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Juniper Q1: Cloud Rises, Security Sags

Craig Matsumoto
4/25/2017

Contributions from the cloud vertical helped Juniper turn in an upbeat first-quarter report, but the company's security business -- pegged for a turnaround this year -- continues to lag.

Juniper Networks Inc. (NYSE: JNPR) divides its business into three major pieces: telecom and cable, the cloud and enterprise. The relatively new divisions help highlight the strength of the company's cloud business, which brought in $331.6 million in the first quarter, up 25 percent from $264.8 million last year.

Table 1: Juniper's Q1 in Segments

Vertical
Segment
Q1 Revenues ($M) Y/Y Growth
Cloud 331.6 25%
Telecom & Cable 568.5 10%
Strategic Enterprise 320.9 2%
TOTAL 1,221.0 11%
Source: Juniper

In addition to those three business segments, Juniper is still reporting growth numbers for major product categories.

The switching business was the star in the first quarter, growing 38% year-over-year to $242 million, driven mostly by the cloud. In fact, cloud business was strong enough to overcome telecom and cable, where switching sales were down compared with last year (Juniper didn't specify the amount).

Growth in switching and in the cloud business was seeded by Juniper's ongoing focus on the data center, "which certainly applies to the large cloud providers but also to our other verticals," CEO Rami Rahim said.

He also stressed that router and switch sales remain unpredictable, as they're driven by big projects at large customers. Juniper's cloud business grew every quarter last year, but Rahim said it was too hard to predict whether that pattern could continue.

Routing remains Juniper's bread and butter, at about 43% of revenues. That business grew 3% year-over-year, driven by telecom and cable and sales of the PTX systems.

Security remains a question mark for Juniper. All last year, Rahim predicted the company's product refresh would kick into gear in 2017, but the first quarter didn't show signs of it. Security revenues shrank to $65.7 million, down from $73.4 million a year ago.

Rahim stressed that he's happy with the sales of Juniper's newer security products. "It's just not fast enough to offset the decline in some of the older products. Eventually, I think the math starts to work in our favor," he said. "I expect in the second half of the year, we can get them to grow."

That appears to be in line with analysts' expectations. "We do not model a return to y/y growth until later in 2017," analyst Simon Leopold of Raymond James wrote in a January research note.

Overall, Juniper reported first-quarter revenues of $1.22 billion, up from 1.1 billion in the same quarter a year ago. Net income was $108.8 million, compared with $91.4 million a year ago.

Non-GAAP net income of 46 cents per diluted share beat analysts' expectations of 42 cents, according to Thomson Financial.

For its second quarter, ending in June, Juniper is predicting revenues of $1.25 billion to $1.31 billion; the midpoint would represent growth of 5% compared with the same quarter last year.

Juniper shares were up 3% at $28.70 in after-hours trading.

ó Craig Matsumoto, Editor-in-Chief, Light Reading

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