We attended a well-organized and information-packed virtual conference hosted by Juniper Networks last week.  While there were many themes (400G, telco cloud, AI, Mist), the one that really came through was how much the Mist acquisition has reinvigorated the Juniper organization.  About a year ago, Juniper made its acquisition of the Wi-Fi startup. It is clear a year later that Juniper’s Enterprise strategy has been “Mistified.”  We will share some Mist statistics from conference and our thoughts, as well.
Juniper shared some milestones that now characterize the Juniper Enterprise group:

• 4 of the Fortune 10 are Mist Wi-Fi customers
• 3 of the Fortune 10 are AI customers for wired as well as wireless
• By 4Q20, Juniper will make its SD-WAN products assured by Mist AI, thereby completing the single-pane managed system that will include Wi-Fi, Ethernet Switches, Security and SD-WAN.  In slightly over a year, the AI operations system (AIops) from Mist will support the Enterprise products that Juniper had in house prior to the merger.
• Since January 2019  through last month, the Mist AI system has improved to the point where Marvis, the company’s Virtual Network Assistant, can resolve 80% of customer inquiries, compared to 20% in January 2019.

We asked the company what has worked well with the acquisition, including whether the deal structure may have contributed towards to its success.  Juniper executives explained that there was nothing special about how the acquisition was structured beyond the normal incentives for the acquired team.  What happened after the acquisition, though, is somewhat unique:  in effect, the Enterprise group at Juniper was subject to a reverse merger with Mist, whereby the Mist management team now leads the group.  Perhaps the fact that the Mist team is in charge of the show explains the rapid integration of the existing Juniper products into the Mist AI management system.  Perhaps, also, the integration went well was because the Juniper products (switches, SD-WAN and Security) were designed to collect and easily share telemetry data for use by the Mist AI system.

Juniper also featured a customer – whose name we cannot share – that is a major fast food chain across the US.  It currently has 10,000 Wi-Fi Access Points with another vendor and recently made the decision to replace them with Mist Wi-Fi 6 APs by the end of 2022.  We found it interesting how important support is for IoT and the increased importance of outdoor Wi-Fi during the pandemic.  The company is deploying four indoor APs and three outdoor APs per restaurant.  The customer spokesperson shared that Mist does AI-based, dynamic radio resource management (RRM) very well and he shared numerous screenshots showing power levels that were kept around 11-13 dBm instead of values he recalls seeing closer to 20 on the existing infrastructure.  At this point, the customer has installed Mist APs in over 50 restaurants and he says he has not had a single Wi-Fi-related trouble ticket from these locations.  He is also looking to implement location services in the future with the company’s vBLE technology.

The company’s cloud-based location analytics capability is designed to serve as a contact tracing and crowd management system to allow Juniper WLAN customers to reduce risks as employees and visitors go to the campus environment.  The company introduced this contact tracing capability in May 2020.  The company said its cloud-based contact tracing service is something that can operate on top of Juniper infrastructure, as well as its competitors.  The company shared details about a large elite US university that is using the service and decided to upgrade to Juniper WLAN infrastructure as well.
​
Our view is that Juniper is well-positioned in the Enterprise market because by year-end it will have an AI-driven, single-pane operations system that covers Wi-Fi, Ethernet Switching, Security and SD-WAN.  This is an enviable position because increasingly customers are making purchasing decisions for various equipment at the same time, and they are looking to reduce ongoing operational costs.  By managing a system with a single-pane, customers can correlate customer experience, application responses and network issues in an integrated system, and pinpoint corrective action.  This is not to say that Juniper has an exclusive on single-pane managed systems covering all these network systems – Cisco, Fortinet and others lay claim in the same.  Juniper is in good company. ​

Alex Choi, SVP, Head of Strategy and Technology Innovation at Deutsche Telekom, presented at Day 2 joint keynote broadcast for ONF's Spotlight event on 5G and open source. He shared several comments about DT’s strategy that we thought were interesting and showed that the German telco is looking to break away from old ways of doing business.

• Open RAN is being used to accomplish two major goals
  • Get smaller vendors into the DT network bids
  • Enable multiple vendors to interoperate, for instance between RRU, CU and DU
  • Break the “monopoly” and “Vendor lock-in” that the larger RAN players have at DT
• Wi-Fi 6 is excellent technology and may compete with cellular, depending on the situation
• Unlicensed and private licenses.  The use of cellular systems on these newly available spectrums is important to DT, and the telco is working closely with German industrial players like Siemens, Bosch, for instance.

