Juniper's Negative Preannouncement Signals Enterprise Demand Problems, UBS Downgrades To Neutral

Juniper Networks, Inc. JNPR preannounced weak 1Q revenues of $1.1 billion and EPS of $0.36, citing weak enterprise demand and push outs of Tier 1 service provider deals. UBS’ Steven Milunovich downgraded the rating for the company from Buy to Neutral, while reducing the price target from $31 to $25.

“Although Juniper came into the quarter with macro concerns, we are surprised at the miss given cautious guidance, which may be reflective of general demand problems for enterprise vendors,” Milunovich noted.

Long-term Structural Concerns

Although Juniper Network’s core routing products are protected against encroachment for now, Jericho-based switches may begin to cannibalize parts of the edge routing markets in 2017, Milunovich commented. Juniper Networks has already introduced Jericho-based products for data center interconnect applications where its MX product is used.

Sales stagnation at Juniper Networks can be attributed to the lack of a strong channel and the absence of a wireless LAN product. “We believe customers are increasingly buying wired and wireless products together, putting Juniper at a disadvantage,” the analyst wrote.

Juniper Network’s plans to pull back on its more expansive security plans, a key spending area for the enterprise, may also limit the company’s sales growth.