Juniper Networks said Tuesday that it is shipping the world's fastest Internet router, upping the competitive stakes against rival Cisco Systems amid a tepid climate for such technologies.
Juniper said four customers are currently using its new high-capacity T640 series router, an upgrade to the company's wildly successful M160 device that took market share away from once-dominant router maker Cisco. Routers shuttle information around the Internet, forming the "core" of networks based on IP, or Internet Protocol.
The company is introducing the long-rumored new technology--previously =" 2100-1033-276094.html"="">code-named Gibson--in the worst climate for telecommunications equipment in recent years. Many service providers that were once counted on to drive sales have fallen on hard times or have disappeared completely. For example, Williams Communications, once a leading buyer of new equipment from the likes of Juniper, on Tuesday said it would file for Chapter 11 bankruptcy.
Juniper executives said the company collected modest revenue for the T640 in its just-completed quarter, with more sales expected for its current quarter.
With the introduction, Juniper can once again boast a technology lead over Cisco, with the new T640 device capable of handling connection speeds of 40 gigabits per second (gbps), four times the capacity of current technologies. But analysts said the upgrade with starting prices of about $500,000 will receive little interest in the near term due to the precipitous decline in telecommunications equipment spending, expected to be down about 30 percent for the year, according to various analyst estimates.
"I think they're ahead of the game," said Kevin Mitchell, an analyst with technology consultants Infonetics Research. "At least in the near term, they don't get any benefit from it.
"I think it's supposed to show a technology lead over Cisco."
Juniper Chief Executive Scott Kriens said despite the dire straits of many service provider customers, the new T640 gives his company a technology advantage and shows its customer base where Juniper is headed.
"It's a clear product advantage by a considerable margin," Kriens said. "What it does more than anything is it gives our customers the confidence we can deliver."
Rumblings about the T640 first percolated in the industry last fall. Rival Cisco is also expected to announce several technology improvements to its high-end routing system in the coming months.
"We're focused on the needs of our customers," a Cisco representative said. "We think we're uniquely positioned at the core (of networks) and the edge."
After market share gains over the past two years that at one point approached 40 percent of the high-end routing niche, Juniper's share is now down to about 30 percent, according to analysts. Much of the pullback is attributed to Cisco matching Juniper's technology lead in 10gbps systems. But Cisco continues to have issues with its routing technology, with three software and hardware engineering teams failing to make progress on a new system at the company over the past few years, according to sources close to the company.
But winning converts to the new high-speed router won't be easy for Juniper.
For example, Juniper counts WorldCom as a customer that provided more than 10 percent of its revenue in its most recent quarter, continuing a long-term sales relationship between the two companies. WorldCom, however, is in the midst of a prolonged slump, having to reduce earnings estimates and seeing its share price drop to historic lows. It has reduced capital expenditures, or cap-ex, for equipment such as Juniper's to $4.5 billion for its fiscal year.
"Further reductions in capital spending plans by the service providers could also lead to lower revenues for Juniper," UBS Warburg equities analyst Nikos Theodosopoulos noted in a recent report.
Juniper announced four customers for its new router: Verio, France Telecom's research and development arm; the National Science Foundation's TeraGrid project; and the Internet 2 Abeline network.
"The cap-ex that is being spent is being spent on new (Net) infrastructure," Kriens said, noting that navigating the current market conditions is "not easy."
One issue for Juniper will be the upgrade path to the company's new T series routers. Juniper's customers will, in many cases, be forced to buy an entirely new router, or "box," which is often an opening for rivals in any niche of the networking market. Theodosopoulos said there is "customer transition risk" due to Juniper's "lack of a "graceful"" upgrade.
"A new box is an opportunity for anybody," said Michelle McLean, a spokeswoman with start-up rival Pluris.
Juniper has delayed the introduction of a technology called Matrix that would allow a service provider to string together several T640 series routers to form a single routing system with a capacity of 10 terabits. Such capacity is not necessary at the moment, according to Kriens, but the company wanted to show customers where the technology is headed.