These three major trends synchronize with our researching findings and forecasts, as well. 

• For instance, we also presented at the ONF 5G event on the topic of Open Source and Open RAN, and we shared that we expect Open RAN to represent 10-20% of RAN spending in a handful of years.  We shared the results of the August and September 2020 surveys we did of telcos about topics like open source, Open RAN and capex spending plans.  One of the key findings we shared was that telcos who participated in our survey are more bullish about using Open RAN than they were just one year ago, and that, surprisingly, these same telcos are open to using open-source software in their RAN systems in as early as a couple of years from now. 
• In our WLAN-related studies, we expect by next year, over half of enterprise WLAN revenues will be 802.11ax-based. 
• Unlicensed spectrum has been popular mainly for use in communications technology such as Wi-Fi, Bluetooth and other short-range communications systems.  However, like DT, we expect enterprises to use cellular technology at enterprises on new unlicensed, shared and private licensed spectrum.  While DT didn’t spell it out in the presentation, our view is that enterprise cellular has the potential to be deployed in a manner similar to the way Wi-Fi is deployed today, and that could mean telcos may not participate fully in the enterprise opportunity so often cited as a driver to 5G-related growth.
  

Like many companies that sell campus networking gear, Ubiquiti Networks saw a slowdown in 2Q20.  Its Enterprise-related revenues grew only 4% Y/Y and were down 16% Q/Q.  We reviewed the public material from its disclosures this morning, plus as we do during each of the quarters, we are making checks along the way because we assess Ubiquiti’s market share in many of its markets like Ethernet Switching, Enterprise WLAN, Consumer WLAN, routing and security.  

The company experienced production delays in the quarter, primarily as a result of its main manufacturing site being located in southern China.  It has established subcontract manufacturing relationships recently where parts are made in Vietnam and Taiwan.  The company has been penalized with tariffs because many of its products are made in China, so it has an incentive to get out of the PRC.  Its facility lease in China ends in a year, and we expect that Ubiquiti will begin using subcontract manufacturing outside of China increasingly.  

Inventory and purchase obligations are at a record high.  At the end of 1Q20, inventories had dropped, probably because of shutdowns in China, but inventories grew nearly 40% Q/Q in 2Q20.  We believe that the company is expecting revenue growth in the future, based on its high inventory and purchase obligations.   

The company attributes its growth to the expansion of distribution channels and expansion of its product line.  Since the pandemic shutdowns hit, it appears that the company has not grown its distributor count appreciably.  In previous quarters, it had grown its reseller and distributor counts, fueling growth.  Coincident with the company’s supply chain difficulties, we have noticed that the company is having trouble getting important new products to volume.  For instance, its Amplifi Alien 802.11ax product, while introduced months ago, is unavailable for purchase.  We have evidence that some volume was available during 2Q20, though.  We see this type of difficulty getting products to volume as related to the sequential growth challenges the company experienced.  But, the company has record purchase obligations, so we think it is just a matter of time before it has 802.11ax consumer – and enterprise-class – WLAN products in the market.  Our hunch is that by 2H20, the company will have 802.11ax enterprise WLAN products in the market.

Speaking of WLAN, since Ubiquiti is selling primarily 802.11ac products at a time when the market is moving towards the newer generation 802.11ax, this is effectively shrinking Ubiquiti’s addressable market as about 1/3rd of enterprise Access Point revenue is related to 802.11ax.  Additionally, the company has significant exposure to smaller customers, which are being hurt more during the shutdowns than larger ones.

Ubiquiti has been a share-taker in the enterprise WLAN market for many years.  But, with the short-term challenges it is experiencing (supply chain, distribution, older product portfolio, customer exposure), its share-taking ended in 2Q20.  It looks like the company is taking steps to address the supply chain and product refreshes.  However, its exposure to smaller customers and its challenges in expanding distribution are more difficult to fix during the pandemic.

Commscope expects 6 GHz 802.11ax products to be shown at the CES show in January 2020 and that FEM and filters are not available today but will be by year-end or early 2020.

