Juniper, Riverbed woes may be good news for Cisco

Fri Jan 27, 2012 5:10pm GMT

Quotes

   

* Cisco seems to be winning market share from smaller rivals

* Riverbed stock off 20 pct, Juniper off 9 pct on weak view

* Analysts concerned about Riverbed's long-term growth

* Juniper's problems seen continuing for several quarters

By Nicola Leske and Soham Chatterjee

Jan 27 (Reuters) - Network equipment maker Cisco (CSCO.O) may have reason to rejoice despite bleak outlooks from smaller rivals Juniper Networks (JNPR.N) and Riverbed Technology (RVBD.O) amid signs that it is winning back market share from its peers.

Cisco's chief executive John Chambers promised his shareholders in September that Cisco would go after Juniper and it looks like he is delivering on that promise.

Cisco stock was down 1.4 percent, which some analyst put down to a knee-jerk reaction to Juniper's and Riverbed's news.

"People often reflexively sell the peer company when there is bad news," FBN Securities analyst Shebly Seyrafi said.

But Cisco's competitors took a beating, with Riverbed stock plunging 20 percent and Juniper down 9 percent in morning trading after their first-quarter outlooks were well below estimates.

Riverbed blamed disruption in product sales as it launches new products [ID:nL4E8CQ6N0] and Juniper pointed to weaker-than-expected demand from service providers for its routers -- which move data packets along networks -- in the fourth quarter.[ID:nL4E8CQ7HX]

Juniper, based in Sunnyvale, California also said that it did not see a pickup in demand anytime soon but that its fundamentals were strong.

Juniper generated around 60 percent of total revenue from business with service providers such as Verizon (VZ.N) and AT&T (T.N) in the fourth quarter but Cisco's exposure to carriers is at 25-30 percent.

"We believe that Juniper is losing share to Cisco in routers," FBN's Seyrafi said, arguing that Juniper's router revenue declined by 13 percent year-on-year and that he estimated Cisco's router sales to be up 8 percent in its January quarter.

Stifel Nicolaus analyst Sanjiv Wadhwani, who downgraded Juniper to "hold" from "buy," agreed, although he pointed out that Cisco's quarterly router revenue was not out yet. The company is scheduled to report on Feb. 8.

Wedbush analyst Rohit Chopra warned that Juniper's "problems may take multiple quarters to resolve as the product portfolio focused on core and edge routing does not address the immediate need of the large carrier market — alleviating overly congested wireless networks that have been burdened by unprecedented traffic."

Unlike Juniper, Riverbed's fourth quarter beat estimates but it is in the midst of a product transition and some analysts said that they were concerned about longer-term growth prospects.

"We take a cautious view on the longer-term growth prospects of the company (Riverbed) as we see wide area network (WAN) optimization market slowing down, competition from Cisco (CSCO.O) heating up and Riverbed likely stretched too thin with multiple product initiatives," Auriga USA analyst Sandeep Shyamsukha wrote in a note.

FBN's Seyrafi downgraded Riverbed, based in San Francisco, from "Outperform" to "Sector Perform" because its outlook was materially lower than average estimates and that it created a high bar for the coming quarters, which would all need to grow nearly 10 percent quarter-on-quarter in revenue.

(Reporting By Nicola Leske; Editing by Phil Berlowitz)

((Nicola.Leske@thomsonreuters.com)(+1 646 223 6134)(Reuters Messaging: nicola.leske.thomsonreuters.com@reuters.net)) Keywords: CISCO/

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