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Optical/IP

Juniper Crushes Estimates in Q4

Juniper Networks Inc. (Nasdaq: JNPR) blew away analyst expectations by as much as 30 percent when it reported fourth quarter and year-end results after the market closed today.

The company reported that fourth-quarter revenue rose 47 percent from the third quarter, to $295.4 million. Pro forma net income was $84.6 million, or 24 cents per share, a 40 percent increase over the $60.3 million, or 17 cents per share, reported in the third quarter.

Although the company didn’t beat the whisper number of $300 million in revenue, the news sent the company's stock up 8 percent to $139.5 per share in after hours. The stock was down slightly during regular trading hours.

“This is the biggest revenue ramp in a single quarter,” says Gina Sockolow, an analyst with Brean Murray & Co. Inc.. “It’s very good news for them.”

This surpassed by six cents per share expectations of analysts surveyed by First Call/Thomson Financial, which put the fourth quarter forecast at 18 cents a share.

Juniper’s successful quarter is no big surprise. Wall Street has been watching the company eat into arch routing rival Cisco Systems Inc.'s (Nasdaq: CSCO) market share for the past several months, most recently raising its percentage from 22 percent to 29 percent (see Juniper Eats Into Cisco's Lunch).

This was the first quarter that the company realized revenue from its low-end M5 and M10 metro routers. Even though the company doesn’t break out individual contributions from individual products, it can be deduced from the figures given that these smaller devices, which were sold in high volumes almost fully loaded, contributed significantly to the company’s bottom line, says Sockolow.

And while the average selling price on each unit was down 17 percent and the selling price on ports was down 25 percent, gross margins were up. Sockolow says this means that the company was selling higher-margin OC48 and OC192 interfaces into existing accounts, another good sign.

In light of such good news, the company raised its revenue expectations for the year to $1.5-$1.6 billion, from $1.3-$1.4 billion. Still, Scott Kriens, the company’s chairman and CEO, tried to temper enthusiasm, telling analysts on the conference call that the company is cautious about its visibility going forward -- but not too cautious, noting that the company wouldn’t be raising expectations if it weren’t confident about the future.

“The strong top-line performance provides additional support for our thesis that service providers are likely to continue investing in next-generation equipment even in this challenging macro environment,” writes Alex Henderson, an analyst with Salomon Smith Barney in a note he issued to investors during the company’s conference call. “It also reinforces that the core router market, as the network bottleneck, remains very insulated from both macro trends and Service Provider cap trends.”

The company also had its largest staffing increase in any given quarter, adding 229 new employees, ratcheting the total headcount to 927. And it expects to double that number again by the end of next year.

The big question now is whether or not Juniper will continue to grow at this pace. Henderson says he is cautious about a possible slowdown in the second quarter of 2001 as a result of Cisco beginning to sell its OC192 interfaces. And Cisco gearing up for a fight could mean trouble for Juniper (see Chambers: Cisco's Ready to Brawl)

”The second quarter of 2001 could be their most vulnerable quarter,” Henderson says. “This is going to be maximum attack time for Cisco.”

But Kriens said the company plans to stay a year ahead of its competitors in terms of technology. The company is already working on OC768 -- 40 Gbit/s -- interfaces, but Kriens said that there are still obstacles to be overcome regarding the technology, and he made no promises as to when to expect these line cards.

Some in the industry have speculated that the company will be deploying a bigger router in beta sites later this spring, which could also slow revenue growth as customers wait for the new model to be commercially available.

“The same thing happened when the M160 was about to come out,” says Henderson. “Carriers waited and deferred their orders until the new box was ready. And then revenue really ramped in the next two quarters. I would expect the same thing here.”

On the call with analysts, Kriens didn’t seem worried about new competition, saying he expected the market to continue to be a two-horse race. And he didn’t seem too worried about Cisco’s new, feisty, aggressive attitude. He emphasized what has become his mantra: Juniper is focused on execution, and that is what will make them successful.

“One of the most common misconceptions is that Juniper is a second-source company,” he said. “That isn’t the case. The only way service providers would change their infrastructure is if they could get something from a new company that they can’t get from their current supplier. We brought things to market that someone else couldn’t.”

-- Marguerite Reardon, senior editor, Light Reading, http://www.lightreading.com

Marguerite Reardon 12/4/2012 | 9:00:44 PM
re: Juniper Crushes Estimates in Q4 Can Juniper continue its phenomenal growth? Has anyone heard about a new bigger box coming out this spring?
Techboy 12/4/2012 | 9:00:41 PM
re: Juniper Crushes Estimates in Q4 Juniper is building better boxes than Cisco. It is that simple. I think as time goes on you will see Cisco lose more and more market share to Juniper. The Core router market is where the ISP dollars are focused and that is Junipers strong point.
Welsh Boy 12/4/2012 | 9:00:41 PM
re: Juniper Crushes Estimates in Q4 What about the Ironbridge router? That is supposed to be twenty times faster.
Avidi 12/4/2012 | 9:00:40 PM
re: Juniper Crushes Estimates in Q4 The Aranea-1 from Charlottes's Networks sounds better and faster than the m5, m10, m20, m40, m160 and m???.

E.g. ports per chassis

M160 = 8 OC192c
Aranea-1 = 16 OC192c

Also

Aranea-1 = 128 GigE per Chassis
M160 = 8

Aranea-1 = 64 OC48 Per chassis
M160 = 8

Aranea-1 = 384 DS3 per chassis
M160 = 128

etc, etc...

Chambers has alot more to worry abount than Juniper it would seem and vica verca Criens.

P.s. Welsh Boy,My understanding is that the Ironbridge.com domain name will be up for sale soon ?
lu_csco_nt 12/4/2012 | 9:00:38 PM
re: Juniper Crushes Estimates in Q4 Wow. Impressive. Yes, John Chambers should worry about this. Juniper is catching up.

But then again...Cisco crushed Lucent. AT&T does more business with Cisco than Lucent now. Thats gotta hurt.
Techboy 12/4/2012 | 9:00:34 PM
re: Juniper Crushes Estimates in Q4 I think Juniper will be back into the 200s by end of 2nd quarter beginning of 3rd. In addition to the CORE boxes they have, they are a step ahead in the multiplexing department and will more than likely be at the front of the pack for people building and selling the OC768 Aggregator Boxes.
Welsh Boy 12/4/2012 | 9:00:34 PM
re: Juniper Crushes Estimates in Q4 what do you think it will cost
rustybridge 12/4/2012 | 9:00:26 PM
re: Juniper Crushes Estimates in Q4 The grapevine is saying that Ironbridge can make payroll in January, but not February... They've alienated the vc community... no bridge loans are to be had... the only option left is for them to be bought... be bought fast, and be bought by a daddy warbucks that can cope with the ferocious burn rate...

Don't know the truth... but it looks grim over there.

-al
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