We design and sell products and services that together provide our customers
with secure and assured Internet Protocol (“IP”) networking solutions.
Our solutions are incorporated into the global web of interconnected public
and private networks across which a variety of media, including voice, video
and data, travel to and from end users around the world. Our network infrastructure
solutions enable service providers and other network-intensive businesses to
support and deliver services and applications on a highly efficient and low
cost integrated network.
In 2004, we completed the acquisition of NetScreen Technologies, Inc. (“NetScreen”)
and in 2005, we completed the following five acquisitions: Kagoor Networks,
Inc. (“Kagoor”), Redline Networks, Inc (“Redline”),
Peribit Networks, Inc. (“Peribit”), Acorn Packet Solutions, Inc.
(“Acorn”), and Funk Software, Inc. (“Funk”). As a result
of the these acquisitions, we expanded our customer base and portfolio of products,
and now offer two categories of networking products: infrastructure products,
which consist predominately of the original Juniper Networks router portfolio
and Acorn products, and Service Layer Technologies (“SLT”) products,
which consist predominately of the former Funk, Peribit, Redline, Kagoor, and
NetScreen products.
During 2005, our operations were organized into the following three operating
segments: Infrastructure, SLT, and Service. Our Infrastructure segment primarily
offers scalable router products that are used to control and direct network
traffic. Our SLT segment offers solutions that meet a broad array of our customer’s
priorities, from protecting the network itself, and protecting data on the network,
to maximizing existing bandwidth and acceleration of applications across a distributed
network. Together, our secure networking solutions help enable our customers
to convert networks that provide commoditized, best efforts services into more
valuable assets that provide differentiation and value and increased reliability
and security to end users. Our Service segment delivers world-wide services
to customers of the Infrastructure and SLT segments.
Our objective and strategy is to provide best-in-class traffic processing
technologies that allow our customers to provide a secure and assured network
experience for any application on an IP network. Our technological leadership
and problem solving abilities combined with our experience and fundamental understanding
of the requirements of high performance IP secure networking solutions will
help us in meeting our objectives. Key elements of our strategy are described
below.
Maintain and Extend Technology Leadership. Our application-specific integrated
circuit (ASIC) technology, operating system and network-optimized product architecture
have been key elements to establishing our technology leadership. We believe
that these elements can be leveraged into future products we are currently developing.
We intend to maintain and extend our technological leadership in the network
infrastructure and security markets primarily through innovation and continued
investment in our research and development departments, supplemented by external
partnerships, including strategic alliances, as well as acquisitions that would
allow us to deliver a broader range of products and services to customers in
target markets.
Leverage Position as Supplier of Purpose-Built Network Infrastructure and Security.
From inception we have focused on designing and building IP network infrastructure
for service providers and network intensive businesses and have integrated purpose-built
technology into a network optimized architecture that specifically meets our
customers’ needs. We believe that many of these customers will deploy
networking equipment from only a few vendors. We believe that the purpose-built
nature of our products provide us with a competitive advantage, which is critical
in gaining rapid penetration as one of these selected vendors.
Be Strategic to Our Customers. In developing our infrastructure and SLT solutions,
we work very closely with customers to design and build a product specifically
to meet their complex needs. Over time, we have expanded our understanding of
the challenges facing these customers. That increased understanding has enabled
us to subsequently design additional capabilities into our products. We believe
our close relationships with, and constant feedback from, our customers have
been key elements in our design wins and rapid deployment to date. We plan to
continue to work very closely with our customers to implement enhancements to
current products as well as to design future products that specifically meet
their evolving needs.
Enable New IP-Based Services. Our platforms enable network operators to build
and secure networks cost-effectively and to offer new differentiated services
for their customers more efficiently than legacy network products. We believe
that the secure delivery of IP-based services and applications, including web
hosting, outsourced Internet and intranet services, outsourced enterprise applications
and voice-over IP, will continue to grow and are cost-effectively enabled by
our secure networking solutions.
Establish and Develop Industry Partnerships. Our customers have diverse requirements.
While our products meet certain requirements of our customers, our products
are not intended to satisfy certain other requirements. Therefore we believe
that it is important that we build relationships with other industry leaders
in a diverse set of networking technologies and services. These relationships
ensure that we have access to those technologies and services, whether through
joint development, resale, acquisition or other collaboration, in order to better
support a broader set of our customers’ requirements.
Markets and Customers
We sell our products and services through direct sales and through distributors
and value-added resellers to end-users in the following markets:
Service Providers
Service providers include wireline, wireless, cable, and next-generation network
operators. Supporting most major service provider networks in the world, our
platforms are designed and built for the scale and dependability that service
providers demand. Our secure networking solutions benefit these customers by:
• Reducing capital and operational costs by running multiple services
over the same network using our high density, highly reliable platforms;
• Promoting generation of additional revenue by enabling new services
to be offered to new market segments based on our product capabilities;
• Increasing customer satisfaction, while lowering costs, by enabling
consumers to self-select automatically provisioned service packages that provide
the quality, speed and pricing they desire; and
• Providing increased asset longevity and higher return on investment
as their networks can scale to multi-terabit rates based on the capabilities
of our platforms.
