Cisco, Juniper see government differently

Spending up in Juniper's Q1 while Cisco expects segment to be challenging for the rest of the year

Juniper's enterprise business may be doing better than expected this quarter, according to Oppenheimer & Co. Based on 26 interviews in the US and Europe, the investment firm says the Cisco rival is experiencing solid upgrade activity and a recovery in security and government spending.

Government spending has been soft in recent quarters, impacting the results of many leading vendors, including Cisco. Cisco still believes it will be an issue for the rest of the year, according to this post on the CNBC site.

About one-fifth of Cisco's revenue comes from the public sector.

Meanwhile, demand for Juniper enterprise products is strong in the US and mixed in Europe, Oppenheimer reports. Juniper's switching business appears to be mixed as well, with increased competition from Cisco and the slow ramp of the QFX/QFabric line. Oppenheimer expects some offset from sales of security products.

But the wild card is service provider routing, where softness has impacted the last two or so Juniper quarters. Limited visibility into a recovery in spending makes this business hard to gauge, compounded by product transitions in core routing: the T4000 router and the PTX packet/optical transport system.

Oppenheimer believes carrier spending may rebound over the next 2-3 quarters but increased competition from Cisco and Alcatel-Lucent could be a further drag on Juniper's results:

we still expect a bumpy road in the year as competition continues to rise, and as Juniper maneuvers multiple complicated and long-cycled product transitions.

And Juniper might revisit its long-term growth targets as well. The firm's current goal of 20% annual growth "seems urealistic," according to Oppenheimer. The firm expects Juniper to reset its target at 10-12% year-over-year growth.

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