Cisco recently provided a grim outlook that was far short of analyst estimates. However, its rivals Juniper, F5, and Polycom reported strong results and provided outlooks close to analyst estimates. They are trading close to 52-week highs, while Cisco is close to its 52-week low. Let’s take a closer look.
Juniper reported third quarter revenue of $1.012 billion, up 23% but missing analyst estimates of $1.03 billion. Net income was $134.5 million, or $0.25 per share, versus $83.78 million or $0.16 per share last year. The company ended the quarter with nearly $2.7 billion in total cash and investments and repurchased shares for $135 million.
For the fourth quarter, Juniper expects revenue of $1.12 billion, plus or minus $20 million and non-GAAP EPS of $0.35 to $0.37. Analysts expect EPS of $0.35 on revenue of $1.1 billion. The stock is trading around $34.35 with market cap of about $18 billion. It hit a 52-week high of $36.00 on November 12 and a 52-week low of $23.03 on June 29.
Recent Acquisitions By Juniper
Last week, Juniper announced its plans to buy Trapeze Networks for $152 million and the intellectual property assets of Internet video storage and delivery technology company Blackwave for an undisclosed sum. Trapeze Networks is a technology leader in enterprise wireless local area network (WLAN) systems and management software. A recent report by Dell’Oro Group estimates that the enterprise WLAN technology market will grow from $2.2 billion in 2010 to $3.4 billion in 2014. The acquisition will make WLAN infrastructure a key part of Juniper’s portfolio, accelerating the company’s growth in the enterprise market and advancing its vision for the new network. This vision is centered on two significant market trends, mobile Internet and cloud computing. Security is also a critical element of the mobile Internet. Earlier in the quarter, Juniper acquired SMobile Systems, Inc., a privately held software company focused solely on smartphone and tablet security solutions for the enterprise, service provider, and consumer markets, for $69 million.
Polycom (NASDAQ:PLCM), with annual revenue of $967 million, reported third quarter revenue of $308 million, up 27%. Net income was $17 million or $0.20 per share compared to $14 million or $0.16 per share last year. Non-GAAP EPS was $0.38 versus analyst estimates of $0.36 on revenue of $301 million. Gross margin increased more than one point sequentially and more than two points year-over-year driven by network systems growth. Polycom ended the quarter with $500 million in cash and investments and no debt.
For the fourth quarter, Polycom expects revenue to grow 5% to 7% sequentially or $323.5 million to $329.5 million, beating analyst estimates of $317 million.
Polycom faces stiff competition from Cisco, which recently acquired its rival Tandberg, which held about 31% share in 2009. Cisco recently launched a home video conferencing product, ?mi, priced at $599 to expand its consumer presence. In response to this, Polycom has announced its plans to release videoconferencing applications for Samsung’s Galaxy platform, which powers its Galaxy S smartphone and Galaxy Tab tablet. Sayantani Ghosh of Reuters reports that
“Polycom has similar apps lined up for BlackBerry, Windows Mobile 7, Apple and other Android-based devices, and is hoping to launch these through 2011. Polycom is also talking to consumer-electronics makers to add low-latency video to home devices and is working with “at least one major carrier on a home telepresence system.”
Polycom is trading around $36.76, a three-year high, with market cap of about $3.14 billion.
There has been much M&A activity in the video conferencing sector over the last year. Apart from Cisco’s $3.3 billion Tandberg acquisition, there is LifeSize, which holds about 5.6% of the market. Polycom, the market leader with 35% share, is an attractive acquisition prospect for either HP or Juniper, which are looking to expand their presence in this active sector. The videoconferencing market grew over 5% in 2009 to about $1.7 billion, and Gartner expects the market to reach $8.6 billion by 2013.
Unlike in the video conferencing industry, F5 (NASDAQ:FFIV) doesn’t face much competitive pressure from Cisco, whose focus lies elsewhere, leaving F5 to continue dominating this area. Cloud computing, virtualization, and mobile applications are some of the trends that are driving F5’s growth. F5 reported fourth quarter revenue of $254.3 million, up 45.2% and beating estimates of $248 million. Net income was $48.2 million or $0.59 per diluted share compared to $28.4 million or $0.36 per diluted share last year. F5 ended the year with $862 million in cash and investments after repurchasing $75 million of common stock. Its board of directors also approved a new program to repurchase up to $200 million of the company’s outstanding common stock.
For fiscal year 2010, revenue was $882.0 million, up 35% from $653.1 million in fiscal year 2009. Net income for the year was $151.2 million ($1.86 per diluted share) versus $91.5 million ($1.14 per diluted share) in fiscal year 2009.
For the first quarter, F5 expects revenue of $265 million to $270 million with a GAAP earnings target of $0.62 to $0.64 per diluted share. Analysts expect earnings of $0.73 a share on revenue of $259.8 million. The stock is trading around $132 with market cap of about $10 billion. It hit a 52-week high of $133.70 on November 24.
F5 Gains ADC Market Share at Cisco’s Cost
According to market research firm Infonetics Research, the application delivery controller (ADC) market is back on a growth track after a tumultuous 2009, with worldwide sales up 28% compared to the first quarter of last year.
F5 Networks, which had received a takeover overture last year, remains a potential target for technology giants, including IBM, Dell, HP, Oracle, Juniper and Cisco. F5 leads the ADC market and has an almost 20-point lead over Cisco. It gained 8% market share in the recent quarter, half of which came from Cisco.
Cisco’s poor outlook this quarter led to concerns that it was losing its focus in its core routing and switching business while trying to expand in its 30 adjacent markets. However, Jim Duffy of Network World reports that
“Cisco maintained its 72% share of the overall Ethernet switch market and even upped that by 2% from last year. HP and Juniper also gained share sequentially and over the year. HP now stands at 10.5%, from 6.5% a year ago (thanks, 3Com); and Juniper is now just under 2% from 1.3% last year. Share losers during the quarter, both on a sequential and year-over-year basis, were Brocade, Extreme, Avaya, Alcatel-Lucent and Huawei, according to UBS. HP and Juniper share gains seem to be coming from this group rather than from Cisco.”