Juniper remains dark horse: Start-up gets financial support for product still under wraps

As technology has boomed over the last two decades, so has up-front investment in unproven companies and products.

Such investments are typically made by venture capitalists-companies willing to gamble that new technologies and products will turn into cash cows with the right financial backing and management.

Juniper Networks, founded in February 1996, got its initial funding from venture capitalists. But in the last five months it has also drawn more than $40 million from major names in the telecommunications industry-despite the fact that it won't introduce a product until sometime early next year.

Juniper has thus far kept very quiet about exactly what form its core product will take. The company has gone only so far as to say that it will address the Internet-backbone issues of bottlenecks and traffic flow. Of course, Juniper has shown its hand to the companies that are investors, but those who haven't anted up won't see all of Juniper's cards until the company is ready to put a product on the market.

Scott Kriens, Juniper's chairman and chief executive, said the company's low-profile approach thus far is aimed at keeping the company's focus on development until it actually has something to show for its efforts.

"The industry is so cluttered with people who get some money and put together a presentation and run around telling the world what they're going to have," Kriens said. "Network operators gain no value from promises. Promises don't move packets."

Kriens would only describe the company's product as a mix of the best elements of current switches and routers.

But Juniper apparently has something to offer. In August, it received a $40 million shot in the arm from a group of companies. And earlier this month, Qwest invested $2.5 million and AT&T ventures bought in for an undisclosed amount.

Investor companies haven't had much to say about Juniper, other than they're trying to keep pace with the industry and Juniper's technology looks promising.

But Juniper, whose roster of executives includes alumni of companies such as Bay Networks, Cisco Systems, Silicon Graphics, StrataCom, Sun Microsystems, 3Com and Xerox, is widely perceived as a threat to Cisco Systems' hold on the data switching market.

The interest on the part of the big switch vendors has a direct correlation to Cisco, according to Hilary Mine, senior vice president for Cedar Knolls, N.J.-based Probe Research. She pointed out that while Cisco's revenue has yet to hit $10 billion for a single year, its market valuation is about $55 billion.

"That tells you that Wall Street believes that where the future is is Cisco's market," Mine said. "Everyone knows that circuit switches are going away. If you're Lucent, Nortel, Ericsson, Siemens or Alcatel, you've got to get into data networking."

Mine added that the big players aren't just betting on Juniper, however. Their strategies for data networking include asynchronous transfer mode. And although other companies have the same target market as Juniper, none is attracting the same telecom backing, perhaps because they haven't offered such opportunities for others to buy in.

Juniper's telecom backers are indeed an indication of a different fundraising strategy, said Rosemary Cochran, principal at Vertical Systems Group in Dedham, Mass. While Juniper may indeed challenge Cisco and help its investment partners do so as well, it will have to make do with initial products that don't match what Cisco already has, she said. But if her assessment is correct, Juniper's investors believe it will indeed beat Cisco to the punch in certain areas.

"If you went around telling people you're going to make a router that will kill Cisco, I don't think you'd get very much money from venture capitalists," she said.