Juniper sees 2016 as growth year for security business, but journey will be bumpy

Juniper Networks is confident that security will be a key revenue driver in the next year for the company as more service providers and enterprise customers purchase its SRX platform and security software.

Speaking to investors during the second-quarter 2015 earnings call, Rami Rahim, CEO of Juniper Networks said that while he sees potential growth in the security portion of the business it will have to weather a storm to get there.

"There is still a lot of hard work for us to stabilize this element of our business," Rahim said during the earnings call, according to a Seeking Alpha transcript. "I continue to expect 2016 to be the year of growth for us in security, and I expect it to be a bit bumpy as we get there."

Rahim added that Juniper's integrated network security strategy enables us to be a strong provider of secure network, and we remain confident we can win," but "it will take us time as I stated."

Driven by growth in the Americas from cloud and cable providers, security product revenue was $107 million, up 12 percent year-over-year and 15 percent sequentially. Within this segment, the SRX Platform and Security Software was up 22 percent year-over-year and 18 percent sequentially, while its Screen OS and other legacy products were down 34 percent year-over-year and flat from the prior quarter.

"Cloud providers for example, loved the fact that our security portfolio, the high end SRX actually supports 100 gig interfaces to connect their clouds to the wide area network and when it comes to 100 gig interfaces on a firewall, that we're the only game in town," Rahim said. "Really, so the use cases have actually became a very good use case for us."

Tier 1 telcos are still a big factor in Juniper's revenue mix, but given the wavering capital spending patterns the vendor said it is seeing utility for its products in other segments like cloud services.

"While the telco space remains a very important vertical for us, we are by no means tied completely to that space in terms of what drives our business," Rahim said. "The diversification across the vertical and across products is certainly helping us in dampening if you will some of the effects of the lumpiness in that space."

The performance of Juniper's business lines were a mixed bag with routing product revenues down 2 percent year-over-year to $602 million, but up 19 percent sequentially. Juniper said the year-over-year decline was due to "expected softness from large US carriers, partially offset by continued momentum from cloud and cable providers and an increase from enterprise in EMEA and the Americas." Likewise, switching declined slightly in the same period to $190.2 million, respectively and security declined 4 percent to $107 million.

Service provider revenue rose fractionally to $835 million and enterprise declined 3 percent to $386 million.

From an overall financial standpoint, Juniper reported net revenues of $1.2 billion for the second-quarter, down 1 percent year-over-year but up 15 percent sequentially. Operating margin rose 10.5 percentage points from the same period a year ago.

Company net profit dropped 29 percent from a year ago to $158 million or 40 cents per share, while adjusted profit increased 33 percent over the same period to $208.8 million or 53 cents per share. 

Looking forward, Juniper has forecast third-quarter revenues of about $1.2 billion, plus or minus $20 million.

"As far as the second half, it really is consistent with what we have been saying over the last several quarters," said Robyn Denholm, CFO of Juniper, during the earnings call. "We expect to see some improvement, but that's going to be complemented with continued diversity. That's going to help us achieve the results that we're expecting for the second half."

Shares of Juniper were trading at $27.95, up $1.47, or 5.53 percent, in Friday morning trading on the Nasdaq stock exchange.

For more:
- see the earnings release
- see the earnings transcript (sub. req.)
- Reuters has this article

Related articles:
Juniper taps Davidson to lead routing, switching, security divisions
Juniper CEO Kheradpir resigns over conduct related to customer negotiation
Juniper lowers Q3 2014 revenue guidance on slower U.S. carrier sales
Cisco's grip on service-provider routing, carrier Ethernet slips to 41 percent

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