Newracomm is an 802.11ah (900 MHz WiFi) chip company that had won an award at the show. It claims to be an early leader in the market and based on comments made during presentations, we expect by 2H20, we will see systems and IoT services based on these types of chips.

Celeno, a stand-alone WiFi chip company, demonstrated radar on WiFi chip capability - the company won multiple award at the show. The company expects that a year from now, its Doppler on WiFi will emerge in products from SPs such as BT, Orange, and Comcast. The Doppler service only consumes about 3-5% of throughput capability when using Doppler and enables some very interesting capabilities such as fall detection, proximity detection, people counting and arm gestures.

We attended the Qualcomm Wi-Fi 6 event held in San Francisco today. Representatives from partner companies who attended included HPE Aruba, Cisco, Commscope, Boingo, Netgear, Rivet Networks, AMD, and Microsoft. The principal announcement at the event was that Qualcomm announced its Networking Pro Series Platforms which are focused on Wi-Fi 6 capabilities, semiconductor systems which are in initial stages of availability and expected to be available on systems in coming months and quarters. The new Networking Pro Series chip systems hit four price points generally segmented by the number of antennas (more at the higher end) and are primarily targeted to the enterprise market, though we learned that some of the high-end consumer ("prosumer") vendors plan to use these chips as well. The new Networking Pro products have unique features compared to previous Wi-Fi 6 chips introduced from Qualcomm, including upstream MU-MIMO and upstream OFDMA and the design claim is that these can support 1,500 simultaneous users both upstream and downstream.

In the past, it could be said that Wi-Fi and cellular compete in some markets. We found it interesting that Qualcomm said that it expects that Wi-Fi 6 mesh products will be the way to get 5G millimeter-wave signals indoors. Several Qualcomm executives echoed the message that Wi-Fi and cellular are complementary, even though many Qualcomm service provider and cellular equipment partners do not subscribe to this point of view.

Qualcomm shared some impressive numbers. It ships approximately 1B Wi-Fi device chips per year at a run-rate; it has shipped over 4B Wi-Fi chips since 2015; and by comparison, had shipped 1/2B chips by 2010. It has shipped Wi-Fi chips with MU-MIMO capabilities to a total of 0.75B client devices. Qualcomm claims it has found that Target Wait Time (TWT) can improve cell phone battery life by as much as 60%.

HPE Aruba President, Keerti Melkote, presented and shared with the audience that it had won the Wi-Fi project to the nearby Chase Center, where the NBA's Warriors play and that it should operating soon. Additionally, Melkote emphasized that Aruba had recently begun shipping its price-competitive Instant ON product and the take-up has been strong. Cisco SVP Engineering, Anand Oswal, primarily discussed Cisco's Open Roaming initiative that focuses on seamless and secure public Wi-Fi onboarding. It was interesting that Cisco did not focus its comments on Wi-Fi 6. Morgan Kurk, CTO Commscope and acting President of Ruckus Networks spoke about the benefits of Wi-Fi 6 to venues, primary and secondary educational institutions, including AR & VR, 1:1 and online assessment use cases. Derek Peterson, CTO Boingo, a Wi-Fi/cellular venue services provider shared that it is now serving 1B consumers per year. Its goal is to get 100 MHz to each user, and that it will reach this goal by using all available spectrum, licensed and unlicensed. Peterson also shared its observations of the benefits from using Wi-Fi 6 at its trial that began in April of 2019 at the John Wayne Airport in Irvine, CA. Morgan Teachworth, Head of Hardware Platforms of Cisco Meraki, shared observations of several events it has been involved with, including the US Open Pebble Beach 2019 event, where, to its surprise, upload traffic exceeded downlink traffic. David Henry, SVP Connected Home Products from Netgear, hinted that it plans to introduce its Wi-Fi 6 mesh product, saying wait for details next week. We also learned that Netgear would leverage the highest end Qualcomm Network Pro chips intended for enterprise-class devices. 

VK Jones, VP of Technology, Qualcomm Atheros, spoke about future products and standards work. He said by 2020, we should expect 6 GHz, and, by 2022, 802.11ax Release 2 features including scheduling and spatial re-use to improve old device capabilities. 6 GHz requires a third-party service provider to coordinate what frequencies each access point uses.

