Service Provider Transformation: Adapting and Adopting, ACG HotSeat Video

Pratik Roychowdhury, Senior Director and Head of Product Management for Contrail at Juniper Networks, and Ray Mota, CEO, ACG Research, discuss today’s constantly evolving competitive landscape; how and why service providers must transform their business, technology and organization to meet the demands and opportunities of the new virtual and cloud world. 

For more information about ACG's video services, contact sales@acgcc.com.

Ray Mota

rmota@acgcc.com
www.acgcc.com

Juniper Networks Cloud CPE Solution: Helping Providers Transition to Software-Centric Network

Vice President of Service Provider Portfolio Marketing at Juniper Networks Paul Obsitnik and Ray Mota, CEO, ACG Research, discuss the recent expansion of Juniper’s Network Functions Virtualization portfolio. Cloud CPE, which is a fully automated, end-to-end network functions virtualization solution, enables service providers to create and automatically deploy new services faster than ever at scale. The solution includes Contrail Service Orchestration, a comprehensive management and orchestration platform that delivers and manages virtualized network services and the NFX250, the first in a series of network services platforms that can operate as secure, on-premises devices running multiple virtual network functions from both Juniper and third parties. They also discuss the lineup of new Juniper professional services offerings to help customers and partners evaluate technology choices and develop a plan to integrate them within existing network infrastructures. Listen to Paul and Ray outline the four key benefits of the Cloud CPE solution for service providers and their customers.

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Ray Mota

rmota@acgcc.com
www.acgcc.com

Juniper Analyst Day Report

Juniper Networks’ full commitment to virtualization of the network was clear at the NXTWORK 2015. Juniper introduced Cloud CPE, a fully automated end-to-end NFV solution to enable its customers to implement a smooth migration strategy for their existing purpose-built networks to a virtualized, more efficient infrastructure. 

Key Findings

• Juniper’s Cloud CPE solution includes Contrail Service Orchestration, an important feature for both service creation and automation, that can greatly benefit their customers to gain competitive advantage in service introduction with faster time to market.

• Juniper’s Cloud CPE solution is the first of many NFV use cases that blends both physical and virtual network services together to simplify the service creation process and automate the entire service delivery process.

• Junos disaggregation is a good move by Juniper to decouple its software and hardware and place more value on Junos rather it hardware.

• Juniper’s competitors are also working on similar solutions. Juniper’s professional services becomes a major team to ensure its customer can roll out their virtualized infrastructure in a predictable time frame.

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         Robert Haim
     rhaim@acgcc.com
       www.acgcc.com

2Q Vendor Financial Index: Highest Number in Low-Risk Category

Strong revenue outlook, high operating margins and other factors put Adtran, Brocade, Cisco, Infinera, and Juniper into low-risk category

ACG Research has released its 2Q 2015 Vendor Financial Index report, which delivers independent information about the sustainability of a vendor or company to help providers assess the risk of selecting the right vendor to meet their business requirements and to ascertain a risk level on the stability of the vendor regardless of technology innovations.

Low-risk vendors for the quarter are Adtran, Brocade, Cisco, Infinera and Juniper. Characteristics of low-risk vendors include strong revenue outlook, high operating margins because of sales, solid gross margin and expense discipline, low debt dependency, and high receivable efficiency ratio. Medium risk were Alcatel-Lucent, Ericsson and Fujitsu.

