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Juniper Disappoints in Q4

Juniper Networks Inc. (NYSE: JNPR) disappointed investors with an earnings report that broke the company's streak of beating analyst forecasts; the company also said it would earn less revenue in the first quarter 2006 than in the fourth quarter 2005.

Juniper stock quickly fell $2.12 (9.9%) to $19.40 in after-hours trading during the company's conference call.

For its fourth quarter, ended Dec. 31, Juniper reported profits of $105.5 million, or 17 cents per share, on revenues of $575.5 million, compared with profits of $84.1 million, or 14 cents per share, on revenues of $546 million for the previous quarter.

For its fourth quarter a year ago, Juniper reported profits of $66 million, or 11 cents per share, on revenues of $430 million.

Reuters. Its non-GAAP net income came to 20 cents per share, matching analysts' estimates -- but that counted as a miss in investors' eyes, considering the company regularly outpaces the earnings-per-share estimate. In fact, prior to the quarter, Juniper had beaten estimates for at least the past eight quarters, according to Thomson Financial .

Juniper's fourth-quarter revenues just missed analysts' forecast of $578 million.

Juniper predicted revenues of $565 million to $575 million for its first quarter, which ends in March. Prior to today's results, analysts expected Juniper to report revenues of $586.1 million and non-GAAP net income of 20 cents per share for the March quarter.

Product revenues were to blame for the revenue shortfall, growing just 4.7 percent from the previous quarter, Prudential Equity Group LLC analyst Inder Singh wrote in a report issued immediately after Juniper's release.

Sales from Juniper's recent acquisitions in the enterprise networking space appeared to show little growth, perhaps contributing to the disappointment

On today's conference call with analysts, CEO Scott Kriens said business in Japan hit a pause during the fourth quarter, as major carriers went into planning mode for the next wave of network buildouts. That might have hurt product sales, but Kriens declared it a sign of good things to come, particularly as other countries follow Japan's lead in building next-generation networks.

"This second wave of buildouts will be lumpy, but it's extremely important strategically," Kriens said.

Kriens proceeded to outline how traffic processing is central to Juniper's long-term plans, a strategy he's preached for more than a year. The idea is that more sophisticated network services, such as video, will require more fine-tuned engineering of traffic, a function Juniper intends to provide.

Kriens hasn't wavered from that message, but Juniper has come under scrutiny lately for its long-term plan. It hasn't helped that executives including former Unisphere Networks CEO Jim Dolce left this month, part of what Juniper said was a "structured" reorganization plan. (See Dolce & Others out at Juniper, Juniper's Marketing Mystery, and Juniper Sues LR Message Boarders.)

Juniper has made several acquisitions, including some directly related to traffic processing, and it could be moving into wireless LAN with the rumored pickup of Colubris Networks Inc. or Meru Networks Inc. But analysts have previously stated Juniper should be trying to get into Ethernet switching, and some, including Singh, aren't sure whether these purchases can make up for what appears to be a slowing of Juniper's base product growth. (See Juniper Takes Two: Peribit & Redline, Juniper Buying WLAN Startup?, Juniper's Slow Shopping Trip , and Analyst: Juniper Faces Tougher Times.)

— Craig Matsumoto, Senior Editor, Light Reading

startup_shutup 12/5/2012 | 4:07:51 AM
re: Juniper Disappoints in Q4 On credit bubble,

http://www.mises.org/rothbard/...

Since it clearly takes very little time for the new money to filter down from business to factors of production, why donGÇÖt all booms
come quickly to an end? The reason is that the banks come to the rescue. Seeing factors bid away from them by consumer goods industries, finding their costs rising and themselves short of funds, the borrowing firms turn once again to the banks. If the banks expand credit further, they can again keep the borrowers afloat. The
new money again pours into business, and they can again bid factors away from the consumer goods industries. In short, continually
expanded bank credit can keep the borrowers one step ahead of consumer retribution. For this, we have seen, is what the crisis and depression are: the restoration by consumers of an efficient economy, and the ending of the distortions of the boom. Clearly, the
greater the credit expansion and the longer it lasts, the longer will the boom last. The boom will end when bank credit expansion
finally stops. Evidently, the longer the boom goes on the more wasteful the errors committed, and the longer and more severe will be the necessary depression readjustment.
robert_rodriguez 12/5/2012 | 4:07:52 AM
re: Juniper Disappoints in Q4 If it where no for dreamers you would still be in a cave. Start-ups are very very important to an economy.

