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Optical/IP

Juniper: Guidance Down, Stock Up

It's bad -- just not as bad as everyone thought.

That appears to be the reaction to Juniper Networks Inc.'s (Nasdaq: JNPR) announcement last night that it expects revenues for the quarter ending March 31 to be approximately $120-$125 million, down from its original guidance of $150-$155 million.

The recent buzz on the street, as reported here just two weeks ago, had been that Juniper would have a hard time meeting its guidance (see Will Juniper Miss Its Quarter?). That may be why, when the news actually came out, the stock rose 0.98 (5.5%) to 12.58 in midday trading today.

“There was no mystery here whatsoever," says Salomon Smith Barney analyst Alex Henderson. "People had to know that this was coming,” he says, pointing out that most financial analysts had already cut their earnings estimates for the company. "We first cut our estimates to $128 million in mid-February. I don’t think the street was looking for $150 million.”

The company expects that pro forma, fully diluted earnings will be slightly above breakeven. Its earlier guidance projected earnings of 3 cents a share. The company blamed cautious spending by its service provider and carrier customers for the expected reduced revenues.

“Juniper’s pre-announcement should not have been a surprise, we think, given negative carrier newsflow, capex cuts by IXCs… and the company’s emerging presence in the cable and wireless segments,” said a note published by Morgan Stanley Dean Witter & Co. analyst David Jackson this morning. The research note emphasized that recent weakness in the company’s stock had already sent a warning signal that Juniper might lower guidance.

Others say that Juniper’s lowered guidance was actually a positive surprise, not dropping as low as many had expected.

Still, some traders remain skeptical of the company's prospects for next quarter. "The Ericsson AB (Nasdaq: ERICY) deal was a substantial part of their revenue in that quarter and that's not a sustainable thing," said one hedge-fund manager who asked not to be named. "We think there is a psychological component to this stock: People buy it when it goes down because they remember when it was $100 per share."

And while the price of Juniper’s shares steadily rose today, several financial consultant firms were downgrading the stock. This morning, Needham & Co. downgraded Juniper stock from Strong Buy to Buy, and Wedbush Morgan downgraded it from Buy to Hold.

Still, most observers agree that the lowered guidance doesn’t reflect badly on Juniper’s business per se, but is rather a symptom of the slowdown affecting the entire industry. “Juniper’s getting clipped by the same blade that caught [among many others] Cisco Systems Inc. (Nasdaq: CSCO) and Nortel Networks Corp. (NYSE/Toronto: NT),” says Smith Barney's Henderson. And according to the Morgan Stanley note, the revised guidance was driven by deployment delays and carriers' hesitancy to spend money, not by competitive losses.

This was also the message that Scott Kriens, chairman and CEO of Juniper Networks, tried to convey on a conference call discussing the lowered guidance yesterday. He said that although the company faces “conditions that test both our discipline and our collective patience… [it is] continuing to generate cash in a market where few others can say the same. We’re doing it by remaining committed to our carrier and service provider customers."

During the quarter, the company announced several new customers and deployments, among others Deutsche Telekom AG (NYSE: DT), adding to an already broad customer base. The company also announced that positive cash flow from operations is expected to be in the range of $5 million to $10 million.

As for the company’s staff, Kriens' claim that Juniper will not be restructuring any time soon is good news. "When these markets turn around, it’s not possible to double the engineering staff and catch up,” he said. “Our product lead… is going to be protected. Period.”

— Eugénie Larson, Reporter, Light Reading
http://www.lightreading.com
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red1969 12/4/2012 | 10:41:33 PM
re: Juniper: Guidance Down, Stock Up Anybody have any thoughts on which company to join as an engineer when things pick up and why?

Technology, culture, opportunity etc.

Thanks
Tony Li 12/4/2012 | 10:41:48 PM
re: Juniper: Guidance Down, Stock Up I wish that everyone would just tell cisco that the "grace LSA" hacks are a bad idea and that they should either do redundancy the right way (like amber) or not at all.
---------------------

Having redundancy 'the right way' is not as obvious as you make it sound, IMHO. There is a great deal of complexity involved in creating true transparent redundancy. The most challenging problem is the ability to mirror hundreds of TCP connections on the redundant processor. This requires a certain amount of complexity. Adding that complexity to routing protocol implementations that are already deemed unstable (see previous thread) is not going to improve net stability.

A solution that is simpler to implement, even if it requires protocol changes, might well be a better long term solution for all involved.

Tony
Iipoed 12/4/2012 | 10:41:52 PM
re: Juniper: Guidance Down, Stock Up FYI, Foundry is shipping MPLS as well as true 10 GigE. Their is CLI is Cisco identical and their NetIron Core Router competes well with Juniper's M5 and 40 at half the price. I agree they would be a great partner for Juniper. Unfortunately Bobby Johnson, CEO, is not big on being acquired at Foundry's current price of $7.10. Foundry instead needs an edge router company such as AVICI, F10 or Procket.

Extreme's VC are much closer to Juniper as well and Gordon Sitt is a marketing CEO not engineering as is Bobby Johnson.
skeptic 12/4/2012 | 10:41:53 PM
re: Juniper: Guidance Down, Stock Up Stateful protocol redundancy, do you mean something like OSPF running on two different processors and one taking over in case of the other one crashing, without loss of adjacency, without hacks like "grace LSAs"?

Does Amber actually have this, or anyone else?
=======================
Amber claimed to have stateful protocol
recovery without graceful restart. Its never
been clear what the technology was that they
used to accomplish it as they disappeared
into Nokia before much information got widely
distributed. There are rumors of other companies
possibly working on things along the same lines.