Adtran has the highest equity to debt ratio (2.32) in the industry and financing its assets with more shareholders’ equity than debt. The company’s financial performance is predicted to improve in the second half of 2015 as a result of higher carrier expenditure in U.S. However, weakness in Europe will continue to impact Adtran’s revenue. Brocade’s operating margin is 20.9 percent, one of the highest in the industry. However, the company’s operating income decreased by 18 percent QoQ. Brocade’s growing data center presence, positioning as storage networking experts and innovation in software-enabled networking, will be the focus in 3Q15 as well. Cisco’s a very high operating margins because of sales, solid gross margin, improved productivity and expense discipline led to its operating income increased 4.3 percent YoY. Application Centric Infrastructure and APIC are predicted to be the cornerstone of the Cisco’s next generation of networking architectures. Infinera's operating margin (8.0 percent) is high compared to industry average, driven by cost decline because of vertically integrated model and improved services profitability. Revenue for 3Q15 is estimated at $215 M, a 30 percent YoY growth and will be mainly driven by continued acceptance of DTN-X. Juniper’s revenue was up 14.5 percent QoQ, mainly driven by better demand from its cloud and cable service providers. The company’s services revenue increased 7.4 percent on YoY. Juniper’s partnership with VMware will enable highly automated cloud data center solutions for both service provider and mission-critical enterprise network.

The same as last quarter, Ciena, Cyan and ZTE remain in the high-risk category. ZTE, healthy but fluctuating net cash ratio, has had Difficulty establishing presence in North America markets. The company will focus on three key markets in the second half of 2015: carriers, government and corporate sectors and consumers. Cyan has the lowest operating margin in the industry. The company suffers from lack of customer diversification and revenue is concentration in one company, Windstream, which represented 52 percent of its revenue; two other companies accounted for more than 10 percent revenue each. Ciena has very low net cash ratio at $(6 M) and has substantial segment of revenue continues to come from sales to a small number of service providers. However, higher spending on optical upgrades and increased international orders will positively impact revenue.

“This is the highest number of vendors in the low-risk category we have seen since we started tracking vendor financial ratios and launched this report,” says Ray Mota, CEO, ACG Research. “Network vendors are taking operational efficiency and sustainability more seriously and the numbers show that they are running more efficient companies.”

For more information about ACG Research’s Vendor Financial Index service or other syndicated and consulting services, contact sales@acgcc.com.

Ray Mota

rmota@acgcc.com
www.acgcc.com

Juniper and Ruckus: A Combination Sure to Shake Up the Unified Communications Market

This strategic alliance reinforces the inter-relatedness of the wireless market and portends disruption.

Juniper Networks, which has been looking for a unified communications solution for quite some time, recently announced its partnership with carrier/enterprise Wi-Fi hardware and software vendor Ruckus. The companies plan to offer solutions that pair Juniper’s EX Series Ethernet switches with Ruckus’ ZoneFlex Wi-Fi access points and SmartZone Wi-Fi management software to enterprise, government, and education clients. This alliance comes on the heels of another significant announcement: HP’s (Juniper Ethernet competitor) acquisition of Aruba Networks, which was Juniper’s partner since last year.

Juniper’s alliance with its interesting value proposition will pose significant competition to Cisco/Meraki and HP/Aruba and no doubt will shake up the expanding unified communications market. We believe that the Cisco/Meraki and HP/Aruba will maintain strengths as they do have extensive wired and wireless offerings but as Juniper puts down stakes we would anticipate some serious changes in market shares. The bottom line is that it’s all about innovation and positioning, for example, if Juniper can enhance the enterprise environment by introducing products that could lower the number of logical network devices that need to be managed by IT administrators that could result into a key advantage. Similar solutions could be attractive enough to disrupt the WiFi enterprise market and threaten the major vendors’ leadership.

We do see this partnership as one of many in broader enterprise access realignment (in parallel with Enterprise Small Cells market) with more to come this year and next. The enterprise and the indoor coverage and access markets have been a hot field lately with high promising revenues, on which undoubtedly Juniper wants to capitalize. This alliance is expected to pay bigger dividends in the service provider market where both companies see their strengths.

This next step for Juniper is extremely important as it joins this upcoming unified communications market in a “never too late” move. Perhaps market pressures, dynamics and the new strategic plan will force a severing of the Aruba relationship, which will most likely cease in the next six months or earlier. Time will tell.

Click for more information about Elias Aravantinos.

