Juniper seen regaining core router share in 2008

By Ritsuko Ando

NEW YORK, June 13 (Reuters) - Network equipment maker Juniper Networks Inc. JNPR.O will likely gain share in the router market in 2008 with a new product due for sale later this year, analysts said, although rival Cisco Systems Inc. (CSCO.O) will not cede its dominance.

Juniper said earlier this week that it plans to sell a new core router in the fourth quarter of 2007 that will direct Internet traffic for large networks such as telecoms and cable television companies.

The new product, called the T1600, has more capacity and uses less power, and will be Juniper's first major upgrade to its core router line-up in five years. Analysts said it was a much-needed move for the company after it lost share to Cisco's high-end router, the CRS-1, in the past few quarters.

"We believe the T1600 could help Juniper gain back share in the core, further supporting our thesis that Juniper's investments in 2007 should yield operating leverage in 2008," JP Morgan analyst Ehud Gelblum said.

Most analysts estimate Cisco's market share in core routers to be around 60 percent, compared to around 30 percent for Juniper.

Telecoms carriers and cable television companies have been upgrading their networks to handle increasing data traffic, including Internet-based video services, which require advanced core routers.

Some analysts, including Jefferies analyst Bill Choi, noted that Juniper's T1600 has higher capacity and density than the CRS-1, with lower requirements for power and cooling.

"It certainly does improve performance," he said, adding that any shift in market share was likely to emerge in the second half of 2008 into 2009, and that Cisco could also announce some improvements to its CRS-1 in the meantime.

Gelblum said Juniper's recent announcement was "more of a positive for Juniper than a negative for Cisco," and CIBC World Markets analyst Ittai Kidron said in a report that he did not see the T1600 as a "game killer" for the CRS-1.

Cisco said on Monday it has sold 900 units of the CRS-1 since the product was launched in May 2004. The number of customers deploying the CRS-1, which can cost more than $1 million per unit, has risen steadily from 13 in June 2005 to 50 in 2006 and now to more than 85, it said.

Some analysts said Cisco and Juniper will remain leaders in core routers for a while, but there may be more competition ahead from French equipment maker Alcatel-Lucent ALU.PA and smaller firms like Foundry Networks Inc. FDRY.O.

Kim Perdikou, an executive at Juniper's infrastructure products group, told analysts on Monday that success in the core router market required many years "and a lot of money."

"You can never say never ... but it's been a duopoly for a reason," she said.

Juniper shares rose 20 cents to $25.06 in morning trading. Cisco shares firmed 18 cents to $26.24. Juniper's share price has gained more than 30 percent so far this year, while Cisco is roughly flat after strong gains in 2006.