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Juniper finds its own networking niche

Juniper is in a privileged position to take advantage of the Internet boom--and find its own niche among the industry leaders.

Juniper Networks chief executive Scott Kriens is a happy holder of Cisco Systems stock.

That may seem incongruous, considering Juniper competes in the high-end networking market with Cisco, the No. 1 provider of data networking equipment. But as Kriens sees it, Juniper is in a privileged position to take advantage of the Internet boom--and find its own niche among the industry leaders.

The company builds high-end network routers that shuttle information across the Internet at high speeds. Executives at the firm claim they have an advantage over entrenched leaders like Cisco, because the smaller Juniper can tailor its products specifically to the needs of Internet service providers--while others must satisfy the demands of a wider array of existing customers.

"Every incumbent in a fast-moving, changing market arrives eventually, but not as quickly as a purpose-built company," Kriens said in an interview. "I believe we are building the next great networking franchise. We have a clear opportunity within our own control to realize the potential of our franchise."

Investors have already realized Juniper's potential. The company, which went public in June, claims a market capitalization of $10.7 billion--surpassing established networking firms like 3Com, with a $8.8 billion market cap, and Cabletron, at $2.4 billion. Redback Networks, another hot networking company that went public in May, is now worth $4.7 billion.

Kriens said Juniper is simply riding the growth wave of the Internet. "The response of technology to the opportunity is very Spartan," he said. " There aren't many fast-growing markets that are ill-served.

"The difference in Juniper is we're purpose-built for the Internet infrastructure," he said.

The success of companies like Juniper can be attributed to the willingness of firms to look beyond the incumbent companies and buy products from new market entrants. Even though most firms traditionally have been slow to trust newcomers, choice is key for many.

"Carriers are always looking for a second source on things," said Don Listwin, Cisco's executive vice president, during the company's most recent earnings conference call, when asked about the success of companies such as Juniper.

Mike McConnell, analyst with Infonetics Research, echoed Listwin's comments. "The people want a choice" in the market, he said.

Increasingly, industry observers note that Cisco has modified its acquisition strategy. The firm now carefully selects companies that will assure it success in a certain market, rather than relying on its old strategy of scooping up any start-up with innovative technology.

Cisco's recent focus on voice technology has also led it to acquire firms focused on "converged" networks--or networks that can carry voice, data, and video traffic--pitting it against leaders Nortel Networks and Lucent Technologies.

Analysts said that though Cisco will continue to thrive, other companies--such as Juniper, Redback, and Copper Mountain--will increasingly be able to carve out their own niche in the networking market. Redback and Copper Mountain, for example, specialize in broadband equipment.

"It's going to be hard for Cisco to cover all the bases," said John Armstrong, analyst with Dataquest.