Juniper Crushes Estimates in Q4
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