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Juniper says 400G network kit in demand, supply chain worries easing

Hopefully 80-week lead times a thing of the past

Juniper Networks said it is seeing strong demand for network kit, especially for 400G products from the cloud and hyperscale sectors, and claims its earlier supply chain difficulties are easing.

"We're now incrementally more confident regarding our top line outlook and our ability to ship products to customers," said Juniper CEO Rami Rahim on the company's Q2 2022 financial results conference call.

The company reported year-on-year revenue growth across all customer verticals, and saw some momentum in its enterprise business, with sales in the quarter up by 15 percent and orders up by 20 percent year-on-year.

However, Juniper's margins were weaker than expected due to higher than anticipated supply chain costs and lower than expected perpetual software revenues.

On the supply chain side, the company faced difficulties with availability of components throughout the last quarter, with Juniper experiencing "a meaningful uptick in the volume of supplier decommits," according to Rahim, meaning that their suppliers were unable to deliver on time.

Late last year, Juniper was one of the companies warning that extended lead times for components were hurting its ability to deliver finished products to customers, claiming it had been told it would have to wait up to 80 weeks, or more than a year, for some supplies.

"In order to secure access to additional parts and get products to customers as soon as possible, we incurred higher costs than we anticipated at the beginning of the quarter," Rahim explained, but justified this by saying that while it will impact profitability for the next few quarters, these measures are enabling the company to "access more parts and better satisfy customer demand, which should have positive, longer term implications for our business."

According to the CEO, Juniper saw improved demand from multiple hyperscale providers and cloud customers for the company's 400G Ethernet network equipment. Juniper also recently secured a win with a Tier 1 US carrier for 400G core kit, he added.

It was also another quarter of triple-digit order growth for the ACX Metro portfolio, while newer additions to the MX line such as the MX10K, the LC 9600 line card and the MX304 also sold well.

"We continue to feel good about our ability to capitalize on big opportunities tied to enterprise digital transformation and clarification initiatives, 400 gig upgrades at cloud and service provider customers and the broader adoption of cloud-based services and network architectures," Rahim said.

Even though software revenue came in lower than expected, this still grew by 24 percent compared with the same quarter last year, and Juniper said it was encouraged by take-up of its Junos Space software and Mist self-driving network software-as-a-service platform.

Meanwhile, CFO Ken Miller warned price rises might be on the way: "In 2021, we implemented some pricing actions, which have begun to pass the offset of some but not all the increased costs we are incurring. We are planning to take additional pricing actions to further offset these incremental costs."

Rahim said its actions taken to secure supplies meant: "As a result, we now expect to deliver approximately 10 percent sales growth in 2022 and at least mid-single digit revenue growth in 2023," he said.

Juniper's net revenue for Q2 was $1.269 billion, an increase of 8 percent year-on-year, while net income was $113.4 million, an increase of 83 percent year-on-year. ®

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