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Juniper Grows Like a Weed

Light Reading
News Analysis
Light Reading
10/12/2000
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Juniper Networks Inc. (Nasdaq: JNPR) is still growing like a fertilized weed.

But according to Juniper CEO Scott Kriens, the company's success comes from growing smart, not just getting bigger. Wall Street remained uneasy leading up to Juniper Networks' earnings call for its third quarter on Thursday. Shares of Juniper fell $6.39 to $191.61, a 3.1 percent drop (see What's Spooked Juniper Investors?). On its earnings call, however, the router maker didn't give investors any reason to grouse.

Juniper's earnings for the quarter that ended Sept. 30 were 17 cents per share. That's 8 cents more than what Wall Street expected and 9 cents more than its second quarter earnings (see Juniper's Revenues Rocket).

Juniper's net revenues for the quarter were $201.2 million, a 78 percent gain from its second quarter net revenues of $113 million.

Juniper's net revenues for all of 1999 were only $102.6 million.

"The growth was exceptional," said Seth Spalding, director at Epoch Partners, an investment bank. "The price points on the products were rising. It could be a mix of things, including selling more interfaces, but overall, that's a bullish sign."

Juniper also added 175 employees this quarter, the most it's added in any previous quarter to date, bringing its total ranks to 690.

Kriens attributes Juniper's strong quarter to its expanding and diverse customer base and the fact that Juniper has evolved from a single product startup to a sustainable company with a family of products.

"The market is maturing, and the companies involved must do so as well. It's no longer a point product contest," said Kriens, after touting Juniper's recently announced products in the access and metro markets.

Kriens said equipment makers today need to be broad enough to serve carriers' needs, but not so broad that they spread themselves too thin. "Building the best products is still required for a winning strategy. It's just that it will take more than one [best in class product] to compete effectively."

Interestingly, though, Juniper did give investors reason to keep an eye on how well it grows in the face of industry-wide components shortages. Juniper CFO Marcel Gani acknowledged that the company had lengthened its lead times on shipping some products due to components shortages in the industry (see Components Shortage Gets Real).

"We expect component availability to remain tight; however we feel that we'll be able to work through those issues," Gani said. "Over time we expect the DSO [days sales outstanding -- meaning how long it takes Juniper to collect payments from customers] to be in the 55 to 65 day range."

Gani said that Juniper, which has never carried inventory in the past, may soon be forced to do so because of the current component supply situation. This is likely a competitive response to archrival Cisco Systems Inc., which is also attempting to solve supply issues by carrying larger inventories (see Cisco's Optical Customers Face Delays).

-- Phil Harvey, senior editor, Light Reading http://www.lightreading.com

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