Juniper Falls as Goldman Downgrades, Citing Competition

Juniper Networks Inc. (JNPR), the No. 2 maker of networking gear, dropped the most in five months after a Goldman Sachs Group Inc. analyst downgraded the stock, citing competition from Cisco Systems Inc. (CSCO) and Alcatel-Lucent.

Shares of the Sunnyvale, California-based company slid 5.3 percent to $19.14 at the close in New York, the biggest decline since Oct. 24. The stock has fallen 12 percent in the past year.

Juniper’s sales and profitability are being threatened by Alcatel-Lucent’s entry into the market for routers that sit at the center of Internet providers’ networks, as well as Cisco’s new Nexus 6000 switches and Palo Alto Networks Inc. (PANW)’s momentum in security firewalls, Simona Jankowski at Goldman Sachs wrote in a research note today. She cut her rating on Juniper stock to sell from neutral, and lowered the price target to $17 from $21.

“We have greater concerns about Juniper’s ability to execute in an environment marked by more rapid disruptive change and heightened competition,” Jankowski wrote. The challenges “include the potentially disruptive nature of the move to a more software-oriented model, the impact on the balance sheet from the accelerated pace of recent acquisitions, and higher than average senior management turnover over the last three years.”

Juniper’s primary business is selling networking equipment to telecommunications-service providers, whose capital spending has been inconsistent. While there are positive signs in that area, spending on core Internet-routing gear may remain sluggish, Jankowski wrote.

Bloomberg News reported in October that Juniper planned to eliminate 500 jobs, or 5 percent of its workforce, to cut expenses amid rising competition, citing people familiar with the matter.

To contact the reporter on this story: Jordan Robertson in San Francisco at jrobertson40@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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