While tech stocks often trade in tandem when there's news from the major players, not all networking is the same. In other words, the problems that Juniper Networks (NYSE:JNPR) is now facing are not necessarily directly translatable to Cisco Systems (Nasdaq:CSCO) or smaller vendors like F5 Networks (Nasdaq:FFIV) and Riverbed Technology (Nasdaq:RVBD). For Juniper, as for Alcatel-Lucent (NYSE:ALU) and Acme Packet (Nasdaq:APKT), the story today is about weak spending in North America from the large service providers. (For more, see Earning Forecasts: A Primer.)

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A Disappointing End to the Year
Juniper announced January 9, 2012, that fourth quarter results were not going to meet Wall Street expectations. Instead of the average estimates of $1.19 billion in revenue and 34 cents in earnings, Juniper announced that results were going to be on the order of $1.11 billion to $1.12 billion and 26 cents to 28 cents.

How Healthy Is the Business?
This marks the third straight quarter of Wall Street disappointment with Juniper's performance. The idea of service provider weakness (that is, Verizon Communications (NYSE:VZ) and AT&T (NYSE:T)) is not exactly new; this has been a story for several quarters now and looks to remain in play through the middle of 2012.

What is somewhat new, though, is the apparent lack of compensating enterprise growth and the margin pressure that Juniper seems to now be facing. Chinese vendor Huawei has been competing on price aggressively for some time now and Cisco and Alcatel Lucent have decided to go along to some extent. Clearly, that limits Juniper's flexibility and constrains their own margin growth expectations.

New Products to the Rescue?
Juniper has plenty of new products rolling out as it tries to grab share from the likes of Cisco and Hewlett-Packard (NYSE:HPQ). The EX6200 looks like it could be an attractive campus modular switch, while the PTX could be a big deal as it brings home the convergence of packet, circuit, and optical. At the same time, the company is still trying to drive its QFabric against Brocade Communications' (Nasdaq:BRCD) VDX and an expected upcoming product release from Cisco in 2012.

It will be interesting to see how much these new products help in 2012. For starters, some of them (like PTX) could cannibalize their own business in the short-term. Also, it's worth wondering whether new products will stimulate spending from service providers that just apparently don't feel like writing checks today. So, can Juniper pick up enterprise business from the likes of Amazon or Facebook and pacify the Street, while the service provider market gradually improves?

The Bottom Line
Expectations have certainly come down on Juniper. The average sell side analyst target price is almost half of what it was six months ago and the enterprise multiple has slipped below 10 times. Given the long-term growth prospects of the business (and sizable market share growth potential in markets like ethernet switching), the shares do seem attractive.

That said, momentum is a big part of the tech stock world and Juniper will be sorely lacking in that for at least another quarter. Investors looking for brighter near-term prospects may instead want to look at names like Adtran (Nasdaq:ADTN) and F5 not because they are so clearly superior to Juniper, but because they seem to have a somewhat smoother path to growth. (For additional reading, check out 5 Must-Have Metrics For Value Investors.)

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At the time of writing, Stephen D. Simpson did not own shares in any of the companies mentioned in this article.

Tickers in this Article: JNPR, CSCO, FFIV, HPQ, ALU, VZ, T

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