With that said, if everyone is a dreamer then we would all freeze to death cuz no enough would be produced to meet basic needs.

Start-up are great but yes their is too much capital and not enuff "business smarts" in the VCs.
startup_shutup 12/5/2012 | 4:07:52 AM
re: Juniper Disappoints in Q4 >> Start-up are great but yes their is too much capital and not enuff "business smarts" in the VCs.

Credit bubble is detroying SILLY CON VALLEY ... you can see this in housing costs and abundance of JUNK startups ....

The point is VC CONFIDENCE in Silly Con valley is MISPLACED ... this capital should go OVERSEAS....
robert_rodriguez 12/5/2012 | 4:07:53 AM
re: Juniper Disappoints in Q4 I am not sure what the long, sarcastic response if for but I agree that integration capability is critical to the success of a product.

Integration, however, is not necessarily what companies would go to a box maker for -- not matter what the box makers wants to believe.

Careful network design is important why would I outsource this to CSCO when I know they are going bury CSCO crap into the network design and then charge me a premium price for it. CSCO is not too successful with this model from what I see and JNPR is trying to do the same garbage.

JNPR should just focus on the products and make sure that each integrates nicely. Why can't they do well just selling good products and at good price that integrate well.

It is so funny funny cuz solutions people always find product sexy and product people find solutions and integration sexy.

Neither seems to understand they each have a role they are paid to do and making them one and the same in the same company is an error.

You would think you have learned that Vertical Integration is a failure in most industries.
BlueFox 12/5/2012 | 4:07:53 AM
re: Juniper Disappoints in Q4 If code quality has dropped it is due to engineering being outsourced. Only an MBA would think that is a model for successful product development.
startup_shutup 12/5/2012 | 4:07:53 AM
re: Juniper Disappoints in Q4 >> I can guess your nick name -- how much you hate the startups? What is that one thing which makes you to hate it so much? Mgmt bullshit or fake market or product quality?

1. product quality
2. Mgmt bullshit
3. fake market supported by credit bubble (indiscriminant money creation)
Light-bulb 12/5/2012 | 4:07:54 AM
re: Juniper Disappoints in Q4 Yawn...

Just keep telling yourself this while you sit at your desk and ponder on the world, space time etc.

Come on, are you really serious? Do you think that only the best products count? The reality is Integration, Capability, and Flexibility = Convenience = cost savings for business. How does a 5 box solution from JNPR differ from Cisco? I don't really care.
I say find a way to address the Millions of edge users who need an end-product to address all their Busines needs. The company isn't looking for some WhizBang Geewhiz I can do 2Trillion packets per second... they are only looking for a way to conduct business better.
So provide me a solution that: Supports application accleration, Wan optimization, Web Caching, Routing, MPLS, VPN, SSL acceleration, Firewall, Voice, and Load-balancing... AND let me manage and control the upgrades from one area and only have to worry about keeping one device updated to keep my configuration management simple.

There ya go... Just do that; I believe if I have a decent box that can do all that while providing up to an OC3 heck even 100mb I'd be happy... oh what did you say? There is a company who can do this and give me an economical way to handle 10mb all the way to multiple Gb/s all with the same features and capability?

In the mean time, please continue on thinking that only the best point products matter and that every CTO/CIO is looking for the best product in every category and is willing to pay the premium in both Capital as well as in operational spends. Because as I'm sure you know VERY well... all the cost is in capital spending... operational costs are nothing...

