Sin-Yaw @ Juniper

This Internet thing is good at satiating curiosity. I started a pursuit this weekend to get a grip on the industry, defined as: Cisco, Alcatel, Juniper, HuaWei, F5, Extreme, RiverBed, and Arris Group. (Foundry and Nortel are kind of hard to get these days.) I am interested only in their financial performance, so I dug up their latest federal reports, or whatever their websites will give.

Relative to each others, Cisco dominates with 51% market share. Alcatel follows with 25.7%, HuaWei 15.5%, Juniper 4.7%, and the rest combined is 3.1%. Interesting that each major sales region has a dominant player: US, Europe, and Asia Pacific. The numbers show Juniper is winning share, but I can be biased.

If economy of scale plays in this industry, smaller ones — Arris, F5, Extreme, and Riverbed — will face consolidation pressure. Since this is high-tech, I am not very sure economy of scale really play.

Among the “big 4″ (Cisco, Alcatel, HuaWei, Juniper), Juniper has the best gross margin (67.5% of total revenue) and HuaWei least (33.9%). This is not surprising that Juniper is at the “high performance” segment and HuaWei competes on costs. (Alcatel is 34%, just a hair better than HuaWei.) Juniper spends the most on R&D at 20.7% and HuaWei the least at 11.4%. HuaWei has the lowest OPEX (27%) and Alcatel highest (54.5%). Cisco makes the most money with 20% net income and Alcatel lost at -20.2%.

Alcatel deserves some attention with low gross margin and high OPEX. Not a good combination: products cost too much to make, company is not efficient. Over the other end, Riverbed has a whopping 73.5% gross margin and equally high OPEX of 74.8%. On the surface, this means they make and spend money both quickly.

Juniper’s and Huawei’s numbers make sense. One invested on R&D and the other kept the corporate overhead low. Extreme is interestingly pretty much on average in every areas. Mediocracy can be difficult to rid.

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