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
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William Wallace 12/4/2012 | 10:42:34 PM
re: Juniper: Guidance Down, Stock Up Now that's funny - old kep gets busted - the anonymous NT pimping stops here - looks like you need a new corner to work
Steeler 12/4/2012 | 10:42:34 PM
re: Juniper: Guidance Down, Stock Up This is almost the warning that wasn't. Both JNPR and CIEN are tagged as suffering from LH spending cuts, but JNPRs 150 to 125 cut is less dramatic than the 160 to 100 guidance reduction CIEN delivered recently.
cruiser 12/4/2012 | 10:42:34 PM
re: Juniper: Guidance Down, Stock Up skeptic, good points here as usual. imho, they could have bought extreme as an example, to get them into the campus. cisco bought companies and expanded into new markets when they were around a billion in revenues, if i recall correctly, and didn't seem to lose focus. granted the market was growing at that time vs shrinking now.

ciena is only a half a billion dollar company now after flirting with a billion, and they bought lightera. the other companies they bought notwithstanding, they would be nowhere without that acquisition. it saved the company when long haul died. i'm just saying, jnpr should have at least picked up new technology when they had the chance. now their market cap is down and they've got to conserve cash because they've built infrastructure for a billion dollar business with only a half a billion in revenues. and, they have only one product anyone cares about. what do they do to make it through this market? where do they go from here, and how? any ideas?
tsat 12/4/2012 | 10:42:31 PM
re: Juniper: Guidance Down, Stock Up >they have only one product anyone
>cares about. what do they do to make
>it through this market? where do they
>go from here, and how? any ideas?

Yes cruiser, Routers are dead. Nobody buys
them anymore. IP is a dead-end.


marionetteworks 12/4/2012 | 10:42:29 PM
re: Juniper: Guidance Down, Stock Up they could have bought extreme as an example, to get them into the campus.

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 12/4/2012 | 10:42:28 PM
re: Juniper: Guidance Down, Stock Up 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.
cruiser 12/4/2012 | 10:42:27 PM
re: Juniper: Guidance Down, Stock Up it's worth mentioning that around 70% of their business is in catalyst like enterprise switches lipoed. no question jnpr's technology is superior but they have no enterprise play. that was the point. not comparing their metro edge routing type offerings.
Metadata123 12/4/2012 | 10:42:26 PM
re: Juniper: Guidance Down, Stock Up The last year has shown that the carefully crafted product strategies have fallen by the wayside and so have companies and careers. Juniper has suffered from the fact that the core routing market is flat or falling. And the supposed edge market boom never happened. Juniper tried to create the M5 for the edge market; but the over architected product is of inferior quality and over priced. The possibility that Juniper may resurrect itself by becoming an edge player has also been eliminated by the fact that almost every edge player like Foundry and Riverstone are floundering in a tepid market.

Juniper has also been severely disadvantaged by hiring a largely incompetent bloke from Bay called Lloyd Carney who is considered a virtual joke by both customers and competitors alike. Expanding along verticals may have some future like in Cable where Cisco does not have an option if DOCSIS 1.1 gets acceptance. But overall, the future is bleak for Juniper employees. They might as well find a new profession.
cruiser 12/4/2012 | 10:42:26 PM
re: Juniper: Guidance Down, Stock Up did i say that tsat? no, i did not say routers are dead. i am saying, quite simply, juniper needs to expand its product line for leverage. it has no leverage. it has one product: a core router. it's a great product but one product does not a franchise make. right now if you are a one trick pony, you are dead. i'm not even saying jnpr is dead. i'm just saying they need to do something in the way of diversification--fast.
TriteReading 12/4/2012 | 10:42:24 PM
re: Juniper: Guidance Down, Stock Up >Expanding along verticals may have some future >like in Cable where Cisco does not have an >option if DOCSIS 1.1 gets acceptance.

Why can't Cisco have a DOCSIS 1.1 play? The technology is available to everyone. You can't tell me you think Cisco is sticking to 1.0?
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