Leading networking infrastructure products and services provider Juniper Networks Inc. (JNPR) recently announced that it has been selected as a key networking supplier by the leading telecom company AT&T Inc. (T). Financial terms of the agreement were not disclosed.
As per the terms of agreement, Juniper will supply its core networking products for AT&T’s IP (Internet Protocol), MPLS (Multi Protocol Label Switching), Ethernet and Evolved Packet Core (EPC) fields.
Previously, Juniper supplied network equipment like routers and switches to AT&T. However, as a domain supplier, Juniper will now facilitate AT&T in its many innovations and investments.
Juniper established its position in the industry with its unique assortment of contributions and fundamentals. These include supplier diversity results, innovative cost management solutions, teamwork, customer service, product/service performance and maintenance.
We believe a long-term partnership with AT&T will aid Juniper to secure its revenue model.
However, we expect Juniper to face some competitive pressure from its networking peers such as Alcatel-Lucent (ALU) and Cisco Systems Inc. (CSCO) as they remain key suppliers to AT&T.
Nevertheless, we appreciate Juniper’s strong product adoption by its customers. The company recently inked a deal with telecom company Zito Media. As per the agreement, Juniper will provide MX80 Universal Edge Routers, which are powered by Junos software. Juniper’s solutions will help Zito Media to enhance its network and develop a broadband infrastructure, which will be competent enough to reach the underserved communities.
The high demand for its products aided Juniper to report decent second-quarter results. With companies substantially increasing their IT spending budgets, we believe the demand for networking products will continue to grow through the rest of 2010.
Although Juniper’s growth appears imminent with improvement in network spending, stiff competition from other big players like Cisco Systems and Hewlett-Packard Co. (HPQ) may pose some challenges. The high operating cost of the company is also an added concern.
We currently have a short-term Zacks #3 Rank (Hold) recommendation on Juniper.