Juniper's enterprise and cloud divisions carried the day during the company's fourth quarter earnings on Monday, which offset weakness in the service provider sector.
Juniper Networks made a return to year-over-year growth during its fourth quarter earnings, while posting modest revenue growth in the fourth quarter. Juniper's quarterly net income was $168.4 million, or 49 cents per share, compared with $192.2 million, or 55 cents a share, a year ago. Adjusted earnings were 58 cents a share, while analysts had projected adjusted earnings of 57 cents per share.
Juniper's fourth quarter net revenue rose 2.3% from a year ago, and 7% sequentially, to $1.21 billion, which beat analysts' projections of $1.19 billion. Juniper's annual revenues were $4.4 billion, which was down 4%. Juniper's net income fell 3% on a non-GAAP basis to $198.7 million, which was up 19% from the previous quarter.
On a year-over-year basis, cloud increased 18% and enterprise increased 2%, while service provider was down 5%. Sequentially, service provider revenue increased 9% while enterprise was up 7% and cloud grew 3%. Software sales increased 25% year-over-year and were more than 12% of Juniper's total revenues.
Juniper Networks CEO Rami Rahim said that Juniper's quarterly enterprise revenue growth in the fourth quarter was record setting and that enterprise revenue has grown for the third consecutive year.
According to Credit Suisse, Juniper's enterprise customer segment growth decelerated to 2% in year-over-year growth in the fourth quarter compared to 6% year-over-year in the prior quarter.
Rahim cited last year's $405 million deal to buy Mist as one of the reasons he's optimistic about the enterprise division's prospects going forward, as well as Juniper's enterprise switching business and "healthy traction" for its secure SD-WAN product.
Due to its service provider division, routing was down 12% year-over-year while switching declined 4%.
"I’m pleased with the fact that we saw success across a broad number of customers, not just within the hyperscalars, but also in Tier 2 cloud (providers) where I think we’re doing actually quite well," Rahim said of the company's cloud division, according to a Seeking Alpha transcript. "Also the breadth of the technologies with strength in those switching and in routing, that we’re quite pleased with. We have a unique position when it comes to the routing footprint that we retain in the hyperscale space."
Rahim said that the large hyperscale cloud providers would start deploying 400G gear in the second half of this year ahead of larger deployments in 2021. Credit Suisse analyst Sami Badri said in his Monday earnings note that he doesn't see meaningful 400G deployments picking up until late 2021.
Rahim and his executive team were asked during the earnings call Q&A if they planned to separate software, silicon and hardware and sell them separately after Cisco announced last month it planned to do so with its new Series 8,000 routers and Silicon One products
"Disaggregation, selling software and silicon separately is not a new concept," Rahim said. "In fact, I believe architecturally we have done a lot over the last couple of years to disaggregate our software from our silicon in a way that allows us to achieve much more nimbleness in how we develop our systems and can move and adapt to different silicon offerings.
"As far as selling silicon separately, while I have confidence in our silicon itself, that business model, I am not sure that there would be a huge market for it, quite frankly."
Rahim said there's a greater demand for network operating system (NOS) software that will sit on white box hardware "than there is for something that is the other way around." He said some of Juniper's cloud customers are interested in running the SONiC open source-based NOS on a system that his company has built that could be either merchant or custom silicon.
"And so SONiC as sort of this lightweight NOS, network operating system, that some of our cloud customers are asking for, (that's) something that we have very much embraced," he said. "We have demoed versions of this on our systems that I think have demonstrated to our customers how seriously we are and there is more to come in this space."
Given Juniper's past struggles, Juniper's fourth quarter results were a move in the right direction, but it's not entirely out of the woods going forward. In the first quarter, Juniper is expecting adjusted earnings per share ranging from 24 cents to 30 cents on revenue of $1.00 billion to $1.60 billion. Wall Street is estimating EPS of 31 cents on revenue of $1.03 billion for the quarter.
Based on its guidance, Juniper's stock was down 2.9% to $23.76 a share in aftermarket trading Monday. After closing at $24.47 a share, Juniper was trading at $23.54 late Tuesday morning.