Challenging Cisco’s Might in Network Switches Difficult for Juniper

by Trefis Team

Juniper (NYSE:JNPR) has a very small presence in the network switches market compared to market leader Cisco (NASDAQ:CSCO). It’s current market share stands at around 4%, and we expect this to grow although at a slower rate in the coming years due to a maturing switches market and Cisco’s well entrenched position in it. There could however be more upside if Juniper is able to efficiently leverage its tie-up with IBM, selling its network switches under the IBM brand.

Juniper competes with second rung players like Alcatel-Lucent (NYSE:ALU), Huawei-3Com and HP (NYSE:HPQ), which are all competing fiercely for the pie left out by Cisco.
 .
While we expect Juniper’s network switches share will rise to nearly 6% by the end of the Trefis forecast period, Trefis members expect a market share level of close to 8%, representing a potential upside of 8% to JNPR stock.

We currently have a Trefis price estimate of $27.76 for Juniper’s stock, about 25% below the current market price of $36.95.


Cisco’s Dominant Market Position Difficult to Challenge

Cisco has consistently maintained a market share of 55-60% in the bottom layer switching market. It has well developed and longstanding relationships with all major customers. Cisco is widely considered synonymous with switches in the industry, and hence it’s difficult for other players like Juniper to make a cut into it’s share. Even a player like HP, which is industry leader in most of the other industries it operates in, could capture only 3-4% of market share and failed to dislodge Cisco.

IBM Tie-Up a Positive

To counter Cisco’s move into the server space, IBM has collaborated with Juniper whereby Juniper will be selling its network switches and routers under IBM’s brand name to complement IBM servers in data centers. Data centers are one of the fastest growing business segments for the networking business, and access to data centers is a major plus for Juniper. If Juniper is able to fructify its relationship with IBM, it can give a significant boost to its market share.