Juniper Meets Lowered Expectations
Guidance for the first half of the year remains flat.
”I think it was pretty courageous of them to say anything on guidance,” says Steve Kamman, analyst with CIBC. “I’m sure they went with what they were fairly certain they could get.”
Juniper’s net revenues for the fourth quarter were $151.0 million, compared with $201.7 million for the third quarter -- a decrease of 25 percent. Pro forma net income was $15.9 million or 5 cents per share, compared with pro forma net income of $32.5 million or 10 cents per share in the third quarter of 2001.
These numbers met a revised forecast, released in December, in which Juniper said that instead of $200 million in revenue, it expected revenues between $150 and $155 million (see Juniper Spooks the Street).
Analysts polled by First Call expected Juniper to post $152.5 million in revenue and earn 5 cents a share, excluding special charges. Last year during this same period, Juniper posted earnings of 24 cents per share, excluding charges.
Overall, 2001 wasn’t a complete wash for Juniper. Net revenues for 2001 were $887.0 million, compared with $673.5 million in 2000. Pro forma net income for 2001 came in at $169.9 million or 50 cents per share, compared with $184.0 million or 53 cents per share during 2000.
During the analyst call, Scott Kriens, chairman and CEO of the company, reflected on the difficult year just passed and looked optimistically toward the future.
”It’s easy to say 2001 was a tough year, definitely tougher than the late 1990s to be sure,” he said. “But how tough was it, really? We still had to run a business and provide long-term value and had to show customers the fundamental advantages over our competitors. I expect conditions to improve this year; people aren’t going to stop networking.”
Kriens said he expected revenues to remain flat over the first half of 2002. He said Juniper was surprised by revenues from Asia, which had come in on the low end in Q4. “The international softness is due to a shortfall in Asia,” said Kriens. "It suggests some lumpiness that I’m not sure will go away in the quarters to come.”
The bottom line is that the short-term prospects for the company are still shaky due to the bleak carrier outlook. Every carrier has made big cutbacks in 2002 capital spending plans, including Juniper customers like Qwest Communications International Inc. (NYSE: Q) (see What's Behind Qwest's Numbers?). Kriens said that he expects current purchasing patterns to continue, which means service providers will make smaller purchase orders more frequently, rather than bigger orders spaced over longer time periods.
But the future isn’t all bad. The over-build of optical long-haul systems plays in favor of core IP routing companies like Juniper, as carriers work to take advantage of raw transport capacity, writes Mark Sue, an analyst with Frost Securities Inc. in a research note published earlier this week. Incumbent carriers are also expected to continue offloading traffic from their current ATM backbones onto new IP backbones, which should also translate into more core routing sales.
Kriens said that the company will rely on new markets for growth through this downturn. Access and edge routing, which already contributed to the bottom line in 2001, will continue to play an important role in generating revenues in 2002. Kriens also expects products from the new cable division, Pacific Broadband, to kick in during the first half of the year. And new wireless products, coming out of Juniper's joint venture with Ericsson AB (Nasdaq: ERICY), will also be contributors.
“The access market, mobile market, and the Juniper cable piece will all contribute to revenue growth in the short term,” said Kriens. “They will also stimulate growth in the core infrastructure. It doesn’t take much traffic on the on-ramps to congest the freeway. You can’t have growth in the access market without growth in the core.”
Juniper will also attempt to build on its number two spot in core routing at the same time as it expands into new markets (Cisco is number one). The company is rumored to be working on its next-generation core router, code-named “The Gibson.” This router, which probably won’t be announced until at least Q2 2002, will likely allow service providers to hook existing Juniper routers together in a more scaleable and efficient manner.
The company also announced Lloyd Carney as COO (see Juniper Creates COO Position). This is Juniper’s first COO, a move that suggests current CEO Scott Kriens is looking to take a more strategic role and that the company is gearing up for an expansion into other product categories.
— Marguerite Reardon, Senior Editor, Light Reading