    

    Elias Aranvantino

    earanvantino@acgcc.com

    www.acgcc.com

Two Major Vendors Shift Risk Categories: 1Q 2015 Vendor Financial Index Results

Ericsson Jumps into the Med-Risk Category and ALU Moves from Medium Risk to High Risk

ACG Research has released its 1Q 2015 Vendor Financial Index report, which delivers independent information about the sustainability of a vendor or company to help providers assess the risk of selecting the right vendor to meet their business requirements and to ascertain a risk level on the stability of the vendor regardless of technology innovations.

Low-risk vendors for the quarter are Adtran, Brocade, Cisco, and Juniper. Characteristics of low-risk vendors include strong revenue outlook, high operating margins because of sales, solid gross margin and expense discipline, low debt dependency, and high receivable efficiency ratio.

Adtran’s performance is predicted to improve in 2015 as a result of higher carrier expenditure in U.S. and Europe. Tier 1 U.S. and Tier 2, Tier 3 carriers’ business is expected to grow. Broadband Access platforms will drive growth. Brocade’s SAN revenue is expected to be down by 8% to 11% QoQ. IP networking revenue is projected to be up by 3% to 11% QoQ. Global Services revenue is expected to grow 2%. Focus for new business is on large enterprises and cloud service providers. The firm is collaboratively working on Dell’s new open standard NFV platform. Cisco’s Vision is strong for Application Centric Infrastructure (ACI) and InterCloud. ACI and APIC are predicted to be the cornerstone of the next generation of networking architectures. The volatility in service provider and emerging markets will continue to be a concern. Order growth in SDN will add to revenue in 2Q15. Juniper’s strategy is focused on Cloud Ecosystems and High-IQ Networks segments. Partnership with Vmware will enable highly automated cloud datacenter solutions for both service provider and mission-critical enterprise network.

Alcatel-Lucent, which was a medium risk last quarter, Cyan, Ciena and ZTE are high risk, which is characterized by low inventory turnover ratio, revenue decreases and low value of equity to debt ratio. Alcatel-Lucent, soon to be called Nokia, saw a decrease in revenue in 1Q (21.5% sequentially) because of a decline in spending in the North America market and increase in cost of sales. The merger with Nokia will shift ALU’s priorities to include expanding Nokia-ALU’s optical networking portfolio with the introduction of high-capacity metro optical networking platforms and a scalable wavelength routing technology.

Ericsson, which moved from low risk to medium risk, is expected to see slow growth in its North American mobile broadband business. The company’s investment focus is in both core and new businesses in IP networks, cloud, OSS, BSS, TV and media to capture new markets.

For more information about ACG Research’s Vendor Financial Index service or other syndicated and consulting services, contact sales@acgcc.com.

Ray Mota

rmota@acgcc.com

www.acgcc.com

Juniper Networks: Converged Supercore, an ACG HotSeat

Paul Obsitnik, vice president of service provider product marketing at Juniper Networks, and Ray Mota, CEO of ACG Research, discuss Juniper’s Converged Supercore announcement, which includes new custom silicon, updates to the PTX Series router and expanded SDN capabilities. Juniper has positioned itself as a thought leader in the service provider routing space, not only by addressing higher capacity requirements, but by also focusing on automation and SDN programmability to enable networks to be more agile and risk adverse. Listen to how the MX and PTX Series together change the router landscape by addressing service router requirements in the edge and transit router requirements in the core, as well as how customers can maximize cost optimization and service delivery.

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Ray Mota

rmota@acgcc.com

www.acgcc.com

Business Case for Open Data Center Architecture in Enterprise Private Cloud

Dr. Michael Kennedy analyzed the transition costs from state-of-the-art switching infrastructure to elastic and agile infrastructure that enables private enterprise cloud for a medium-sized enterprise data center. The Juniper Networks’ open data center infrastructure architecture was compared to a proprietary programmable architecture that requires simultaneous investment in a centralized controller and application-aware switch combination. The proprietary architecture requires parallel operation of the existing switching equipment and the new application-aware switches until all applications are moved to the new switches. This is a multiple-year effort for most enterprises. In contrast, the open architecture does not require any change in the existing infrastructure base. The study found that the open architecture provides full asset protection; the proprietary architecture destroys 88 percent of the value of the original switching investment in the first year of the transition period.

