Telecom and networking balance each other in terms of products and services. The fast paced growth of data consumption, deployment of 4G networks, and build-out of data centers provide huge opportunity. Going forward, Plunkett Research expects the global telecom industry to be worth $5 trillion and grow further.
Alcatel-Lucent (ALU, Financial), Juniper Networks (JNPR, Financial), and Cisco Systems (CSCO, Financial) are three companies that have established global demand for their products and stand to gain from the above mentioned trends.
Cisco
The company has delivered quite healthy revenue growth despite a minor slowdown in the networking market. Cisco was able to keep this growth intact through a diversified product portfolio. Moreover, it is looking to establish its footprint in cloud computing.
Also, Cisco is dominating the router and switches market. Over 60% of market share in the Ethernet switch market belongs to the company which targets at maintaining this share.
Cisco is focused on tapping the growing demand for fast port switches in data centers. The solid sales of Cisco’s 10G products is driven by higher demand for high speed switches. The Nexus and Catalyst series of switches are also gaining momentum. The 20% healthy growth of the Nexus portfolio in the last quarter shows that Cisco’s data center portfolio of switches is ramping up nicely.
Its UCS (Unified Computing System) segment is quite popular and is among the preferred choices for customers globally. In integrated solutions, Cisco has tied up with companies like NetApp for Flexpod and VCE for Vblock have helped it broaden the scope of UCS and leaving no space for competitors.
Cisco commands 4.1% of the global server market as reported by the market research firm IDC. This could grow further with hardware giants like IBM moving away from the server segment.
Cisco can be considered as a solid long-term investment for investors as it strengthens its position in the UCS market. Moreover, Cisco’s Sourcefire acquisition should strengthen its security products division.
Juniper Networks
Juniper is among the leading competitors of Cisco. The company’s operating expense has increased substantially over the past two years due to its investments in new products.
Juniper recently acquired Mykonos Software that helped it to broaden its security products portfolio. The cyber security market is anticipated to grow at a CAGR of 11.3% from 2012 to 2017 to $120 billion.
But Juniper’s network security revenue declined almost 20% last quarter and so, the Mykonos acquisition could help it improve its condition in the future.
In addition, looking at Juniper’s focus on returning cash to shareholders through the stock repurchase policy is a wise decision.
In the future, Juniper is expected to demonstrate decent growth in earnings by the analysts. The earnings are expected to grow at a CAGR of 14% over the next five years, which is impressive and above Cisco’s expectation of 9%. The share repurchase plan is another solid reason for investors to invest in the stock and consider Juniper for their portfolio.
Alcatel-Lucent
Alcatel-Lucent is performing quite impressively in the networking and telecommunication segment. Alcatel is only second to Cisco and is moving up the ranks in the market for switches and routers. Alcatel acquired the second position defeating Huawei. However, there’s a tight fight for number two between Alcatel, Huawei, and Juniper.
Alcatel has partnered with Qualcomm to develop small cell base stations for enhancing wireless connectivity for 3G, 4G and Wi-Fi users that could accelerate growth.
Alcatel’s joint venture with Qualcomm is a move in the right direction as small cell base stations provide the required cost-effective solutions. Its LightRadio portfolio enhances network capability at a lower cost per bit.
Conclusion
Cisco has grabbed the top spot in the networking and telecom industry. However, both Juniper and Alcatel are trying hard to make a place. Juniper’s acquisition of Mykonos and Alcatel’s tie-up with Qualcomm in small-cell technology are good examples to depict their serious efforts going forward along with Cisco’s moves to maintain its dominance.