May the light ever shine!

robert_rodriguez 12/5/2012 | 4:07:56 AM
re: Juniper Disappoints in Q4 They are expensive (particulary Core) and not modular enough to work across and entire network.

It is a disparate protfolio of nice stuff though. They do need ethernet L2 if they want a portfolio.

They should just let each business develop itself and forget about the big bang integration IMHO.

Easier accountability for result too.

Look at J&J.
mrbhagav 12/5/2012 | 4:07:58 AM
re: Juniper Disappoints in Q4
The weak GDP growth for Q4 was mostly caused by a big drop in defense spending, and to some extent autos and housing. Economists also accept that there is the Katrina effect still lingering. Inflation is still pretty tame, and unemployment is low.

Its a bit premature to spell doom for the economy. The stock market certainly does not seem to care about these 4Q results. Corporate earnings, especially in tech, continue to be strong and deal flow continues unabated. Wall Street put out bonuses this year that exceeds the GDP of several third world countries. If you believed in the concept of trickle-down economy, the North East has nothing to worry about.

Unless you are looking into a very murky crystal ball, you should know that the GDP numbers will mean-revert in Q1 2006.
russ4br 12/5/2012 | 4:07:59 AM
re: Juniper Disappoints in Q4 If code quality has dropped and that may have contributed to Juniper missing revenue, who is accountable? Maybe it is time to check the credentials of the people running the quality group.

I find it intriguing that Juniper has recently appointed two non-engineers to head their most important product groups. Is this the right product development leadership?

Rob Sturgeon, is running the ex-NetScreen (Security Product Group). Rob is a great manager, but his experience has never been in product development, but rather as a Services and Support organization (ex-Lucent).
http://www.juniper.net/company...

Kim Perdikou, is running the Infrastructure Product Group (all M/T Series products?). Her experience has always been in IT (she was Juniper's long time CIO).
http://www.juniper.net/company...

- russ
andropat 12/5/2012 | 4:07:59 AM
re: Juniper Disappoints in Q4 Can you explain how the 5 products to solve issues differs from ciscos?

pat
falsecut 12/5/2012 | 4:08:00 AM
re: Juniper Disappoints in Q4 "There is a fundamental difference between correlation and causation, and the latter has not been established yet between a drastic economic slowdown and the curve inverting."

It is a very good indicator of trouble ahead and is very well established in that regard.

Oh, and economic growth is at 1.1% for GDP for 4Q2005, just announced this morning. Worst figures in three years.
falsecut 12/5/2012 | 4:08:00 AM
re: Juniper Disappoints in Q4 "you can be sure that this time is coming from some engineer somewhere"

Clever thought but dead wrong. Not now, not ever an engineer. Never took an engineering course either. But I am a finance guy.

Someone obviously doesn't like this stuff since a whole lot of "1" ratings hit the board but it is important to you as an employee of a company and as a citizen. When the CEO shovels his load your way, it's good to be able to do a sanity check on it.
Light-bulb 12/5/2012 | 4:08:01 AM
re: Juniper Disappoints in Q4 Come on, the leadership at JNPR have tried. I mean look at it this way... they purchased many companies to "try" to expand their base, they are "trying" to extend into the Enterprise business which they thought would "never" be the main blood for the company. They've "tried" to tought "Modular Single OS" then buy every little piece of equipment and have Zippo integration! This company makes me laugh all the time, but at least I can say, they try. I actually enjoy hearing different pitches normally involving a reason I would want to use 4-5 products to solve a problem, all of which are completely independent, all of which have different OS's. Are you friggin serious? The only people who find this company interesting are the geeks who like the cartoons, I know no CIO who sees the value offering from this company? From a Business standpoint... JNPR offers nothing. Inferior technology integration = Inferior Technology! But as long as the JNPR lovers out there keep saying yes to the Sales reps and the 5 boxes they will need... the longer the company will keep "Trying"
Oh and the leadership of the company? Will they end-up being accountable? No... instead they will take millions of stock, the board may ask them to leave, but they'll never actually be held accountable with millions in the bank, it's the classic American Sham!
matahari 12/5/2012 | 4:08:02 AM
re: Juniper Disappoints in Q4 If code quality has dropped and that may have
contributed to Juniper missing revenue, who is
accountable? Maybe it is time to check the
credentials of the people running the quality
group. Bring out the axe and cut before it is
too late or more bleeding will occur. When
people with a few years experience out of college
and those who don't even know what a router is
are left running a multimillion segment,
this result should not be a surprise.

