriens, a networking industry veteran who co-founded StrataCom Inc. in 1986, held shares worth more than $311 million at Friday's closing price. Cofounder and Chief Technology Officer Pradeep Sindhu's stake is worth more than $222 million.
Huge Score for Investors
Juniper's debut was a huge score for the venture-capital firm of Kleiner Perkins Caufield & Byers, which invested $2.7 million for a 22% stake in the company, now worth more than $1 billion. Telefon AB L.M. Ericsson of Sweden, which is a big Juniper customer, owns more than 6% of the company, worth more than $300 million.
Nortel had been an early investor in Juniper, but sold its stake in Friday's offering. Nortel also owns 20% of Avici, with which it agreed to sever business relationships Friday. The companies said the decision was mutual. Nortel had been seen as a potential acquirer of Avici, but said it can develop fast switches on its own.
Meanwhile, Avici saw Juniper's soaring stock as proof that it can prosper without Nortel's help. "The current valuations we're seeing for Juniper and Nexabit validate the market and the opportunity for a company to build a lot of value in this market," said Surya Panditi, chief executive officer of Avici, based in North Billerica, Mass. He said the company plans to pursue an initial public offering early next year.
Lucent's acquisition of Nexabit, a closely held maker of high-capacity routers, bolsters the Murray Hill, N.J., company's presence in the data-networking arena. Nexabit's equipment is capable of routing trillions of bits of data per second. As Internet users and others demand more bandwidth, telephone companies increasingly will need switches and routers capable of handling vast streams of traffic.
"The communications revolution is fueling tremendous demand for more bandwidth in core networks," said Curt Sanford, president of Lucent's InterNetworking Systems.
Nexabit, Marlborough, Mass., employs more than 120 people.
In New York Stock Exchange composite trading Friday, Lucent shares fell 31.25 cents to close at $63.6875
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IronBridge has 155 employees and Juniper Networks has 265. |
