Strong demand from telecom operators in Q4 2015 enabled Juniper Networks to post growth across all portfolios.

Juniper ended 2015 by notching record quarterly revenue of $1.3 billion, up 20 percent year-to-year driven by adoption of its routing, switching and security products by telecom, cable, and cloud providers. A year removed from the Junos Pulse divestment, Juniper’s Security revenue grew 20 percent year-to-year. However, the disclosure that Juniper’s ScreenOS source code had been altered to enable unwanted intrusion will drive continued declines in legacy security revenue.

Driven by improved cash flows and a stronger financial position, Juniper announced its first acquisition in over two years by revealing plans to buy optical specialist BTI Systems for an undisclosed amount. Juniper’s strategy is to drive growth from telecom, cloud, cable and content providers investing to handle an ever increasing volume of video and data traffic.

Juniper will adhere to its IP strategy in the face of industry-shifting alliances and consolidation

Juniper Networks revenue in Q4 2015

$647.6 million ($523.1 million) from Routing
$210.2 million ($174.4 million) from Switching
$116.1 million ($96.5 million) from Security
$933.2 million ($744.4 million) Service Provider
$386.4 million ($357.2 million) from enterprise

Following a number of major industry alliances and acquisitions announced in 2015, Juniper is increasingly marginalized as a networking vendor. In November Cisco and Ericsson announced an alliance in which Ericsson will resell Cisco’s IP networking portfolio to service provider and enterprise customers, putting Juniper’s relationship with Ericsson in question. Ericsson and Juniper have collaborated since the year 2,000, however, Ericsson will likely lean on Cisco’s IP portfolio for the majority of engagements.

In January Nokia and Alcatel-Lucent began operating as a single entity, likely signaling the end to Juniper’s reseller agreement with Nokia, which generated $190 million in 2014 for Juniper. Many of Alcatel-Lucent’s IP networking products compete directly with Juniper’s and as the Nokia and Alcatel-Lucent portfolios are integrated, the opportunities for Juniper to sell its solutions through the merged company will be minimal.

While Juniper’s revenue growth outlook is undoubtedly more challenged than it was a year ago, Juniper indicates it will not alter its strategy in the short term. TBR believes Juniper will strive to remain a specialist in IP routing and switching, where it has entrenched positions with U.S. Tier 1 operators and large enterprise accounts. However, rivals such as Nokia, Ericsson, Cisco and Huawei will leverage a larger pool of resources and services capabilities to encroach on Juniper’s accounts.

Juniper strikes a more software-centric chord by disaggregating Junos OS from its hardware

In a marked departure from Juniper’s traditional business model, in November the company announced plans to decouple Junos OS from its hardware. The move enables Junos to be run on competitor hardware. Conversely, Juniper plans to run rival software on some of its boxes.

Embracing white-box trends enables Juniper to differentiate from its rivals and align with customer demand for open networking while reducing vendor lock-in. Additionally, the company is positioning itself to support future NFV and SDN-based architectures where clients are increasingly demanding open solutions. For example, Telefonica recently reopened the bidding process for lead integrator of its UNICA initiative, citing HPE’s solutions did not support its objective of a multi-vendor environment.

By Patrick Filkins, telecom tesearch analyst at Technology Business Research