The future is one of those things that always gets ahead of us. Companies today are particularly challenged with futures because financial practices focuses them on quarterly results. Still, while the future may be redefined daily and may be hard to come to terms with, it’s either there for us all or we don’t have much further to worry about. Yesterday we had two indications of that impending future in two different areas, and it’s worthwhile to look at them both.
Juniper reported its quarterly numbers, and followed what’s been a bit of a pattern for the company in reporting a slight beat on the current number and somewhat downbeat guidance. Analysts liked the fact that Juniper was somewhat bullish about carrier capex, but they were concerned that Juniper was clearly still struggling in the enterprise and thus at risk to becoming a pure-play carrier networking company. None of those companies deliver anything like the P/E multiples that Juniper does, so if Juniper can’t somehow fix something then the stock price would be in for an agonizing reappraisal.
I want to frame the Juniper situation in the carrier space with a quote from the call, from Kevin Johnson the CEO: “The response we’re getting from customers indicates our SDN and network function virtualization strategy continues to resonate with them. SDN is a growth opportunity for us in both networking systems and software.” This is interesting first because so far the only vendor with a resonant NFV strategy that I’ve heard about is Alcatel-Lucent. Second, carriers see SDN and NFV (the latter in particular) as a means of reducing capex, and of course Juniper is the kind of company on whom the operators are spending.
It is true that many operators don’t really see capex reduction as the drive for SDN and NFV these days. One told me that if they wanted 20% savings they’d simply beat up Huawei. But if you’re going to offer service agility and operational savings as the alternative benefits to SDN and NFV, you have to climb above the current level of articulation—whether you’re Juniper or somebody else. Either of these benefits is mostly a matter of operationalizing, not building, and none of the network vendors—even Alcatel-Lucent—have a really strong story in the operational side of the problem.
Kevin Johnson talked more about SDN and Contrail than anything else, and yet SDN today tends to be stuck in the data center, lacking any strong end-to-end message. Contrail, in my view, could offer a lot as an end-to-end SDN architecture but it’s not being positioned that way, likely because end-to-end SDN has the potential to vastly undermine the spending on traditional routers and switches. You can build an agile “connection SDN” layer on top of very low-level infrastructure based on “transport SDN” and almost forget the middle layers. That’s particularly true if you adopt NFV on a large scale because you’ll have a lot of functionality running as software in servers. So, arguably, Juniper is working to protect its current earnings (as in one sense the must) while trying to address where future earnings will come from.
The biggest thing for me in the call wasn’t what was said, though. It was who didn’t say it. For several quarters now, Johnson has trotted out his Microsoft compatriot Bob Muglia to talk about the progress of Juniper, even in areas where Muglia has neither experience nor direct responsibility (he’s head of software). Yesterday, a platform guy was on the call instead. I don’t want to read too much into this, but it may mean that Juniper has decided that people who understand application software and PC operating systems may not be the “software guys” that Juniper needs. It may also mean that Muglia will not succeed Johnson (that likely would have happened by now if it were the plan, in any case) and calls into question whether he’ll stay around. I think Juniper needs to take a fresh look at things. They have all the assets Johnson talks about, they only lack the most important asset of all—the ability to innovate and inspire at the same time.
Apple has always had that asset, and it announced what most agree is another evolutionary shot at the tablet space with its new stuff. Price points don’t change radically but enough to worry some analysts who fear that Apple will be drawn into a price war. But you can’t invent a new wearable tech item every year; buyers would be festooned with glowing gadgets to the point where they’d irradiate themselves and endanger air travel with all the lights. They have to do some consolidating, but of course they have to innovate too.
Where that may finally be happening is in the Mac side. Analysts dismissed the notion of offering free software updates to harmonize the OS across all the models and get everyone on the same page, but that would be a critical first step in creating a true Apple ecosystem. Microsoft knew when they entered the tablet space that they somehow had to pull the Windows franchise through into the mobile future. Apple knows that too, and they think (likely correctly) that they’re in a better position to do that. If everyone runs the same basic software, it helps users of multiple devices a bit, but the real value is that it enables a common framework of tools to support everything.
Where is that framework? In the cloud, even though Apple isn’t saying that. Apple is in the position of being able to create a kind of virtual user agent that lives in every Apple device and in the Apple Cloud, and that migrates functionality seamlessly through all of this. They can create the point-of-activity empowerment I’ve been harping on, because they really have more of the pieces than anyone, including Microsoft. I can’t say what the Apple people really believe and what they’ll really do, but they could do something truly revolutionary here.
So could Juniper. So could all of the competitors of both companies. We in the tech space are on a train that’s broken, that’s slowing down on a siding as a fresh new one overtakes us to pass. There’s a time in such a situation where the new is going just slow enough and the old still moving just fast enough that you can jump safely between them. Jump, Apple and Juniper. It’s not going to get easier later on.
