Juniper Takes a Nip Out of Cisco

Had Scott G. Kriens stayed at StrataCom Inc. for a few more weeks in 1996, he
would have ended up working for fast-rising networking star Cisco Systems, which
bought StrataCom that April. But rather than take a ride on the Cisco rocketship,
Kriens left to run tiny Juniper Networks. Now, Kriens and Juniper are the
highfliers. Over the past year, Juniper has handed its Silicon Valley neighbor a
string of defeats in the market for gear used to shuttle e-mail, videos, and
Internet phone calls between cities and continents. Juniper's share rose from
30% to 36% in the second quarter, while Cisco's fell from 60% to 58%, according
to Infonetics Research.

The main reason for Juniper's success: focus. While Cisco sells to all manner
of customers, Juniper has until now concentrated on one: the telecoms.
Unencumbered by the legacy of earlier technologies and the need to be all things
to all customers, it has won a reputation as an innovator. Its routers are
considered more reliable in a business where downtime is unthinkable, partly
because its software has been better tuned than Cisco's to telecom's needs,
according to analysts.

Now, Kriens, 47, aims to carve out a far more important role for Juniper. His
goal: to help transform the Internet from a one-size-fits-all network to one
that can be optimized on the fly to handle myriad tasks. Juniper is spearheading
a standards-setting Leffort, dubbed the Infranet Initiative, aimed at steering
that switch-over.

If the initiative is successful, phone and cable-tv companies will be able to
offer a full range of services, from basic to fancy, at varying prices. For
instance, a family would be able to reserve an hdtv-quality link so a sick
relative could watch a

wedding online as it happens. "Juniper is trying to push the Internet
forward," says Balan Nair, Qwest Communications International's chief
technology officer.

The Infranet-a contraction of infrastructure and Internet-is a coalition
that brings together network-gear makers and communications companies, such as
America Online and bt Group, with makers of online software, such as Oracle and
ibm. The group plans to release technology standards in coming months that
carriers can use to identify all incoming traffic-and enforce the security and
speed requirements needed to handle it appropriately.

Not surprisingly, Kriens sees Juniper as best able to incorporate the new
standards that fulfill his vision. By providing the smarts behind a more potent
Net, "we have the chance to be every bit as influential as Intel or Oracle
or Microsoft is today," says Kriens.

It's an audacious plan, and Juniper has miles to go before it can rival
Cisco's might. Juniper is still small fry. Sure, its revenues grew 118% in the
third quarter, to $375 mn. But Cisco logged revenues of $22 bn in the year ended
on July 31 and dominates markets for everything from corporate gear to home
routers. Cisco senior vice president Mike Volpi expects to take back some of the
share the company lost once carriers finish testing Cisco's new products. As for
the Infranet, he says, "the concept is not a bad one, but the vehicle
should be a standards body" rather than a group started by Juniper.

Sweet Spot

Still, Kriens is in a good position to catch a major wave. He's betting that
corporations will rely more and more on telecommunications outfits to run their
networks rather than handling it themselves. That puts Juniper, with its focus
on telecoms, in the sweet spot for revenue growth. The carrier market is
expected to grow 16% per year over the next four years, vs. 12% for the
corporate market, says Synergy Research Group. "This is something Cisco
could have addressed," says Thomas L. Nolle, president of telecom
consultant cimi Corp. Now, he says, Cisco has to play catch-up.

Success for Juniper will require more than just a vision. That's why Kriens
is pushing Juniper on a number of different fronts. To keep its edge in carrier
routers, the company will unveil new technology, tx Matrix, on December 6 that
will allow customers to link its fastest routers and improve performance without
changing models. Juniper is also expanding in

new directions by selling some gear to corporations. For instance, it has begun
selling lower-end "access routers," which corporations use to connect
to the Internet. It's a market that Cisco dominates, so Juniper faces tough
competition.

Another risk is that Juniper will lose the focus that got it where it is
today. Until now, the company sold only to 40 or so big carriers. To sell to
thousands of companies, Juniper plans to spend $100 million next year to crank
up its sales and marketing.

How far can Juniper go? Even its execs admit it won't be able to keep gaining
share on Cisco at a gallop. Still, if Kriens can manage its growing pains,
Juniper will be nipping at Cisco for the foreseeable future.

By Peter Burrows in San Mateo, Calif.  In BusinessWeek. Copyright 2004 by The McGraw-Hill Companies, Inc