Juniper Expands Partnership With VMware To Boost Private Cloud Adoption

| About: Juniper Networks (JNPR)
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Summary

Both companies will provide combined platform capabilities to enterprises in the Asia Pacific region to build private cloud environments.

Juniper’s intention to leverage its data center capabilities with a focus on the Asia-Pacific region is likely to provide a much-needed boost to its top line performance.

Our $25 price estimate for Juniper is about 10% ahead of the current market price.

Juniper Networks (NYSE:JNPR) has expanded its partnership with global virtualization and cloud infrastructure provider VMware (NYSE:VMW) in the virtualization and software-defined networking (SDN) domain. Both companies will provide combined platform capabilities to enterprises in the Asia Pacific region to build private cloud environments. This latest collaboration will involve both companies partnering in product development, marketing and sales, and builds on their recent partnership to deliver interoperable products. These interoperable products involve integrating Juniper’s MetaFabric data center architecture with VMware’s NSX network virtualization platform, leveraging Juniper’s portfolio of switching, routing, SDN and security solutions and VMware’s virtualization capabilities. [1]

Juniper’s intention to leverage its data center capabilities with a focus on the Asia-Pacific region is likely to provide a much-needed boost to its top line performance. In the third quarter, Juniper’s Routing and Security divisions registered double digit declines over the same period last year, with Switching being the only division reporting growth (5%). In terms of geographies, the company recorded growth only in the Americas (2.6%), with Asia-Pacific sales declining by a massive 28% y-o-y. [2] [3]

Our $25 price estimate for Juniper is about 10% ahead of the current market price.

Global Private Cloud Market

Juniper’s expanding partnership with VMware is likely driven by two factors. Firstly, both Juniper and VMware face intense competition from Cisco (NASDAQ:CSCO) in the SDN market. Secondly, there is immense opportunity in the global private cloud business in terms of both market size and the kind of growth it is experiencing. Research firm Technology Business Research estimates that the private cloud market will grow at a CAGR of 14%, from $41 billion in 2014 to $69 billion by 2018. TechNavio is even more bullish on growth in this business and forecasts the global market for private cloud services to grow at a CAGR of 22% in the next four years. [4] [5]

In the global private cloud business, self-built private clouds have a share of 30% and third-party delivered clouds have maintained a steady share of 70%. Going forward, industry experts expect the third-party delivered clouds to increase their share on account of the growing complexity of clouds, improving demand for hybrid clouds (public and private) and security concerns among clients. In a survey conducted among private cloud customers/prospective customers by Technology Business Research, 59% of respondents said that security was the top concern while adopting a private cloud. Therefore, Juniper’s security solutions for VMware’s NSX platform are likely to play a key role in deciding the adoption rates and success of their collaborative venture in the Asia Pacific. Research company Gartner expects the cloud-based security-as-a-service market to expand from $2.1 billion in 2013 to over $3 billion in 2015.

Disclosure: None