Core Slowdown Hits Juniper

Putting a sudden end to a remarkable period of hypergrowth, Juniper Networks Inc. (Nasdaq: JNPR) today announced it will miss sales targets for the quarter ending June 30 and that it will be laying off approximately 9 percent of its staff to save expenses (see Juniper Reduces Guidance, Headcount).

Juniper expects revenue for the second quarter of 2001 to be approximately $200-$210 million, down from original guidance of $300-$330 million. This forecast represent a sequential decline in revenue from the first-quarter results, which would mark the first time Juniper has reported a sequential decline in growth since going public in 1999.

The company expects to report pro forma earnings per share to be approximately $0.08 to $0.09.

Juniper's stock plunged on the news, ending the day down 8.47 (18.16%) at 38.16.

These numbers are a drastic change from last quarter's results and the relatively upbeat forecast issued by Juniper executives at that time. In the first quarter, Juniper had net revenues of $332.1 million, up 12 percent sequentially from the fourth quarter and 420 percent year to year. Pro forma net income for the quarter was $85.4 million (25 cents per share). On that conference call, Juniper officials stuck to aggressive sales predictions and gave little warning of a possible slowdown -- saying they were on track to pull in $1.2 billion in revenue in 2001 and that the company was "positioned to prosper in these times."

Company officials attributed the shortfall in Q2 to a "challenging service provider and global carrier business environment."

The company will cut costs by reducing headcount approximately 8 to 9 percent, resulting in a one-time charge of up to $45 million. The charge reflects costs associated with the layoffs, as well as the reduction in the value of Juniper's investment portfolio, which includes investments in both private and public companies, many of them other networking firms.

On today’s conference call, management blamed the second-quarter shortfall on carrier overcapacity and a lack of urgency on the part of service providers to buy new equipment. Speculative investment also helped fuel the excess supply situation, which will require several quarters to stabilize. Simply put, there is too much capacity on the market. And until the excess is absorbed, visibility will remain minimal.

The company offered a compelling illustration of the magnitude of the current oversupply situation. Currently, there are about 4,200 service providers and more than 2,000 equipment vendors, yet less than 10 percent of the population has broadband access, and 80 percent of businesses still access the public network at T1 (1.5 Mbit/s) speed or below. This suggests a pervasive need for increased access capabilities, with a focus on the edge of the network and a move away from core network equipment spending.

To capitalize on the shift in carrier spending, Juniper will need to drive its IP routing intelligence to the edge of the network. And it must transfer to the edge its success in core MPLS routing, with the recently introduced M5 and M10 routers.

— R. Scott Raynovich, Executive Editor, and Chris Bulkey, special to Light Reading
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Belzebutt 12/4/2012 | 8:16:56 PM
re: Core Slowdown Hits Juniper Looks like no one is safe anymore. Last quarter it seemed like Juniper and Ciena where some of very few who didn't suffer, but things have changed. Watch for the next Ciena results...
godbox 12/4/2012 | 8:16:55 PM
re: Core Slowdown Hits Juniper Hey guys, whats with the simple and plain
headline ?
We really miss your catchy headlines
and razor sharp witty commentary. Guess its
really hard to repeat the brilliance of
headlines like "Cisco miscoes!!!", divine
inspiration doesn't happen every day.
Oh well :-(
Milano 12/4/2012 | 8:16:54 PM
re: Core Slowdown Hits Juniper What else is new? CIEN is down 5% already. Belzebutt, we need some real HOT TIPS, not old news. Otherwise all of us day traders can go back to our regular job at LU.

samTheFish 12/4/2012 | 8:16:54 PM
re: Core Slowdown Hits Juniper How about "Juniper prunes expected earnings", godbox? Any better suggestions?

Belzebutt 12/4/2012 | 8:16:53 PM
re: Core Slowdown Hits Juniper Sorry about the old news. My usual strategy of "buy low, sell high" doesn't seem to function when everything only goes down. I have to think of another plan.

Any good punchline must contain an annoying alliteration, i.e.:

"Juniper Joyride Jammed"
red1969a 12/4/2012 | 8:16:53 PM
re: Core Slowdown Hits Juniper Any good for a headline?
Me 12/4/2012 | 8:16:52 PM
re: Core Slowdown Hits Juniper ???
cfaller 12/4/2012 | 8:16:52 PM
re: Core Slowdown Hits Juniper I agree. On Juniper's last earnings call, their upbeat forecast raised some eyebrows. Now, gee, what a surprise, the ripple hit Juniper too. Capex reductions don't discriminate too much, and I'm surprised/disappointed that Juniper didn't expect to get hit by this. Ciena is next...
abarbier 12/4/2012 | 8:16:52 PM
re: Core Slowdown Hits Juniper Maybe these guys have also seen increased competition by Cisco who stopped bleeding market share...

Milano 12/4/2012 | 8:16:51 PM
re: Core Slowdown Hits Juniper CIEN -8.8% now. I smell a good opportunity for the end of the day...

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