Enterprise
Our secure networking solutions are designed to meet the reliability and scalability
demanded by the world’s largest and most advanced networks. For this reason,
network intensive enterprises, federal, state and local governments, and research
and education institutions that rely on their networks for the operation of
their business are able to deploy our solutions as a powerful component in delivering
the advanced network capabilities needed for their leading-edge applications
while:
• Reducing costs through operational efficiencies in implementing and
managing the network;
• Driving down capital expenses with sophisticated network intelligence
that is robust, secure, and scalable;
• Providing enterprises with the control necessary to deliver a secure
and assured user experience to their customers and internal clients; and
• Working as a business partner for the long term with the optimal combination
of flexibility, responsiveness, technical know-how and financial strength.
Fundamental Requirements for High Performance Secure Networks
As they work to support growth in IP traffic and seek to offer new revenue-generating
or mission-critical services, our customers require secure network solutions
that are not only feature rich but also deliver high reliability, high performance
and assured user experiences.
At the same time, both service providers and enterprises must focus on detecting
and preventing the ever increasing number of security threats facing the network
itself and the data that flows across the network. This security must be innate
to networking products and must not come at the expense of overall performance
or unjustifiable cost.
Feature richness, high reliability, security, high performance, scalability,
and cost effectiveness are each fundamental requirements in meeting the needs
associated with the growth in IP traffic and the secure and assured delivery
of value-added services to end users.
Feature Richness. The importance of increasing revenue streams and decreasing
capital and operational costs for our customers is a significant priority in
the industry. Service providers want to sell more revenue generating services
with better cost efficiencies. Enterprises and other network operators want
to provide a secure and assured network experience to their end users on a cost
effective but value-generating basis. Each of these goals is ultimately a function
of the features and capabilities that can be securely provided on each of the
network elements. As networks advance, more and more features are required to
sell new services as well as to lower the ongoing costs of operating the network.
Next generation networking solutions therefore need to have flexibility to add
new capabilities frequently without compromising the performance of the system,
which gets increasingly difficult as the network demands increase.
High Reliability. As businesses and consumers increasingly rely on IP networks
for mission-critical applications, high network reliability is essential. As
a result, those businesses and consumers expect service providers to deliver
a high degree of reliability in their networks.
Security. Today’s network environment presents an ever-increasing number
of challenges regarding network security ranging from simple denial of service
attacks to sophisticated, pervasive and malicious intrusions. The importance
of security is increasing within all of our customers and we are continually
improving and evolving the security capabilities on all of our product solutions.
It is extremely important to provide comprehensive network-based security services
that are fully integrated, free of performance trade-offs, and scaleable to
any customer or market.
High Performance Without Compromising Intelligence. To handle the rapid growth
in IP traffic, today’s network operators increasingly require secure networking
solutions that can operate at higher speeds, while still delivering real-time
services such as security and quality-of-service features. The processing of
data packets at these high speeds requires sophisticated forwarding technology
to inspect each packet and assign it to a destination based on priority, data
type and other considerations. Since a large number of IP packets, many of which
perform critical administrative functions, are small in size, high performance
IP routers need to achieve their specified transmission speeds even for small
packet sizes. Since smaller packets increase packet processing demands, routing
large numbers of smaller packets tends to be more resource intensive than routing
of larger packets. A wire speed router, which achieves its specified transmission
rate for any type of traffic passing through it, can accomplish this task. Thus,
provisioning of mission-critical services increasingly requires the high performance
enabled by wire speed processing.
High Performance Under Stressful Conditions. In a large and complex network,
individual components inevitably fail. However, the failure of an individual
device or link must not compromise the network as a whole. In a typical network,
when a failure occurs, the network loses some degree of capacity and, in turn,
a greater load falls on the remaining network routers, which must provide alternate
routes. IP infrastructure must quickly adjust to the new state of the network
to maintain packet forwarding rates and avoid dropping significant numbers of
packets when active routes are lost or when large numbers of routes change.
Routing protocols are used to accomplish this convergence, a process that places
even greater stress on the router. Given the complexity of IP network infrastructure,
the convergence process is complex and places a far greater load on the router,
thereby requiring a much more sophisticated device.
Scalability. Due to the rapid growth in IP traffic, service providers must continuously
expand their networks, both in terms of increased numbers of access points of
presence (PoPs), and also greater capacity per PoP. To facilitate this expansion
process, secure networking solutions must be highly scalable. Next generation
network appliances therefore need to be flexible and configurable to function
within constantly changing networks while incurring minimal downtime.
High Return on Investment. Continued growth in IP traffic, price competition
in the telecommunications market and increasing pressure for network operators
to attain higher returns on their network infrastructure investments all contribute
to our customers’ desire for solutions that significantly reduce the capital
expenditures required to build and operate their networks. In addition to the
basic cost of equipment, network operators incur substantial ancillary costs
for the space required to deploy the equipment, power consumed and ongoing operation
and maintenance of the equipment. Network operators therefore want to deploy
dense and varied equipment configurations in limited amounts of rack and floor
space. Therefore, in order to continue to scale their networks toward higher
data speeds in a cost effective manner, network operators need the ability to
mix and match easily many different speed connections at appropriate densities,
without significantly increasing the consumption of space or power and driving
costs higher.
