July 2011 Tech Earnings 1.5: Network Transitions
Most of the tech investment world is trying to figure out what happened to JNPR in the last few months. The Fast Money team on CNBC blamed Japan and macro. I have counted five downgrades so far this morning. A number of analysts are maintaining buy ratings, but I think they need to go back and do some research. This is not a Japan problem, this is not a macro problem, and this is not a product transition problem.
I have written extensively that there is a major sea change going on in world of networking. I am too lazy to repeat what I have previously written, but I will provide a short reading list. Read these posts:
Back from the Valley, Things are Going to be Different (June 4, 2011)
Three Dislocations, Will they Meet? (June 7, 2011)
Looking at the Big Picture and Connecting the Dots (June 14, 2011)
Clouds and the Network (June 24, 2011)
Thinking About Moore’s Law (July 4, 2011)
Networking is like last dark art left in the world of tech. The people who run networks are like figures out of Harry Potter. Most of them have no idea what is in the network that they manage; they do not know how the network is connected and hope everyday that nothing breaks the network. If the network does break, their first reaction is to undo whatever was done to break the network and hope that fixes the problem. Router, switch and firewall upgrades break the network all the time. The mystics of the data center/networking world are the certified internet engineers. These are people with special training put on the planet to perpetuate and extended the over paying for networking products because no one else knows how to run the network.
Intended network design has changed little in twenty years. I look back in my notebooks at the networks I was designing in the early 1990s and they look like the networks that the big networking companies want you to build today. If you are selling networking equipment for CSCO, JNPR, BRCD, ALU, CIEN, etc, you go to work every day trying to perpetuate the belief that Moore’s Law rules. You go to work everyday and try to convince customers to extend the base of their networks horizontally to encompass more resources, vertically build the network up through the core and buy the most core capacity you can and hope the over subscription model works. When the core becomes congested or the access points slow down, come back to your vendor to buy more. When you read the analyst reports that say JNPR is now a 2012 growth story that is code words for “we are hoping customers come back and buy more in 2012.” Keep the faith. Keep doing what you are doing. Queue the music…don’t stop believin’.
Tonight we are going to get results from AKAM. I will be curious to see the results and commentary because I think AKAM is another company looking at the evolution of the network and thinking this is not the network from 2000 or 2005. The internet is no longer built vertically to a few core peering points. Content is no longer static. State is now distributed across the network and state requires frequent if not constant updating. Content is no longer little HTML files, it is long form content such has HD video which other people are calling this Big Data. AKAM created amazing solutions for Web 1.0 and into Web 2.0 when the web was architected around the concept of a vertically built over subscription model. AKAM distributed content around the network and positioned content deeper in the network. That is not the internet of today.
As always…thanks for reading. I am very humbled by the emails I get from people I have never met.
* It is all about the network stupid, because it is all about compute. *
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