I wish that everyone would just tell cisco
that the "grace LSA" hacks are a bad idea
and that they should either do redundancy
the right way (like amber) or not at all.





Kangaroo 12/4/2012 | 10:41:54 PM
re: Juniper: Guidance Down, Stock Up marionetteworks wrote...

I'm not familiar with Extreme, how does Juniper's M5/M10 compare with them? I know they also have smaller market share in the edge, but by how much?
------------
Iipoed wrote ....
Juniper's technology is far superior to Extreme's. non blocking versus far oversubscribing the capability of the Extreme's Black Diamond. Big difference in price for similar configs. however. Extreme sells price and will lose $$ to win the deals. They are always the lowest by big margins.
--------------------

At this point in time Juniper and Extreme do not compete with each other.

Juniper is deployed in the Carrier/IPS market where support for BGP4, Sonet/SDH OC192 and redundancy is important. Juniper goes up against the Cisco GSR for the Core and Cisco 7x00 for the edge market. Other players in the Edge Market are Unisphere Networks with their Redstone ERX routers. A new players at the Edge is Laurel Networks, beFORE that they were at Fore.

Companies like Extreme, Riverstone/YAGO, Foundry all came from the Enterprise Ethernet Layer3 switching. They do 10/100/1000 Mbps and do it well. They are moving into the into the Carrier Space chasing the MAN market. Foundry has made some attempt at building a Carrier/ISP router with strong BGP-4 but has not made any impression. Foundry has also done some good work with their Layer 4 switching/SLB/Content Aware products that go up against Alteon/NT, F5, Nexsi.

Cisco's range of Ethernet switching products are the Catalyst. They come from a Layer 2 background of Kalpana(remember them). While they have a huge maket share of the Layer 2 and Layer 3 switching market they are the worst of the lot. If I had a beer for every packet they drop I would be very happy :-)

It will be interesting to see what happens as Carriers start to need BGP-4/MPLS Routers with high density Ethernet interfaces as the WAN and MAN become blurred. Could Juniper look at buying either Extreme, Foundry, Riverstone. Just as Cisco bought Kalpana to get into the Enterprise Ethernet Switching all those years ago, when the market was changing.

By the way Light Reading is running a Webinar on Edge Routing (Carrier/ISP Edge).

Light Reading Webinar Series -- Edge Routing

These days, in order to be successful, any new networking technology
must deliver a bulletproof business case -- either by saving money for
service providers or by making it. As you know, edge routers are the
hottest area of networking because they perform both feats -- delivering
a business-case double-whammy!

Nevertheless, there's still much confusion about the edge routing
market. That's why this Webinar will start by putting edge routers into
context and explaining how they differ from another important equipment
category, multiservice switches.

Tune in on Thursday, April 11th, at 2:00 p.m. EST, for "Taking Routing
to the Edge," sponsored by: Allegro Networks, Laurel Networks, Redback
Networks, and Unisphere Networks.

Click here to register for this event:

http://metacast.agora.com/link...

Belzebutt 12/4/2012 | 10:41:58 PM
re: Juniper: Guidance Down, Stock Up Funny, how the M5 had the same port densities and form factor as Amber's box. just no stateful protocol redundancy.

Stateful protocol redundancy, do you mean something like OSPF running on two different processors and one taking over in case of the other one crashing, without loss of adjacency, without hacks like "grace LSAs"?

Does Amber actually have this, or anyone else?
smok_n_mirz 12/4/2012 | 10:42:10 PM
re: Juniper: Guidance Down, Stock Up Look for Juniper to get into the IP services sector. They have been actively visiting VPN startups and taking notes.

They pretend to be interested in investing in said startups, but they are really only on an intelligence gathering mission. That is similar to how the M5 came into being... They had met with Amber networks about 9 months prior to the release of it. Funny, how the M5 had the same port densities and form factor as Amber's box. just no stateful protocol redundancy.

Should be interesting to see how they convert their routing engine into an IP service switch.
skeptic 12/4/2012 | 10:42:10 PM
re: Juniper: Guidance Down, Stock Up In addition, we've been seeing and hearing about (from other carriers), increasing JunOS reliability issues. The marketing story is that JunOS is more reliable than IOS because it's built on Free BSD. The reality is that Juniper is having to support an ever-increasing range of features deployed in a wide variety of environments. Add to this the inherent instability of IP protocols like OSPF and BGP and you've got yourself a support scalability issue to deal with. Right now our view is that Juniper is not dealing with this issue as well as Cisco - despite IOS's "spaghetti code" reputation, and I'd be interested to hear other experiences.
--------------------

Freebsd is a better software base than IOS and
JunOS is technically superior to IOS in any
number of ways. HOWEVER, from the customer
point of view if the routing software crashes,
it doesn't really matter if it crashed in the
kernel or in user-code. A crash is a crash.

Juniper has a better platform to write software
on than cisco does with IOS, but unless the
people doing software for juniper focus on
quality, it will gain them nothing. Any
single software fault in routing will bring
down the router.




skeptic 12/4/2012 | 10:42:11 PM
re: Juniper: Guidance Down, Stock Up One small correction, I am pretty sure JunOS is built on NetBSD, not FreeBSD.
---------

No, its freebsd. They have said so in various
places before.
uuallan 12/4/2012 | 10:42:14 PM
re: Juniper: Guidance Down, Stock Up "The marketing story is that JunOS is more reliable than IOS because it's built on Free BSD."


One small correction, I am pretty sure JunOS is built on NetBSD, not FreeBSD.
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