Upstart networking equipment company Juniper Networks today unveiled a new network router that runs four times faster than its current flagship product. More significantly, analysts point out that the hardware runs significantly faster than competing products offered by Cisco Systems, the leader in the networking hardware market.
The lagging position is an unfamiliar one for the networking giant. Historically a leader in its field, Cisco competes with high-flying Juniper in selling high-end routers that help telecommunications carriers and Internet service providers (ISP) build faster networks. Routers ship Internet traffic from point to point along a network at high speeds.
Cisco, now the world's most valuable company by market capitalization, still dominates the networking router market with 85 percent market share. Juniper however has made a name for itself since shipping its first router 18 months ago, and has since captured the remaining 15 percent, according to a recent study by market research firm Infonetics Research.
"This proves Juniper is a viable competitor to Cisco. To take any share from Cisco is a mean feat these days," Infonetics Research analyst Michael Howard said.
"A start-up always has to prove itself, and this new product shows (Juniper) is continuing to develop next-generation products. This means Cisco has a competitor that has staying power."
In some ways, the race to build the fastest router is similar to Intel and AMD's eternal battle to build the fastest PC processor. But while the average family can't really tell the difference between an 800-MHz chip and a 1-GHz chip, a new, fast router like Juniper's could solve many speed problems as networks become increasingly burdened with more and more people online.
Juniper's new product, called the M160, can support 160 million packets of information a second--four times faster than its previous hardware product. The company announced that several of its existing customers, including UUNET and Cable & Wireless, plan to use the new router in their networks.
"The primary importance is it supports the demands and growth of the Internet," Juniper chief executive Scott Kriens said. "Today, we have 250 million users and in a couple of years, it will be 1 billion."
Ryan Hankin Kent analyst Raj Mehta said today's announcement puts Cisco on the defensive.
"Juniper is defining what everyone has to measure up to, and they're doing it aggressively," Mehta said. "Cisco finds themselves in a position where they have to aggressively reinvent themselves, and maintain their current customers, which they're finding harder to do."
Juniper's stock jumped 11 percent today, reaching a 52-week high of $307. CIBC World Markets began coverage of Juniper today, rating the company's stock as a "strong buy" and giving a target of $325 a share.
To Cisco's credit, the company has maintained its leadership position in the market for routers for such a long time that it would be difficult, if not impossible, to maintain its position forever. Industry observers say that the amount of new networks being built allows for new entrants such as Juniper to grab their own piece of the networking pie.
Cisco representatives could not immediately be reached for comment. Yet the company announced in December that it plans to build a faster router by the third quarter of this year. Cisco also recently acquired Growth Networks as part of its goal to build faster equipment.
While Cisco and Juniper are currently the only two players in the market, several companies, including Nortel Networks, Lucent Technologies, Foundry Networks and start-ups like Avici Systems and Pluris have similar technologies in the works.
While other firms like 3Com have yielded the market for high-end networking products to Cisco, Juniper has competed head-on and has worked to round out its family of networking products.
Juniper's M160 high-end router released today is used for the Internet's "core," or backbone, where most Net information travels. But to better compete against Cisco, Juniper in December released a router aimed at the "edge" of the network, where service providers connect with other service providers.
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