Sensing the improvement in demand in the data center segment, networking company Juniper Networks ( JNPR - Analyst Report ) has come up with new products to enhance the capabilities of mid-sized data center businesses.

The company has recently announced the launch of Juniper Networks QFX3000-M QFabric System, which helps clients explore the full benefits of the company's QFabric System. Juniper claims that the new version requires 63.0% less space. It will also save additional costs as it reduces cable consumption by 74.0% and power consumption by almost 54.0%.

The company also announced additions to its EX8200 switches portfolio, which is backed by Virtual Chassis technology and helps customers in managing up to four data center cores with a single switch.

New product and technology launches have always been a focus area for Juniper. Apart from traditional networking products and related services, the company is entering the security software segment to diversify its business model and add new revenue streams. The acquisition of Myconos Security is an indication of this strategy, as it will fight against hackers and help the company expand in the security segment.

In a report published by Intel Inc. ( INTC - Analyst Report ) -acquired IT security company McAfee, the company notes the growing adoption of virtualization, cloud computing technologies and flattened network architectures through next-generation data centers. The company continues to witness lower spending on in-house servers by mid-sized organizations. The company cites the improvement in demand for new services, budgetary constraints, and globalization as the chief factors influencing this.

Further, a survey conducted on 100,000 facilities by a data center dedicated website, datacenterdynamics.com, shows that data center usage is expected to be around 7% in 2012. Moreover, the website has also increased its investment projection from about $30 billionin 2010-11 to $35 billion in 2011-2012.

We believe this is good news for networking companies such as Juniper and Cisco Systems ( CSCO - Analyst Report ) , which are adopting necessary steps to seize this opportunity in the data center business.

Juniper’s considerable effort to increase its business volume notwithstanding, the company was able to post just mediocre first quarter results. This was mainly on account of strategic increases in its headcount. However, revenue improved in the EMEA and the Americas, and the company provided impressive second quarter guidance.

Although strategic alliances and new acquisitions are positives for Juniper, stiff competition from industry stalwarts like Cisco Systems Inc. and Hewlett-Packard Company ( HPQ - Analyst Report ) , coupled with high European exposure, remain headwinds.

Juniper has a Zacks #3 Rank, implying a short-term Hold rating.