Tuesday, April 26, 2005

Juniper Spends

JNPR has agreed to buy two networking firms for roughly $500M. Peribit Networks and Redline Networks make gears that make enterprises run applications faster over the wide area network. This allows branch offices of large enterprises have faster access to corporate wide applications such as Oracle or SAP. Peribit competes with PKTR and CSCO (through its Actona acquisition) and various private firms where as Redline competes with FFIV and various private firms also. JNPR paid a steep price to enter this market as these companies combined revenues last year was roughly $40M. But this is where the money is being spent by enterprises large and small and this is where the next-gen enterprise networking is heading. There had been talks of JNPR acquiring FFIV- this certainly will put an end to that and make life of FFIV little tougher as Redline had already been giving hard time to FFIV.

I expect JNPR to move more swiftly in integrating these companies then they did with NetScreen acquisition and also try to retain key employees after the acquisition. The departure of key employees has been blamed for some early missteps by JNPR after NetScreen acquisition. What is interesting to note is that NetScreen was acquired in April 2004 and now these two acquisitions also in April. NetScreen satisfied the "expansion into new areas requirement" under the Management Incentive Plan - Bonuses for management in simple language. Which means these two acquisition will also help management receive larger bonuses.

Back in action

I have been unable to update this blog as I had been on vacation and then busy with earnings. Hope to update with regular posts. Thanks for continuing support

Friday, April 01, 2005

What to expect from Q1 earnings

Companies will start to announce earnings in about a weeks time. I refer new readers to check out my earlier article from January 03,2005 in which I predicted a tough tech market. Now that Nasdaq lost 8% in first quarter its fairly evident that Q1 was not nice for tech investors. I believe end-market demands still very tepid and with "spiking" oil, tech is still a tough place to be. I do not see much support to move tech higher with most end markets still in doldrums. I am expecting most estimates to remain unchanged from what I believe will be tepid guidance by managements.

For Q1 earnings I really do not see many big upside/downside scenarios. I think the market expectations are for basically in-line results. Lets begin with PCs which I believe continue to be weak and we should get a good flavor from DELL how they plan to achieve mid teens growth rate during their analyst day next week. I am more interested in their discussion on how they can drive consumers to electronics then how much discount they need to give to drive PC sales. BBY did not have great things to say about demand as they guided down. There was weakness basically across the board in servers, PCs, and even notebooks. The disk-drive makers saw better pricing and demadn from consumer devices as evident by upside guidance recently by all HDD makers STX, MXO and WDC. The HDD industry is in a supply constraint environment driven by technology shift and at the same time demand continues to be steady from consumer devices driving higher revenues for HDD makers but June quarter remains murky for these guys also.

In semiconductor markets supply demand remain in check with companies making their quarters driven by low expectations as the bar was reset lower late last year. PC market remains a key market for Semis as it represents almost 50% of market. Semi related PCs demand was seasonal at best. Memory market is seeing steady pricing in NAND flash and seriously weak market in DRAM, as evident by commentary from MU. Communication market remain seasonal also with handsets demand being somewhat weak especially in CDMA. Wireline communication related companies should basically see inline quarter with some having trouble meeting expectations especially given weakness in Europe. Demand remains lackluster in networking in March after weak January. Given all these inline demand scenarios its difficult to expect strong tech-tape moving into April earnings season.