Juniper says SD-WAN represents part of a broader services opportunity

Rami Rahim, CEO of Juniper. Image: Juniper

Juniper is aware of the emerging SD-WAN segment, but the vendor sees it as part of a wider set of services it can help its large Tier 1 telco customers like AT&T and Verizon enable on their networks for business customers.

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Speaking to investors during the third quarter earnings call, Rami Rahim, CEO of Juniper, said SD-WAN is just one part of a larger opportunity.

“We do view SD-WAN as a really important opportunity for us, but to be clear, we actually think of the SD-WAN opportunity maybe a little bit differently than our peers in the industry,” Rahim said during the third quarter earnings call, according to a Seeking Alpha transcript. “We think of SD-WAN as just one point solution of a broad set of solutions that are – that enterprise customers will want and desire from telcos in the future.”

Juniper may see SD-WAN in a broader service context, but it’s hard not to notice its growth potential.  

IDC estimated that worldwide, SD-WAN revenues will surpass $6 billion in 2020 with a compound annual growth rate (CAGR) of more than 90 percent over the 2015-2020 forecast periods.

Already, a number of Juniper’s customers like AT&T and Verizon have begun rolling out SD-WAN services to its business customers. To assist in their SD-WAN deployments, vendor offers service providers its Contrail as an orchestration system and the NFX250 as an open platform that sits at the customer prem. In addition to SD-WAN, the NFX250 can also support security and load balancing capabilities.

At the same time, Juniper sees potential near and long-term growth opportunities from telco customers coming as these service providers continue to virtualize more of their network functions with SDN and NFV.

Rahim said Juniper expects telco customers like AT&T and Verizon in the near-term will start ramping up capital spending in the next quarter.

“I think just judging by the conversations we have with our telco customers as well as their CapEx reports for the year and how much they've spent thus far, we do expect there to be some spending by telcos in the Q4 period,” Rahim said.

Rahim said that the longer-term opportunity for Juniper lies in how service providers will start realigning their networks with a distributed cloud network architecture in 2017. Juniper can respond to this need with its Contrail platform.

“Because of this transformation that's happening, telcos we can expect will divert their focus to that transition and less on just building out their core or their Edge networks in the way that they have done in the past,” Rahim said. “The most important thing is that we remain very engaged, very close with them in the transformation so that we can benefit from the new types of buildouts that they will be deploying.”

From a segment standpoint, Juniper reported that its routing business continues to grow both sequentially and year-over-year. Specifically, the PTX line had another record revenue quarter, rising 8 percent year-over-year to $620.2 million, while switching jumped 6 percent to $222.5 million.

Juniper said the sequential increase in routing revenues was driven by telecom and cloud providers, but partially offset by a decrease in national government.

In switching, Juniper said it saw continued growth in the data center and with cloud and content providers. Driven by ongoing data center sales, total revenue for the QFX switch line grew at 50 percent year-over-year.

However, security was once again a struggle as revenues declined 29 percent year-over-year, but were up sequentially at $85.5 million.

Juniper attributed the year-over-year decrease in security revenues form enterprise, telecom and cloud providers, which was partially offset by a sequential increase in national government sales.

From an overall financial perspective, Juniper reported $1 billion in total revenues, surpassing its outlook and up sequentially across all technologies and geographies. 

Looking forward to the fourth quarter, Juniper has forecast revenues to be about $1.35 billion, plus or minus $30 million, an increase of 3 percent year-over-year and an increase of 5 percent sequentially.