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

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paolo.franzoi 12/5/2012 | 4:08:05 AM
re: Juniper Disappoints in Q4

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.

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 ;-)

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?
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.
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!
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.
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).

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).

- 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?

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