These requirements define a clear need for IP infrastructure and security solutions
that can support high speeds and offer new IP-based services. At the same time,
network operators are eagerly seeking new solutions that increase the level
of scalability and reliability within their networks and reduce the cost of
their architectures.
Direct Sales Structure
Our direct sales organization is organized into three geographic theaters and
within each theater according to the particular needs in that market. Our three
geographic theaters are (I) the Americas, (II) Europe, Middle East and Africa,
and (III) Asia Pacific. Our direct relationships with our customers are governed
either by customer purchase orders and our acknowledgement of those orders or
by purchase contracts. In instances where we have contracts with our customer,
those contracts set forth only general terms of sale and do not require customers
to purchase specified quantities of our products.
Global Channel System
In our sales and marketing efforts, we also employ a global network of strategic
distribution relationships, as well as theater or country-specific distributors
and value added resellers. Value-added resellers include our strategic resellers,
which resell our products to end-users around the world. Within each theater,
in addition to our direct sales force, we employ sales professionals to assist
with the management of our various sales channels.
We have strategic reseller relationships with Ericsson, Lucent Technologies,
and Siemens. We believe that each of these companies have significant customer
relationships in place and offer products that complement our product offerings.
Our arrangements with each of these partners allow them to resell our products
on a worldwide, non-exclusive basis, provide for discounts based upon the volume
of products sold and specify other general terms of sale. The agreements do
not require these partners to purchase specified quantities of our products.
Siemens accounted for greater than 10% of our total net revenues in 2005.
In addition to these strategic reseller relationships, we maintain relationships
with distributors and value-added resellers in various theaters. These distributors
and value-added resellers tend to be focused on particular theaters or particular
countries within theaters. For example, we have substantial distribution relationships
with Ingram Micro in the Americas and with NEC in Japan. The value-added resellers
have expertise in deploying complex networking solutions in their respective
markets. Our agreements with these distributors and value-added resellers are
generally non-exclusive, limited by theater, and provide product discounts and
other ordinary terms of sale. These agreements do not require our distributors
or value-added resellers to purchase specified quantities of our products.
Customer Service and Support
We believe that a broad range of support services is essential to the successful
customer deployment and ongoing support of our products and we have hired support
engineers with proven network experience to provide those services. In most
cases, our customer service and support organization provides front line product
support and is the problem resolution interface to our partners and direct end
users. We offer the following services: 24x7x365 technical assistance, hardware
repair and replacement, unspecified updates, professional services and educational
services. We deliver these services directly to major end users and also utilize
a multi-tiered support model, leveraging the capabilities of our partners and
third party organizations. We also train our channel partners in the delivery
of education and support services.
Competition
Competition in the network infrastructure and security markets is intense.
Cisco Systems, has historically dominated the market, with other companies such
as Nortel Networks, Alcatel, CheckPoint Software Technologies, and Huawei Technologies
providing competitive products. In addition, a number of public and private
companies have announced plans for new products to address the same needs that
our products address. We believe that our ability to compete with Cisco and
others depends upon our ability to demonstrate that our products are superior
in meeting the needs of our current and potential customers.
We expect that, over time, large companies with significant resources, technical
expertise, market experience, customer relationships and broad product lines,
such as Cisco, Nortel, Alcatel, and Huawei Technologies, will introduce new
products which are designed to compete more effectively in this market. As a
result, we expect to face increased competition in the future from larger companies
with significantly more resources than we have. Although we believe that our
technology and the purpose-built features of our products make them unique and
will enable us to compete effectively with these companies, we cannot guarantee
that we will be successful.
Many of our current and potential competitors, such as Cisco, Nortel, Alcatel,
and Huawei Technologies have significantly broader product lines than we do
and may bundle their products with other networking products in a manner that
may discourage customers from purchasing our products. Also, many of our current
and potential competitors have greater name recognition and more extensive customer
bases that could be leveraged. Increased competition could result in price reduction,
fewer customer orders, reduced gross margins and loss of market share, any of
which could seriously harm our operating results.
There are also several other companies that claim to have products with greater
capabilities than our products. Consolidation in this industry has begun, with
one or more of these smaller private companies being acquired by large, established
suppliers of network infrastructure products, and we believe it is likely to
continue. As a result, we expect to face increased competition in the future
from larger companies with significantly more resources than we have.
Several companies also provide solutions that can substitute for some uses of
routers. For example, high bandwidth Asynchronous Transfer Mode (“ATM”)
switches are used in the core of certain major backbone service providers. ATM
switches can carry a variety of traffic types, including voice, video and data,
using fixed, 53 byte cells. Companies that use ATM switches are enhancing their
products with new software technologies such as Multi-Protocol Label Switching
(“MPLS”), which can potentially simplify the task of mixing routers
and switches in the same network. These substitutes can reduce the need for
large numbers of routers.