Hit by contract delays and product transitions in the carrier space, Juniper is taking an axe to its product portfolio. It has sold its mobile security line, Junos Pulse, to private equity firm Siris Capital for $250 million and is expected to offload further units, including its access routers and its wireless LANs.
This is all part of the firm’s Integrated Operating Plan, which will streamline activities and refocus some efforts away from carriers and onto areas where the Cisco challenger is doing better, such as internet providers. In its second quarter, Juniper outdid Wall Street expectations with revenues of $1.23 billion, though it offered a disappointing Q3 outlook, for revenue between $1.15 billion and $1.2 billion, citing “some customer specific dynamics”, likely to be delays at major clients, particularly AT&T and Verizon.
The vendor went on to cite “specifically, within US-based service providers, their market dynamics, including M&A activity, are impacting both sequencing and timing of projects.” George Notter, an analyst at Jefferies, believes Juniper may have suffered a hit worth $100 million from reduced or delayed orders at the big two telcos alone, while some speculate that these and other carriers are pulling back on investments in routers because they are moving, more rapidly than expected, towards virtualization/NFV. Large mergers, and a shift in balance from wireline to wireless build-out, may also be affecting Juniper in the US.
The security unit was mainly built around the 2010 acquisition of SMobile, which cost Juniper $70 million. It gained a product designed to secure tablets and other devices, and this was integrated with other functions, such as application acceleration, in the Junos Pulse system for Android, iOS and other mobile platforms.
However, this is now deemed to be non-core under the portfolio rethink initiated by CEO Shaygan Kheradpir, who took over in January. He unveiled the reorganization under pressure from activist investors and particularly needs to reduce exposure to large US operators, and to build on progress in the federal and internet provider sectors.
He is also likely to pull back from many smaller-scale products for enterprises, where it is tough to compete with Cisco, hence the likely sale or closure of the WLAN unit, which was built around the acquisition of Trapeze in 2010 and bolstered with a partnership with Aruba earlier this year. But the division has never had much market impact – Trapeze had only 2.2% market share in 2010, and under Juniper’s control has remained stuck in the same place in the league tables, seventh, that it occupied back then.