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Optical/IP

Juniper Cruises Through Q1

Juniper Networks Inc. (NYSE: JNPR) delivered as expected in its first quarter, although some questions still linger as the company enters what's expected to be a growth year.

It's an interesting time for the company, because Juniper is finally reporting full earnings statements again after dealing with some issues around stock options back-dating. Meanwhile, another handful of top executives have left, reopening questions about the executive turnover Juniper has seen in the past few years. (See Juniper Catches Up, Writes Down and Will Juniper Be Burned by the Churn?)

For its first quarter, ended March 31, Juniper reported net income of $66.6 million, or 11 cents per share, on revenues of $626.9 million, compared with net income of $71 million, or 12 cents per share, on revenues of $595.8 million the previous quarter. (See Juniper Reports Q1.)

For its first quarter a year ago, Juniper reported net income of $75.8 million, or 13 cents per share, on revenues of $566.7 million.

Juniper's non-GAAP net income of 19 cents per share matched analyst expectations as tallied by Reuters Research .

On a conference call with analysts today, Kriens said Juniper shipped more than 200 units of its core routers, the T-series and TX, during the first quarter. Juniper also got its first smattering of revenues from the MX960, an Ethernet platform that covers a hole in the company's product offerings, particularly when it comes to IPTV and similar services. (See Juniper Antes Up on Ethernet (Finally).)

"In aggregate, the market that we participated in grew faster than we did last year," Kriens said. "We have the additional opportunity to participate, with our MX products, in a segment we were not nearly as active in, in 2006."

Analysts on the call pointed out some other touchy spots though. Nikos Theodosopoulos of UBS Investment Bank noted Juniper is losing money on its Service Layer Technologies (SLT) business, which consists mainly of the NetScreen acquisition and is a key part of Juniper's ambitions in the enterprise. For calendar 2006, the SLT group reported operating losses of $12.8 million on revenues of $479.9 million.

Kriens noted that Juniper sells routers to the enterprise, too, so a bad number from SLT isn't an indictment of the entire enterprise business. Still, he admitted that "there is a gap in the contribution from the enterprise business relative to that of the service provider business." Kriens hinted that Juniper expects the SLT group to get back to profitability this year.

The first quarter saw Juniper finally cash in on $50 million in revenues from Verizon Communications Inc. (NYSE: VZ). Those revenues were deferred a year ago –- apparently for esoteric bookkeeping reasons, as the products had already been received on Verizon's end. That amount was originally supposed to be $25 million to $35 million, but it grew to $40 million with Juniper's fourth-quarter earnings, and it's now apparently up to $50 million. (See Juniper Defends Core Business in Q1 and Juniper Talks Up 2007.)

That $50 million will make for some screwy numbers. Verizon represented more than 15 percent of Juniper's revenues in the first quarter, something that's not likely to happen again. And Kriens noted Juniper will probably get a market-share boost from analyst firms that track vendor revenues.

Juniper's forecasts for its second quarter -– revenues of $640 million to $650 million, and earnings of 20 cents a share –- were on par with Wall Street expectations.

Juniper stock was down $0.95 (4.5%) at $20.16 in after-hours trading on Monday.

— Craig Matsumoto, West Coast Editor, Light Reading

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packet1010 12/5/2012 | 3:09:53 PM
re: Juniper Cruises Through Q1 Juniper's Enterprise business is a disjointed group of products that have no real apparent direction. The biggest thing to hit the Enterprise is VoIP and the migration to PoE. By Juniper not being involved in those discussions is hurting their penetration into large enterprises.

Juniper needs to figure out what their strategy is with this product category. I just saw a presentation on the new XOS gear from Extreme and I am VERY impressed and from what I can tell Juniper could pick them up and have virtually no overlap in products.

Anyone out there know of Juniper's Enterprise strategy or here's a better question... does Juniper even have an Enterprise strategy???
lightreceding 12/5/2012 | 3:09:53 PM
re: Juniper Cruises Through Q1 This story paints a nice picture. The earnings looked good if you just ignore a few things.

They spent millions on one time charges due to the stock options fraud investigation.

They recognised accrued revenue from Verizon so they had a big one time bump.

The enterprise business unit is not even profitable. As usual Kriens does not say how he expects the SLT group to get profitable.

Juniper is underperforming the market. They are losing ground to Cisco. They have not increased revenue from their acquisitions and those products have lost market share under Juniper "leadership". I wonder if Juniper will just kill a few products like they have done in the past to cut costs.

All the while Kriens is making big bank for his lack of leadership.

According to other articles

-----

First-quarter net income fell 12 percent to $66.6 million, or 11 cents a share, from $75.8 million, or 13 cents a share, a year earlier, as the company booked charges related to a stock options investigation. Excluding one-time items, earnings were $112.4 million, or 19 cents per share.

In 2006, Juniper posted a net loss of $1 billion, down from a profit of $350.7 million in 2005. Results included $1.28 billion in asset impairment charges, $87.6 million in stock-based compensation expenses, and $20.5 million in stock option investigation expenses.

In addition, Juniper said the CEO recognized $5.27 million in option awards and $182,482 in stock awards.

In other compensation, he got $2.54 million, including $401, 400 in reimbursements for use of his aircraft for business purposes.

laser_focus 12/5/2012 | 3:09:52 PM
re: Juniper Cruises Through Q1 The enterprise strategy is to try to have as complete a product portfolio as possible, from cheap, low-margin stuff to expensive, high-margin stuff, so that you can win business from those customers that want to buy from a vendor that can offer a complete, integrated "solution". That's really it.

