Cisco (NASDAQ:CSCO) and Juniper (NYSE:JNPR) are major players in the networking equipment market which consists primarily of network switches and routers. For Cisco, its network switch business is the most significant driver of its stock value – constituting slightly more than a quarter of the company’s value. Juniper’s stock, on the other hand, is highly dependent on the company’s router business. We estimate that more than 35% of Juniper’s value comes from the router business. There are two main reasons why these networking companies have different drivers of value:
1. High Cisco Market Share in the Large Network Switch Market
The significant contribution of Cisco's network switch business to the company’s stock is attributable to Cisco’s 60% market share in the $18 billion network switch market which is almost 1.6 times bigger than router market. Cisco has more than 50% market share within many of the router markets (enterprise, core, edge) as well, yet the contribution of Cisco’s router business to its stock is less than 15% due to the smaller size of the router market.
2. High Juniper Market Share in Routers compared to Switches
We estimate that Routers constitute about 37% of Juniper's stock while Network Switches constitute only about 20%. The difference is attributable to Juniper’s small, ~4.5% market share in the network switch market compared to its market share in routers. Juniper commands a market share of about 15% in edge router market and about 29% in core router market.
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