Earnings reports

Juniper Sees Second-Half Optimism

Juniper Networks today reported a downturn in revenue, based in part on weak spending by North American service providers, but still managed to beat analyst expectations. The vendor offered a brighter view of the second half of 2015 and saw its stock lifted in trading afterward. (See Juniper Q1 Sales, Profits Exceed Expectations.)

Juniper Networks Inc. (NYSE: JNPR) reported significant reductions in operating expenses as well, as it cut jobs and costs as part of the restructuring launched under new CEO Rami Rahim. That along with good results with non-telco segments in the US such as cable and cloud service providers, and with service providers in EMEA and APAC, lead Rahim to call this "a solid start" to 2015. (See New Juniper CEO Can Be Thankful for $14.5M.)

The router maker's net revenues were down 9% over the first quarter of 2014 and 3% sequentially, but its operating margins increased to 12.3%. Revenue for the quarter ending in March fell 9%, year-over-year, to $1.07 billion, higher than the analysts' estimates of $1.045 billion, and earnings per share were 32 cents, compared to the expected 31 cents.

Both Rahim and CFO/COO Robyn Denholm said they expect business to pick up with North American Tier 1 service providers in the second half, but they also stressed the diversification of Juniper's customer base, to include cloud SPs, cable companies, large enterprises and government units. Denholm says that of Juniper's top 10 customers, four are either cable or cloud SPs, three are carriers outside North America and one was a large enterprise.

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As for the Tier 1 carriers in North America, Rahim said Juniper "remains very close to all of our service provider customers, including those in North America and we have good visibility into projects we are working on together and good visibility into the trends that are happening. Based on that we are pretty confident we will see an improvement in spending and demand in the second half of this year."

Denholm said that improvement would exceed the results not only from the first half of 2015 but the last half of 2014 as well.

Both Rahim and Denholm downplayed the impact of Nokia Networks 's announced acquisition of Alcatel-Lucent (NYSE: ALU), which pairs one of Juniper's major partners (Nokia) with one of its major router competitors. (See Nokia & Alcatel-Lucent: What's Going On?)

Denholm stated and Rahim reiterated that while distribution through partners is a core part of Juniper's sales strategy, the vendor maintains its own direct relationships with the companies that use its products regardless of how they purchase them and also has a diverse partner ecosystem.

Pointing to the rollout of multiple major new products in the first quarter including a new core router and new switches for the network and the data center, Rahim said Juniper will continue to be focused on innovation in the IP space. (See Juniper Doubles Down on Custom Silicon, Juniper Rolls Out New Data Center Cloud Spine Switches, Juniper Unveils Core Routing Platform and Small Cell Backhaul Ready for Big Growth, Heavy Reading Finds.)

"We are confident we will be well-positioned to take routing market share" once its new router and its SDN controller are "at full ramp," the CEO said.

Rahim admitted there is "still some work to do" to bring Juniper's network security business back to growth status. The company took an $850 million charge as part of a major restructuring that more tightly focuses the unit on network security.

— Carol Wilson, Editor-at-Large, Light Reading

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