Click to download ACG’s Juniper Business Case for Open DC Architecture.

What is your best route to the cloud?

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Michael Kennedy

mkennedy@acgcc.com
www.acgcc.com

4Q Vendor Financial Index Results: Ericsson Jumps into the Low-Risk Category

ACG Research has released its 4Q Vendor Financial Index report, which delivers independent information about the sustainability of a vendor or company to help providers assess the risk of selecting the right vendor to meet their business requirements and to ascertain a risk level on the stability of the vendor regardless of technology innovations.

Low-risk vendors for the quarter are Adtran, Brocade, Cisco, Juniper and Ericsson. Characteristics of low-risk vendors include strong revenue outlook, high operating margins because of sales, solid gross margin and expense discipline, low debt dependency, and high receivable efficiency ratio. Adtran’s growth continues with new product launches, such as high- performance routers, momentum of TA 5000 and FTTN platforms, and new product wins in EMEA, which will contribute significantly to the company’s revenue in 2015. Brocade, which is focusing on efficiency, is targeting software networking investments, advanced fabric switches and datacenter markets. Cisco’s diversification strategy of relying less on specialized routers and switching devices and more on rolling SDN tools and security services will add to growth in 1H15. Juniper continues to pursue its restructuring plan, cost cutting initiatives and diversification of revenue with the goal of increasing efficiency in delivery of services and customer support. Ericsson’s sales in most regions are expected to increase sequentially in 1Q15 with rising demand for managed services, consulting and system integration.

Cyan, Ciena and ZTE are high risk, which is characterized by low inventory turnover ratio, revenue decreases and low value of equity to debt ratio. Cyan’s cautious ordering pattern by its customers will impact the revenue in 1Q15, which is estimated at $30.2 M. Ciena’s substantial segment of its revenue continues to come from sales to a small number of service providers. The firm is focusing on diversifying and broadening its customer base and increased spending on optical upgrades and higher number of international orders should positively impact its top line in 1H15. ZTE will continue to focus its efforts on major global carriers and government segments. Future growth will rely on flagship device range. 

For more information about ACG Research’s Vendor Financial Index service or other syndicated and consulting services, contact sales@acgcc.com.

Ray Mota

rmota@acgcc.com

www.acgcc.com

ACG Announces 2014 Omega Award Winners

ACG Research announces the 2014 winners of the company’s first ever Omega Awards. The award honors excellence in two categories: message marketing with HotSeat, Whiteboard and Spotlight Innovation videos and operational excellence.

Juniper Networks earned the award for its HotSeat video “Defining High IQ Networking.” Rami Rahim, EVP/GM of the Juniper Development and Innovation team at Juniper Networks, and Ray Mota, CEO of ACG, discuss the definition of a high IQ network architecture and the significance to service providers and their customers. They recap Juniper’s recent announcement of new solutions that will help service providers automate networks, enable them to scale and dynamically create new services. The new NorthStar Network Controller is highlighted with use cases, as well as Juniper’s position and market differentiation on open standards.

Whiteboard Winner Nuage Networks was awarded the Omega for its “Seamless enterprise networking; data center to branch” video. Sunil Khandekar, CEO, Nuage Networks, and Ray Mota, CEO of ACG, discuss how the cloud is changing the way businesses consume and share information: for internal use or for sharing information with customers and business partners. The trouble with the cloud is it’s not ubiquitous; it is made up of distinct islands of capability. The compute resides in the data center, and the consumers reside remotely. Nuage Networks has shown that with SDN we can remove the static constraints within and across the data center to unleash the speed of consumption of information within the cloud. We now need to provide the same seamless environment for the branch environment and to improve the dynamic nature of the wide area network.

