Goldman Sachs Comments on Implications To Juniper Of Verizon Announcement

According to Goldman Sachs, Juniper Networks JNPR realizes implications from Verizon's announcement of 100G deployment. Goldman Sachs reported that Verizon announced that it would deploy 100G technology, including routers from Juniper and optical transport from Ciena (NC) on certain US routes by the end of Q2, including Chicago to New York, Sacramento to Los Angeles, and Minneapolis to Kansas City. For context, last year Verizon announced a similar 100G deployment using Juniper and Ciena in Europe. “We view the announcement as an incremental positive for Juniper. For context, Verizon is Juniper's largest customer at around 10% of revenues. We believe the win is with Juniper's existing T1600 core router, rather than its next-gen T4000 core router. We have three takeaways: (1) We do not view Verizon's selection of Juniper as surprising, given Juniper is already the leading routing vendor in Verizon's core network, and that it was announced as the vendor in the European 100G deployment. (2) We view the Q2 timing as the most meaningful positive incremental surprise, as it implies a faster than expected ramp of 100G, which could offset some of the concerns about the impact from Japan on Juniper's revenues in Q1/Q2. (3) Verizon's aggressive 100G deployment comes despite the fact that (a) Juniper's next-gen T4000 router is right around the corner, and (b) 100G optical equipment is still at a significant premium to 40G, implying that demand for core network capacity is high enough to trump the desire to wait for the significantly better price/performance of the new product cycles later this year. This supports our thesis that the routing market (about 50% of Juniper sales) will continue to grow at an above-consensus rate of around 20%.” Juniper Networks closed yesterday at $41.86.