For those so-called leaders, time to step up
to the plate and be accountable.
materialgirl 12/5/2012 | 4:08:04 AM
re: Juniper Disappoints in Q4 Yes, but... Our yield curve will not immediately impact Japanese service provider spending plans. Are existing JNPR customers contemplating a core router switch to the CRS for some reason? Are they suddenly on hold for network builds? for another reason?

The real problem seemed to be in JNPR's enterprise area anyway. Do they need to integrate all those purchases before they have a salable product? Or maybe those cartoons are scaring customers away?

IF we have exactly 3 viable core router vendors and none of them are doing well, what does that mean for the rest of us?
paolo.franzoi 12/5/2012 | 4:08:05 AM
re: Juniper Disappoints in Q4
Flush,

Best thing to do with startup is ignore him. He has a mantra that is in all messages:

- Start ups are bad anybody involved with startup founding should be summarily executed for being evil.

- The San Francisco Bay Area (particularly the South Bay) is going to face a drop in home prices so that homes in Palo Alto will be worth about 35 cents for a 3/2 2000 sq foot home.

He clearly had one or more bad experiences with startups and Bay Area home prices. Instead of realizing that he personally has the IQ of a cowflop and caused his own problems, he blames his problems on others. He then rants about these problems.

startup_shutup is a silly, silly man. You can prod him for fun, if you want. Don't expect an actual conversation with him.

seven
mrbhagav 12/5/2012 | 4:08:05 AM
re: Juniper Disappoints in Q4
Yes, the doom theorists need to relax. An inverted yield curve, and I am assuming you mean the term structure of interest rates, is caused by many macroeconomic and market related factors, including weak long-term inflation expectation, rising short-term interest rates, liquidity differences between the short and long end of the term structure, and of course the usual supply-demand of treasury paper in the marketplace usually caused by a flight to quality paper (long-term bonds).

There is unfortunately some historical correlation between an inverted curve and economic slowdowns. The most apparent one was back in 2000 before the stock market collapse; but again, blame it was the dot-com bust. Take two streams of purely random numbers and run a regression analysis on them...they will most likely be correlated! There is a fundamental difference between correlation and causation, and the latter has not been established yet between a drastic economic slowdown and the curve inverting.

flush_meat 12/5/2012 | 4:08:05 AM
re: Juniper Disappoints in Q4 startup_shutup:

I can guess your nick name -- how much you hate the startups? What is that one thing which makes you to hate it so much? Mgmt bullshit or fake market or product quality?

I had a stunt with couple of startups and all were
sort of ok. Needless to say, I didn't make any money ;-)

/FM
startup_shutup 12/5/2012 | 4:08:06 AM
re: Juniper Disappoints in Q4 >> you can be sure that this time is coming from some engineer somewhere spending more time on looking at his etrade account than his/her bug count.

It is a long standing problem that software engineers did not care about yield curve and monetary matters. This led to wholesale exploitation of software engineers. Geeks should know more about management, politics, sociology, theory of money creation, JUNK startup culture etc ...
Stevery 12/5/2012 | 4:08:06 AM
re: Juniper Disappoints in Q4
I have to say, it's a very shrewd move by Kriens and krowd to pursue LR posters with lawsuits when earnings cause the stock to drop 20%.

What a smart move! Imagine: you're in a board meeting, you've just presented powerpoint showing how badly earning suck, and then you mention how much you're spending on lawyers fees pursuing unknowns on LR?