On August 8, 2019, publicly-traded Cambium announced that it had completed the acquisition of the Xirrus products and cloud services from privately-held Riverbed Technology, Inc.  Xirrus has been a vendor in the Enterprise WLAN market for a while now and has been associated with its high-performance enterprise-class WLAN products as well as its cloud-managed services.  In our research, we find Xirrus has done well in the large venues, the education, government, and retail markets.

We interviewed the team at Cambium today and learned that the company is committed to using channels as a distribution strategy for the combined portfolio.  Additionally, the team told us it will be supporting both Cambium WLAN customers as well as Xirrus customers, and that, over time, the products and services will be converged.  We think it makes sense to rationalize the products, which will allow future customers to take advantage of developments made at each of the organizations.  The team explained that Cambium will be focusing primarily on medium and small-sized customers and that it will not be pursuing large enterprises associated with the Fortune 1000, instance.

The timing of Cambium’s acquisition makes sense on several counts.  First, it just completed its Initial Public Offering and is more well-capitalized than when it was a privately-held company. Second, during its IPO, Cambium identified that it expects its exposure to the enterprise market is key to its growth, so getting more exposure here will increase it further.  Third, several other companies have acquired enterprise WLAN vendors, and Cambium is part of this greater trend.  For instance, Arista Networks completed its acquisition of Mojo Networks in late 2018 and Juniper Networks closed its acquisition of Mist Systems at the end of 1Q19.
​

Extreme Networks announced plans to acquire Aerohive, which has most of its revenues in Enterprise WLAN.  The deal was a surprise, as evidenced by the 40% price premium paid on on HIVE.  After this deal closes, Extreme's WLAN business will be the combination of three WLAN businesses - the traditional WLAN business from Enterasys (Ottawa based team), the Motorola Wireless WLAN business (acquired by Zebra, then sold to Extreme) and Aerohive.  Each of these three businesses had strengths, for instance, the Ottawa team had designed a product line that had high performance in crowded venues - Extreme has enjoyed a long relationship with the NFV; the Motorola team had designed systems that were effective in retail and logistics (as a consequence of Motorola's ownership of Symbol Tech, a bar code scanner company); and Aerohive, which was as of 1Q19 the #2 revenue player in cloud-managed WLAN services and with a strong presence in the US K-12 vertical.  While there is certainly some risk that Extreme does not integrate the Aerohive business effectively, there are some interesting aspects to this deal.
#1: Aerohive's cloud-managed WLAN services is a significant player in the market.  We expect many small and medium businesses will adopt cloud-managed WLAN, and Extreme had a less mature offering here.  We see this as the primary benefit of the Aerohive acquisition.
#2: Aerohive's vertical market exposure in US K-12 (education) market and the managed care part of the health care industry are a nice addition to Extreme.  These markets are additive.
#3: Aerohive had a SD-WAN product that while not a big revenue generator will be important for Extreme in selling to small and medium sized businesses.  We expect the SMEs and branch offices will be upgrading using a SD-Branch approach, where upgrades to WLAN, switching and SD-WAN will be done at once.  Extreme had a hole here and Aerohive fills it.
#4: Aerohive had a new product, A3, which we categorized as Enhanced Network Access Control.  The front end of this product is very modern.  Extreme also had its own NAC product.  Our hunch is the company will merge the two, taking the best of both.  We see larger enterprises as demanding this type of support.  HPE Aruba sells its Clearpass product in a wireless+wired+ENAC bundle to larger sized business, just as Cisco sells its ISE and wireless+wired bundle.  
#5: Aerohive has 802.11ax products.  We expect that increasingly, as customers adopt 802.11ax, with its expected throughput under high loads exceeding 1 Gb/sec, this will drive an upgrade cycle to switches with MultiGigabit support.  Extreme cited "cross selling" in its announcement of this deal, and we agree that customers in the 802.11ax world will be increasingly buying new switches when they adopt new wireless.

This deal was a surprise because Extreme already has WLAN in its portfolio, but if Extreme executes on this business transaction effectively, it can solidify its position in the mid-market by offering cloud services and SD-WAN (through a SD-Branch bundle) and potentially move both up market (with ENAC) and if it choses, downmarket by maintaining a business practice that Aerohive rolled out well over a year ago that can be described as a "freemium" model for its cloud-managed WLAN services.