Trusted Vendor Award went to Cisco. The company continues to demonstrate operational excellence as measured by ACG’s financial index. Some of Cisco’s strengths include:    

• Very high operating margins because of sales, solid gross margin, & expense  discipline; operating margin increased by 47.3% 
• US commercial and enterprise orders increased by 10% YoY
• Highest R&D potential (31.6%); allocated more than $1.4 B to R&D each quarter in past two years
• High receivables efficiency ratio: 2.6; aligned credit policy
• Effective asset utilization yielded $3.5 for each fixed-asset dollar
• Dependency on debt is low; can acquire less expensive loans
• QoQ Operating income jumped 52.5% in 3Q

The vendors’ performance scores are calculated using 11 ratios and Z scores, subdivided into two categories: sustainability and operational; the data originates from annual reports, and quarterly filings. The index examines standard financial ratios related to profitability and liquidity, which are validated by Wall Street. An average of all ratios across all vendors was defined as the index. The goal of the index service is to create an industry baseline that takes all of the vendors in targeted sectors and creates an industry average to determine vendors’ risk levels.

Check out the video of Ray Mota, CEO of ACG, giving out the awards.

Interested in becoming a star in your own video? Want to find out which vendors demonstrate operational excellence and sustainability? Check out our services or contact ACG at sales@acgcc.com for more information about services and products.

Congratulations to the 2014 Omega Award winners!

Ray Mota

rmota@acgcc.com
www.acgcc.com

Juniper Networks: Leveraging the Benefits of Virtualization and Automation

Mike Marcellin, senior vice president of strategy and marketing at Juniper Networks, and Ray Mota, CEO of ACG Research, discuss Juniper’s significant new NFV announcements: a carrier-grade virtualized version of its MX Series Edge Router, the vMX, as well as new Contrail Cloud and Junos DevOps capabilities that enable customers to leverage the benefits of virtualization and automation. Service providers' technology, operations, and business model transformations are also key discussion points, as well as customer use cases for Juniper’s new NFV solutions. 

Click here to listen.

For more information about ACG's router services, contact sales@acgcc.com.

Ray Mota

rmota@acgresearch.net

www.acgresearch.net

Business Case for NFV/SDN Programmable Networks

ACG Research analyzes three programmable High-IQ network use cases that were created by Juniper Networks. The analyses show the benefits derived from the deployment of programmable networks for service providers. A cloud customer premise equipment and virtual firewall (vCPE) use case replaces physical CPE with a simple on-premise Ethernet device and moves IP virtual private network  and firewall functions to the cloud. This produces a 36 percent five-year net present value increase as compared to the physical CPE solution. A real-time network self-optimization use case replaces manual traffic engineering processes. This produces a 27 percent five-year total cost of ownership  savings compared to the manual processes. An elastic traffic engineering use case for a national all IP core network demonstrates the advantages of an SDN solution as compared to the present mode of operations. The SDN solution reduces bandwidth and associated link capital expenses by 35 percent while maintaining all network service level agreements.

Click to download the whitepaper.

For more information about ACG's business case analysis services, contact sales@acgresearch.net.

Michael Kennedy

mkennedy@acgresearch.net
www.acgresearch

Optimizing the Network Edge with Juniper Networks MX Series 3D Universal Edge Router

Service providers are increasingly looking to optimize their network design and reduce operational complexity in order to minimize totalcost of ownership, contain operational risk, and reduce environmental impact. Traditionally, service providers use a variety of appliances to deliver and monitor services and ensure security; however, this approach becomes more inefficient, complex, expensive, and risky as network scale and service offerings increase. 

ACG Research compares network upgrades for two hypothetical operators. Operator 1 implements a traditional appliance-based edge network, and Operator 2 implements a converged edge network utilizing the Juniper Networks MX960 hosting both routing and services. Among other findings, the research establishes that the converged MX960 solution demonstrates up to 49 percent lower TCO and 64 percent lower environmental emissions than the traditional appliance-based service delivery method. 

Click here to download the TCO.

For more information about Michael Kennedy, click here. To read other business cases, click here.

