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Juniper Defends Core Business in Q1

Continually needled about its status in the market, Juniper Networks Inc. (NYSE: JNPR) put up a bit of a fight yesterday during its quarterly earnings call.

But the feisty words from CEO Scott Kriens might have been lost under the shadow of an accounting glitch. Juniper said it will delay the recording of $25 million to $35 million in revenues from Verizon Communications Inc. (NYSE: VZ), causing June-quarter revenues to come up short: $560 million to $570 million, compared with the $587 million expected by analysts.

The results sent Juniper stock down 96 cents (4.7%) to $19.34 in after-hours trading.

More about that later. The bulk of Kriens's prepared remarks dealt with the barrage of questions Juniper has faced lately. Investors have gotten frustrated with the stock's lackluster performance -- it's down from a 52-week high of $27.65 -- and many observers think some industry trends spell trouble for the company. (See Juniper Looks Beyond IPTV.)

One subject Kriens pretty much had to address was the pending merger of Alcatel (NYSE: ALA; Paris: CGEP:PA) and Lucent Technologies Inc. (NYSE: LU). (See Alcatel, Lucent Seal Deal.) Lucent resells Juniper routers, and there's concern that Alcatel would favor its own edge routers over Juniper's, siphoning away some potential Juniper revenues.

Similar concerns have sprung up around Juniper's reseller agreement with Siemens AG (NYSE: SI; Frankfurt: SIE). (See Juniper Faces Possible Siemens Shift.)

Kriens tried to emphasize that Juniper should continue to see strong demand regardless of how the Alcatel/Lucent deal plays out.

"The easiest way to stay clear about the dynamics of the market is to remember these are changes in ownership structure and not changes in market requirements," he said. Kriens later added that he would expect Alcatel, as a systems integrator, to pick "best-of-breed" equipment (Kriens often uses that phrase to describe Juniper's own gear).

Lucent, meanwhile, represented more than 10 percent of Juniper's revenues for the first quarter, which ended March 31. The amount was unusually large this time due to a large shipment to BT Group plc (NYSE: BT; London: BTA) for the 21CN project, Kriens said.

Kriens also appeared to take a potshot at Alcatel's success in edge routers, which in part has happened because Alcatel offers an Ethernet aggregation box, catering to certain IPTV architectures. (See Alcatel Router Revenues Surge.)

His argument was that Juniper remains a solid core-network play, a standing that he said wouldn't be threatened by anything happening in the access or aggregation network. And it's the core-network vendors that are in a position to take over other network sectors, he said.

"No network market has been won from the outside in, and the battlefield is littered with debris from access and hardware companies who have tried," Kriens said.

Without naming Alcatel specifically, Kriens also noted that certain companies are doing well in aggregation, which isn't really the same thing as routing. "Juniper does not have the majority share of this carrier switching market today, and those who do are calling their switches 'routers,' adding to the confusion," he said.

Lately, Juniper has been trying to emphasize success stories involving its T-series core routers and the TX Matrix box for creating multichassis routers. On the conference call, Kriens noted Juniper has won a contract to sell T-series routers to Microsoft Corp. (Nasdaq: MSFT) for the core of the MSN network, and added that the first-quarter revenues include sales of more than 200 units of the T-series and TX.

As for the quarterly numbers: For its first quarter, which ended March 31, Juniper reported net income of $75.8 million, or 13 cents per share, on revenues of $566.7 million, compared with net income of $105.5 million, 17 cents per share, on revenues of $575.5 million for the previous quarter. (See Juniper Posts Q1.)

For its first quarter a year ago, Juniper reported net income of $75.4 million, 13 cents per share, on revenues of $449.1 million.

Juniper's non-GAAP earnings of 19 cents per share matched analyst estimates as tallied by Reuters Research . Revenues were a bit short of the analyst consensus of $571 million.

A more disappointing note was the Verizon shortfall. Juniper will defer those $25 million to $35 million in sales until the first or second quarter of fiscal 2007.

That led analysts to repeatedly ask whether the deferral was included in Juniper's previous forecasts. It sounds like it wasn't: "When we gave our guidance for the first half we did not have any specific thoughts about particular customer deferrals like this," CFO Robert Dykes said on the call.

Juniper wouldn't explain why the deferral was happening, saying only that it had to do with the specific terms for this particular project. Officials also wouldn't say what types of equipment were involved in the Verizon deal. But the sale is done; Kriens stressed that neither the product shipment nor the money due Juniper are in jeopardy.

— Craig Matsumoto, Senior Editor, Light Reading

Pete Baldwin 12/5/2012 | 3:56:42 AM
re: Juniper Defends Core Business in Q1 Stock is down 11% today...

So, if we concede this is a "rebuilding" year for Juniper, where should they be building? Wider distribution is one check box that's been pointed out.

Or, would you prefer to see big bold moves, like that Ethernet box we think is coming out in May?
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