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Technology Stocks : Juniper Networks - JNPR -- Ignore unavailable to you. Want to Upgrade?

To: Techplayer who wrote (2061)	1/17/2001 10:16:55 PM
From: Jack Hartmann	Respond to of 3350

Another article discussing market share. Networking/Telecom Equipment: Juniper's Fruitful Results Smell Sweet for Nortel, Sour for Cisco StockHouse News Desk By Warren Shiau (wshiau@stockhouse.com) StockHouse Columnist Toronto, ONT, January 18 /SHfn/ -- Juniper Networks's [JNPR] fourth quarter financial results indicate possible ways to play Nortel Networks [NT] [T.NT] and Cisco Systems [CSCO] shares over the next few quarters. Juniper blew by estimates Tuesday evening and raised its revenues guidance for fiscal 2001. This can be interpreted as good news for Nortel and bad for Cisco. Juniper itself is at high enough multiples to make its stock extremely risky, despite the fantastic financial performance. At Wednesday's closing price of US$136-3/8, Juniper is at 317 times current earnings per share (EPS) and about 173 times projected 2001 EPS. In this type of market, these multiples demand perfect performance. Many brokerage analysts are in the process of raising their Juniper earnings estimates because of the raised revenues guidance. There would have been more room left for further positive revenues and earnings surprises if CEO Scott Kriens hadn't raised the revenues guidance. At these multiples, Juniper is trading on momentum whether it's up or down. If an investor catches it going up, great, but being caught going down would not be pretty. Any bad news could send Juniper's stock price tumbling. There's enough risk here that it might be best left to professional traders. A better stock bet could be Nortel. Juniper's results and raised guidance can be interpreted positively for Nortel because they are in large part based on strength in Juniper's high-end M160 product line. The M160 is designed to hook up to large trans-continental, nationwide fiber optic backbone networks. These backbone networks have standardized on the OC-192 transmission standard. All this can be interpreted as a positive indicator for Nortel because strong demand for Juniper's OC-192 interface M160 routers could indicate strong demand for the OC-192 market in general. And Nortel dominates sales for OC-192 fiber optic telecom equipment. At Wednesday's closing price of $34-3/4, Nortel is trading at a relatively low -- compared to Juniper -- multiple to projected 2001 EPS of 35. Because Nortel is a big acquirer of other companies and Juniper isn't, the market has been valuing Nortel at a multiple of adjusted earnings and Juniper at a multiple of net earnings. Juniper's results could mean the most bad news for Cisco, because they indicate it is continuing to gain market share against its larger rival. Since starting to ship its mainstay M40 router in 1999, Juniper has experienced spectacular market share growth. From 17% in the first quarter of 2000, to 24% in the second, to 30% in the third, and now a projected 35%+ in the fourth quarter, virtually all at the expense of Cisco. Along with other potential problems outlined in a previous StockHouse article, Cisco still doesn't have OC-192 interfaces, which means it can't fully compete with Juniper. Juniper CEO Kriens thinks his company has a twelve-month technological lead on Cisco. Cisco keeps on promising its market share slump will reverse when it upgrades to OC-192 interfaces, but it has to deliver product first. Even when Cisco does deliver, things may not be so simple. Carrier trials and qualification for the new equipment has to be completed before any sales are made. Carrier trials and qualification come first, and only then do sales and profits follow. Lucent Technologies [LU] is still suffering from falling behind Nortel in OC-192 product development. Cisco might be in for similar pain as Juniper continues to gain. stockhouse.com Author very big JNPR fan. Interesting projections on market share and technological lead time. Too bad no references. Jack