Whatta leader! Lesser folk might view such distractions as, well, distracting.
netguru2005 12/5/2012 | 4:08:07 AM
re: Juniper Disappoints in Q4 If ever a study is conducted to understand the relationship between the software code quality for a company and the number of LR messages being posted by a company's employees, I am sure it will be an inverse relationship. When you see messages discussing "Yield curves" and economy on this board, you can be sure that this time is coming from some engineer somewhere spending more time on looking at his etrade account than his/her bug count.
falsecut 12/5/2012 | 4:08:08 AM
re: Juniper Disappoints in Q4 The Fed has stated that they need to rein in housing prices. Consumers are tapping into their home equity to pay off credit and to spend. If housing falls, those houses become less valuable, there is less equity to pull out, and people with some of the riskier home loans (like interest only financing) may panic, putting more housing on the market, and depressing prices, and so on.

I see a recession in the offing. I would love to be wrong. The chicken bones will tell us in a year.
falsecut 12/5/2012 | 4:08:08 AM
re: Juniper Disappoints in Q4 >When I start reading on a Lightreading message board about the yield curve inverting and how it means certain doom, it leads me to believe that the market has fully accounted for the situation, and the economy is not about to go down in flames.<

Despite all the talk about efficient markets, markets are frequently over or under valued depending on the crowd psychology at the time. During the internet bubble, all sorts of excuses were made. This time it's different, the old economy is dying, blah blah blah. Only it wasn't. And yet the market kept going upwards until it figured out that the stocks were not worth it. The yield curve was flipped up on March 10, 2000, when the NASDAQ hit the high. Would you say that the market fully accounted for the situation on that day?

But, hey, opinions are like noses, everybody has one. We'll find out, one way or another.
Mark Sebastyn 12/5/2012 | 4:08:08 AM
re: Juniper Disappoints in Q4 When I start reading on a Lightreading message board about the yield curve inverting and how it means certain doom, it leads me to believe that the market has fully accounted for the situation, and the economy is not about to go down in flames.
falsecut 12/5/2012 | 4:08:09 AM
re: Juniper Disappoints in Q4 See, those darn LR message posters just tanked the stock.

If you are looking for a barometer to how the economy is going, you could do worse than pay attention to the yield curve, which is starting to show signs of inversion. It's a very reliable indicator of recession.

The yield curve is a plot of 3 month, 6 month, one, two, five, ten etc year bonds. In good times, you should get a lower interest rate for 3 month than two year for example, but right now, the two year is at 4.43% and the ten year is at 4.44%. If the curve flattens or starts to fall as you go from short to long term, the country could be in trouble. With the Fed doing all they can to squash the housing market 'bubble', consumers may soon find themselves in trouble, and if they are in trouble, cap spending may decline. Not good news.
optical_man 12/5/2012 | 4:08:09 AM
re: Juniper Disappoints in Q4 Falsecut,
You make sense. I see your logic. Your bag of math is indeed impressive.

However, when I shake the chicken bones in my silk bag, and throw them on the dirt floor, I see signs that the Economy will rise, and the bad tribe on that other island will not prosper.
They will face famine, while we will eat many crops.

Why do we see things different? Are you ascribing to medicine man who is not certified by the right island god?
Pete Baldwin 12/5/2012 | 4:08:10 AM
re: Juniper Disappoints in Q4 I should also mention ... Juniper gave a quick update on the core: > 100 T640s shipped in the last 90 days, and the TX Matrix is shipping. (To whom, for what -- not mentioned.)

It wasn't a major part of the call. Might be of interest to CRS/TX watchers, though.
Pete Baldwin 12/5/2012 | 4:08:10 AM
re: Juniper Disappoints in Q4 So, I guess I'll be making calls to see if other companies are seeing this "pause" in Japan's NGN buildouts. (I picture a bunch of executives sitting around a table meditiating while they contemplate The Network.)

Anybody have anecdotes to support the "pause" theory?
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