Michael Kennedy

mkennedy@acgresearch.net
www.acgresearch

High IQ Networks: An ACG HotSeat Video with Juniper Networks

Ray Mota, ACG Research, and Rami Rahim, EVP/GM of the Juniper Networks Development and Innovation team, discuss the definition of a high IQ network architecture and the significance to service providers and their customers.  They recap Juniper’s recent announcement of new solutions that will help service providers automate networks, enable them to scale and dynamically create new services. The new NorthStar Network Controller is featured with use cases, as well as Juniper’s position and market differentiation on open standards.  Click here to listen.

For more information about ACG's HotSeat Videos, contact sales@acgresearch.net.

Ray Mota

rmota@acgresearch.net

www.acgresearch.net

4Q Vendor Financial Index Announcement

ACG Research has released its 4Q Vendor Financial Index report, which delivers independent information about the sustainability of a vendor or company to help providers assess the risk of selecting the right vendor to meet their business requirements and to ascertain a risk level on the stability of the vendor regardless of technology innovations.

Low-risk vendors for the quarter are Adtran, Brocade, Cisco, and Juniper. Characteristics of low-risk vendors include strong revenue outlook, high operating margins because of sales, solid gross margin and expense discipline, low debt dependency, and high receivable efficiency ratio. Adtran’s growth with the Deutsche Telekom and AT&T opportunities and improved spending by carriers is projected to accelerate the company’s revenue 10% in 2014. Brocade, which was in the medium-risk category in 3Q, is now in the low-risk category because of solid operating margin, high receivable efficiency ratio, good inventory management practices and healthy equity to debt ratio. Although Cisco’s revenue is projected to decline in the fiscal calendar year, the company is aggressively pursuing major technology developments, including Internet of Everything and SDN. The question is how long will the transition take? Juniper has posted its sixth consecutive quarter of YoY growth and is focusing on improving operational execution and managing costs. 

Of note in 4Q:

• Adtran claims the highest Altman Z-Score in the industry: 7.3
• Brocade had the highest receivable efficiency ratio: 2.59
• Cisco posted the highest R&D potential: 28.7%
• Juniper has a high receivable efficiency ratio: 2.20, compared to industry average

Cyan, Ciena and ZTE are high risk, which is characterized by low inventory turnover ratio, revenue decreases and low value of equity to debt ratio. Cyan, with one of the lowest operating margin in the industry, is dependent on a few customers (Windstream contributed 39% revenue). A substantial segment of Ciena’s revenue continues to come from sales to a small number of service providers. ZTE has the lowest receivable efficiency ratio in the industry, indicating significant risks associated with the credit policy and finances. 

For more information about ACG Research's Vendor Financial Index service or other syndicated and consulting services, contact sales@acgresearch.net.

Ray Mota

rmota@acgresearch.net

www.acgresearch.net

Juniper Networks Delivers the PTX3000 with 100G Integrated OTN

The proliferation of 100G connectivity in core networks is now spreading to the regional and metro/access areas. The demands in the metro access area are, in fact, similar for scale, connectivity and latency but actually up the bar when it comes to footprint, power utilization and lower BTUs per Gpbs.

Juniper Networks introduced the PTX5000 at OFC in 2011 and shook up the router landscape with the introduction of the first core-optimized  product on the market that delivers a simple architecture, which both content and service providers can leverage. 

The company has now introduced the PTX3000, which will play an important role in the metro core as Juniper Networks is now delivering the power of the Supercore in a transport package.

Click here to read how this product will impact the market.

For more information about ACG Research's packet optical transport services, contact sales@acgresearch.net.

Eve Griliches
egriliches@acgresearch.net 
www.acgresearch 

Juniper Networks: SDN Enabled Networking

Juniper recently announced its approach to transition enterprises and service providers to SDNs.  Ray Mota and Brad Brooks, Juniper Networks, discuss how to virtualize the mobile network with software-defined networking and network elements of Juniper’s vMCG solution. Click here to watch the video.

Click here for Michael Kennedy's related business case analysis.

