Needham & Co.‘s Alex Henderson this afternoon assumes coverage of Juniper Networks (JNPR), cutting the stock to carry from purchase, writing that though it’s a “solid company with respectable growth prospects,” he’s involved Juniper’s profitability is threatened by broad changes within the networking trade, together with additional “virtual” aspects of kit.
Henderson prefers F5 Networks (FFIV), that he initiated this afternoon with a purchase rating and a $130 worth target.
First and foremost, it’s potential Juniper can see its success so far in security product for networks usurped as additional security functions move out of the “control plane” of routers and switches and into the applying layers, he opines, which, if true, would play to the strengths of F5 and others:
However, we tend to see these mature knowledge plane segments changing rapidly and Juniper seems to be modestly behind during this transition. Over the last many years, the protection threats had moved dramatically from the info plane to the applying layer where these days over eightieth of the attacks occur. ensuing Generation-Firewall Wall (NG-FW) is rising to handle this developing threat-scape, and that we see firms like CheckPoint (Buy, coated by Needham analyst Scott Zeller), Palo Alto Networks, and SourceFire (Buy, additionally coated by Scott Zeller) addressing this arena sooner than Juniper, and new security players like F5 Networks with its deep application layer skills have become increasingly competitive. Juniper is probably going to reposition during this arena and has the potential to be sturdy within the rising knowledge Center core Virtual Security market. However, over the close to term, we predict they need some pressures to touch upon and investments to form.
In addition, Henderson sees Alcatel-Lucent‘s (ALU) recent entry into the service supplier router market as a reputable threat to Juniper:
Alcatel-Lucent has place the service supplier router market in its strategy gun sights. it’s successfully entered the sting and metro core router markets and now’s launching within the core router market. we predict Alcatel’s product look competitive with those of Cisco and Juniper. we tend to additionally assume they’re competitive enough to permit service suppliers to wield the ALU giving as a threat in agitating for lower costs.
As for F5, the corporate is that the best approach, he thinks, to ride the shift in stress from the management plane to the applying layer:
In our opinion, the worth in Networking is moving up the IP stack to the applying Layer. As enterprises and repair suppliers move to cloud and SaaS, managing services becomes dramatically additional necessary than managing infrastructure. F5’s dominant position because the premier Application Layer management plane company provides it distinctive opportunities for sustained growth, in our read. Over time, we tend to believe F5 becomes increasingly mission-critical to the success of virtualization, desktop virtualization (VDI), application security and also the delivery of cloud services.
Juniper shares these days closed up forty eight cents, or virtually three-d, at $17.48, whereas F5 shares were up $2.38, or 2.4%, at $103.27.