Cisco did it, but can Juniper do it?
lightreceding 12/5/2012 | 3:09:51 PM
re: Juniper Cruises Through Q1 Juniper really doesn't have an Enterprise strategy in terms of a complete portfolio. They are a little bit late with a little bit less. They are rumored to have Enterprise switching coming next year, however it is expected to be what Cisco already has. It won't be next generation like Consentry. They won't even have application delivery blades like Cisco already has for the Cat 6500 and who knows what Cisco will have next year since they are not sitting sill. Juniper isn't even rumored to have a storage play beyond loose partnerships with EMC and Brocade. They have nothing going in the application space beyond a partnership with Avaya. In the mean time Cisco is all about enabling the delivery of applications.

What Juniper does is talk about how they are not Cisco and are a viable number 2 choice and how they are standards based, as if Cisco is not, and how they do the hard stuff, as if any of it is easy, and how companies should standardise on JUNOS, which has almost no Enterprise penetration, as if the CIO cares, and as if IOS isn't out there everywhere.

Juniper's story is broken. Juniper is weak in the application delivery space with Peribit and Redline which are falling further behind and their security products from Netscreen are becoming commodities. They are busy trying to combine ScreenOS and JUNOS and put the Peribit and Redline and other products on Linux so that they don't have so many operating systems to support.

If it weren't for the core router legacy Juniper would already be out of business.
lightreceding 12/5/2012 | 3:09:51 PM
re: Juniper Cruises Through Q1 andropat or whatever that name is,

I present facts, while you give opinions and throwing out a phrase used by the PC crowd to censor dissent.

It wasn't Kriens who created the core router or had the vision. It was Pradeep Sindu.

Kriens was brought in to run the business based on his position at Stratacom after it was bought by Cisco. He let the business languish and finally brought in a COO to fix the mess.

What ever current workable strategy Juniper has is coming from Spenser Greene and the strategy group and Kriens is a source of indecision. Just listen to Kriens talk some time and then listen to Pradeep or Spenser if you ever get the chance. The difference is remarkable. Pradeep can give precise examples of where technology is going and Spenser can give details of how to execute while Kriens is all about maybe this and maybe that, but if we do something we might make some money.

As far as doing it themselves they have made many acquistions and killed all but three. They started making switches and then stopped. They looked at making and acquisition and then didn't. Now they are rumored to be making a switch but they are way late.

Kriens has hundreds of millions and doesn't know when to go home. It is a travesty that he makes millions more while the company has a billion dollar write off and spend 20 million on an investigation and while products lose market share.

Of course Cisco puts IOS on everything. That is what they have.

Okay, I won't be a hater. I won't call Kriens names, I'll just state the facts.
andropat 12/5/2012 | 3:09:51 PM
re: Juniper Cruises Through Q1 lightreceding or whatever that name is,

You are such a Juniper hater! Kriens is worth 100s of millions so forget about Kriens. I am impressed he is still even with the company. Give some credit at least. And when you look at his salary it pales in comparison to other CEOs assuming similar workloads and responsibilities. He created a viable number 2 company besides Cisco in core routing. You lose credibility by bashing him.

Also, talk about a pot calling the kettle black! you are bashing Juniper for trying to JUNOS everything? What does Cisco do with everything they buy? They throw old monolithic IOS onto everything! At least Juniper tries to get things to an "all IP focused" OS that has proven it's stability.

As far as Enterprise strategy I too agree. But I would rather own ISP cores and work down than vice versa. And they are trying to do a lot of it themselves instead of just going out and buying Extreme.

Don't be a hater :-)
Pete Baldwin 12/5/2012 | 3:09:49 PM
re: Juniper Cruises Through Q1 andropat mentions:
>And they are trying to do a lot of it themselves instead of just going out and buying Extreme.

In hindsight, should they have just gone and bought Extreme? Or would that create even more headaches, as they tried to merge the NetScreen and Extreme products?
packet1010 12/5/2012 | 3:09:48 PM
re: Juniper Cruises Through Q1 Irregardless of whether it would create more of a mess or not, Juniper needs to figure out that piece and figure it out quickly. Personally I wouldn't buy their 1st gen switch and to be honest how long would it take to reach feature parity of EXTR, FDRY or CSCO. Somebody at Juniper needs to realize what the table stakes are to play and it is not selling segmented and nearly commoditized products, (ie. firewalls and small "me too" errr "Pepsi" routers). They need a solution to bring to the table... if not I don't see much future for them in the enterprise space.
vferrari 12/5/2012 | 3:09:48 PM
re: Juniper Cruises Through Q1 The issue is integration and customer sat. If they acquired extreme, or any other switch vendor, then there would be another OS to maintain. If they converted to JUNOS they'd upset the acquired customer base with either 1) the conversion or 2) the stranding of the product.

This way they don't strand customers, build themselves, and maintain that 'JUNOS advantage' message that seems to be key to the long term strategy.

While I agree that it's late in the game with ethernet, I think it's a market where it's better late than never. They needed to fill the gap in the product mix and now they are doing it while keeping JUNOS front and center on the key products.
vferrari 12/5/2012 | 3:09:47 PM
re: Juniper Cruises Through Q1 Cart before the horse. Can't have the 'solution' without the product mix to fill in the parts to the solution. Unless you want to fill the gaps with partner products which doesn't fly when competed against the end to end 'Cisco powered network'.
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