For more information about ACG Research's business case analysis service click here. 

For more information about ACG Research's syndicated and consulting services, contact sales@acgresearch.net.

Ray Mota

rmota@acgresearch.net

www.acgresearch.net

Business Case for Juniper Networks Virtualized Mobile Control Gateway

Juniper Networks announced its new software and services virtual Mobile Control Gateway, which enables mobile service providers to build software-defined networks (SDN). “With mobile traffic growth exploding, operators need a virtualized Mobile Packet Core for scaling capacity up and down to both increase service velocity and control costs.  Our research has validated that Juniper’s virtual Mobile Control Gateway (vMCG) has a 54 percent lower total cost of ownership over five years and the time to deploy the initial implementation is 46 percent faster than a standalone appliance-based solution.  In addition, the vMCG provides incremental capacity additions in 87 percent less time, enabling operators to address the volatility of mobile control plane traffic driven by smartphones and smartphones apps.” Dr. Ray Mota, managing partner, ACG Research.

Click here to download the TCO. 

For more information about ACG Research's business case analysis service click here. 

For more information about Michael Kennedy, click here.

Michael Kennedy

mkennedy@acgresearch.net
www.acgresearch

2012 Service Provider Routing and Switching Market Ends in Softness for Core and Flatness for Edge

From 2011 to 2012 Juniper Networks, which was hit the hardest of the top vendors, declined -14.3% in the global carrier routing and switching markets. Cisco increased 2.5% and Alcatel-Lucent increased 6.1%. 

The Worldwide Carrier Routing & Switching markets increased revenue 3.3% in Q4 but decreased 2.3% for the entire year. Additionally, overall profit margins, ASPs, were down -7.9% for 2012 due to softness in core routing. ACG Research anticipates global economic uncertainty, a challenging market and aggressive competition will continue to put pressure on vendors’ pricing and margins in 2013. “Service providers have been deferring spending in the core and, instead, investing in the edge,” states Ray Mota, managing partner. “Despite weaknesses and challenges in global economies, the long-term demand for high-performance and innovative networks continues to be strong. Mobility, Big Data, and software-defined networking will instigate a significant shift in networking and will be top-of-mind issues in 2013.”

Q4 Total Worldwide Carrier Routing & Switching market posted revenue of $2.8B. Core Routing revenues were down 15.8% q/q and 18.5% y/y. Edge Routing and Switching revenues were up 8.5% q/q and 3.9% y/y. 

Cisco posted a total worldwide decline of 3.8% q/q and a decrease of 4.2% y/y. In spite of the decreases Cisco continues to address shifting market priorities by refocusing on the core and edge networking market segments. Alcatel-Lucent, which posted a strong quarter, increased 17.2% q/q and up 8.6% y/y. ALU is benefiting from significant activity by MSOs as they focus on subscriber retention and expansion. Juniper remained flat at 0.2%, q/q and 1.0% y/y. In spite of this flatness, Juniper is seeing good traction with bookings of the MX, and the company reports that it has finally started shipping.

Although worldwide economic issues are plaguing regions, demand for mobile broadband and related services continues to increase and put pressure on providers’ networks. According to Cisco’s Visual Networking Index, global mobile data traffic increased 70 percent in 2012. Other services, such as cloud, virtualization, Big Data, machine to machine and software-defined networking, are also putting pressure on data centers and networks and redefining the way applications run on the network, exposing the underlying limitations of the networks. These demands are fueling operational complexities and costs that continue to be a challenge for service providers. 

QUARTERLY TREND AND DRIVER HIGHLIGHTS

• Software-defined networking is the most recent buzzword to hit the telecom industry. SDN provides distinct control plane that allows fundamental changes to be programmed across the network as “network applications.” Enterprise networks will continue to lead the SDN adoption even though the really big potential impact will be “the great carrier revival,” which will take place when carriers have the WAN infrastructure in place to support new services and to create a new telecom revolution. 

