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Juniper Networks Inc. ( JNPR - Analyst Report ) recently announced that it will be joining hands with Korea-based leading telecom operator SK Telecom Ltd. ( SKM - Analyst Report ) . Financial details of the deal were not mentioned.
Per the deal, Juniper will offer its cloud-based security solution, vGW Virtual Gateway. The security solution will be accompanied by Juniper’s flagship SRX Series Service Gateways. Now, it remains to be seen how these security services fare.
The vGW Virtual Gateway provides utmost security across virtualized data centers and hybrid cloud environments. The SRX Series Service Gateways allow secure Internet access and deliver security across local area networks.
These two security suites will take care of the smooth functioning of physical and virtualized IT systems. This will ultimately help SK Telecom in delivering incessant data flow from its data centers, which in turn would fortify its market leadership. SK Telecom currently has a 50.0% share of the market in South Korea.
The deal, in addition to its financial impact, seems to be very important to Juniper. The networking vendor says that its security suites have found a way to penetrate into Korea via SK Telecom. This could undoubtedly be an excellent opportunity for the company since data center growth prospects in Korea seem immense.
Juniper’s acquisition of Mykonos Software in February 2012 for $80 million should work in its favor. Mykonos’ technological capabilities will improve Juniper’s security products, a business in which the company has struggled to stand up against rivals such as Fortinet Inc. ( FTNT - Snapshot Report ) and Palo Alto Networks Inc.
Juniper remains a key player in the networking market, but the increasing focus on security has created a big opportunity for the company. Additionally, the core routing segment in the U.S. is becoming increasingly competitive because of lower-cost solutions coming to market. So this is the right time for the company to generate a fast-growing adjacent segment. The fact that international opportunities are also unfolding is a big positive.
Despite Juniper’s strong product line-up and continuous deal wins, we are a bit cautious about its first quarter 2012 results, which missed the Zacks Consensus Estimate. Moreover, stiff competition from industry stalwarts such as Cisco Systems Inc. ( CSCO - Analyst Report ) and Hewlett-Packard Company ( HPQ - Analyst Report ) , as well as Juniper’s European exposure could weigh on the stock.
Currently, Juniper has a Zacks Rank #3, implying a short-term Hold recommendation.
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