The Latest IT-Equipment Buzz
Janney Montgomery discusses product launches from Alcatel-Lucent and Juniper Networks.
On Tuesday, Alcatel-Lucent introduced a new core router that features the highest density in the industry.
The 7750 XRS routers will ship in third-quarter 2012, initially with 16 terabytes-per-second (Tbps) capacity (two interconnected racks) and then a 32 Tbps version in the first-half of 2013. Alcatel-Lucent (ticker: ALU) will support several large trials this year.
Alcatel-Lucent has been trying in earnest to break into core routing for the last two-to-three years, with minimal success to date. The core routing market remains a virtual duopoly between Cisco Systems (CSCO) and Juniper Networks (JNPR).
According to ACG Research, Cisco had 63% share and Juniper had 31% of a $2.6 billion market in 2011.
The latest launch by Alcatel-Lucent seems more tangible because Verizon (VZ) confirmed on stage that it will use Alcatel-Lucent's router in its metro core network.
Metro core is really a new market, since metro networks (i.e. access aggregation routers) would traditionally feed into the core internet protocol and multiprotocol label switching (IP/MPLS) backbone.
Growth in video, cloud, and ethernet traffic has created a need for dense metro core networks. Juniper is still Verizon's primary IP/MPLS backbone core supplier. However, it is important to compete successfully for these emerging "core networks" within the access parts of the network.
We note Cisco announced a win for Verizon's FiOS network core with CRS-3 in December 2011.
Alcatel-Lucent's foray into core routing market may raise investor concerns for Juniper, which roughly generates about 25% of sales from core routers. There have been a lot of false rumors about application specific integrated circuit (ASIC) issues with T4000 and the PTX Series Packet transport switch (PTX); we believe any issues were minor JUNOS software bug fixes that have largely been addressed.
We also believe Juniper's multi-chassis announcement was aimed at pre-empting Alcatel-Lucent's announcement. Juniper announced 22Tbps capacity by linking together multiple T4000 core routers, with plans for 64Tbps in the future.
We believe Juniper could also compete with MX960 routers for the new metro cores, and use the newly announced 100 gigabyte (G) line cards.
Current density still appears to be in Alcatel-Lucent's favor. Lastly, our checks show Verizon will likely use T4000 in core IP backbone as well as PTX in parts of its networks. Verizon was a 10% customer for Juniper in first-quarter 2012, due to strong MX edge router purchases.
[We rate Juniper Networks at Buy and Cisco Systems at Neutral].
--Bill Choi