• Next-gen networks will be much more open, not closed, and include software and hardware components from multiple vendors working together. This development represents significant new business opportunities for those vendors that introduce products that interoperate and can generate new revenue opportunities.

• The service provider edge continues to be competitive because of diverse range of applications and solutions, requirement variations in the regions, and cross-technology solutions. Core has been in a soft cycle but we anticipate growth in 2013 as the delays in upgrades are addressed.

For more information about ACG Research's Q4 Router and Switching report contact sales@acgresearch.net.

Ray Mota

rmota@acgresearch.net

www.acgresearch.net

Looming Fiscal Cliff and Europe Uncertainties Continue to Undercut Router Market Growth

In addition to economic uncertainty, vendors in the router and switching market are dealing with more intensive competition, diminishing service provider’s profit margins, and their largest customers cutting spending and delaying purchases of new equipment.

Against a backdrop of global economic instability and political unrest, the Worldwide Carrier Routing & Switching markets reflected typical cyclical performance, remaining slightly flat in Q3. ACG Research anticipates global economic uncertainty, a challenging market and aggressive competition will continue to put pressure on vendors’ pricing and margins. “Enterprise CEOs will, most likely, remain conservative and more focused in their IT spending and hiring for the remainder of the year,” states Ray Mota, managing partner. “These factors will continue to force vendors to innovate and develop technology that can deliver significant operational savings as well as address market demands for new and cutting-edge services that are application focused. Despite some vendors providing low guidance for Q4, AT&T announced a CapEx increase of $2.5 billion per year.”

Q3 Total Worldwide Carrier Routing & Switching market posted revenue of $2.75B. The global market decreased 1.7% q/q and 2.5% y/y. Core Routing revenues were down 1.9% q/q and 9.6% y/y. Edge Routing and Switching revenues were down 1.7% q/q and down 0.4% y/y.

Cisco posted a total worldwide decline of 0.3% q/q and a decrease of 0.8% y/y. In spite of the decrease Cisco reports that its CRS and ASR series continue to demonstrate strong traction. Alcatel-Lucent decreased 2.16% q/q but was solidly up 8.2% y/y. ALU’s 100 Gig is a big differentiator for the company, and the company continues to see more sales traction with this port for core solutions, edge and metro. Juniper increased worldwide routing revenue 1.2%, q/q but was down 7.7% y/y. The company cited the reduction in service providers purchasing high-end networking equipment, difficulty penetrating new markets with new products and strong competition from Cisco as factors influencing its quarterly results. 

Vendor	Q-Q MS Point +/-	Y-Y MS Point +/-
Cisco	+0.8	+1.0
Alcatel-Lucent	-0.1	+1.8
Juniper	+0.5	-1.0
Tellabs	-0.1	-0.4
Huawei	-0.2	-0.2

In the US the threat of the “fiscal cliff” is creating a tremendous uncertainty and service providers are monitoring it closely in order to get some visibility on what kind of impact it will have on consumer, small, mid and enterprise business spending. The threat of another recession could potentially extend service providers’ build-out of new services that, in turn, could impact their CapEx spending. ACG plans to monitor this closely in 2013 with our service provider capacity index service, which tracks the rate of change in capacity and how “hot” SPs are running their networks.

QUARTERLY TREND and DRIVER HIGHLIGHTS

• Core network traffic is growing in excess of 50% per year and new services such as content-rich digital media, cloud and mobile placing new requirements on the network.
• Competitive factors such as lower pricing and reduced margins are putting pressure on the routing segment.
• Interest in mobility and cloud computing continues to grow, especially with SPs that recognize that to have a cost-effective, scalable, automated data center that enables them to offer new services/products they need technology that can deliver significant operational savings.
• In a recent ACG survey, 78% of respondents reported that they have SDN plans that were either under discussion or were planned deployment. Interest in SDN has increased in momentum for two primary reasons: 1) a less than positive macroeconomic environment and 2) providers are searching for a new way to deliver new services and realize significant operational savings while increasing service velocity.

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Ray Mota

rmota@acgresearch.net

www.acgresearch.net