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Juniper Points to the Economy

Craig Matsumoto
1/26/2012

Juniper Networks Inc. (NYSE: JNPR) is blaming the tough macroeconomy for its downhill run (not the good kind).

The company said Thursday that revenues for the first quarter, which ends March 31, will dip below $1 billion, the first time that's happened to Juniper since June 2010. (See Juniper's Q1 Forecast Disappoints.)

Part of that is due to weak spending by service providers, a trend that grew during the December quarter, Juniper officials said on Thursday's earnings call with analysts.

But that, in turn, is due to an uncertain economy. Juniper is keeping its forecasts down to reflect "seasonally lower enterprise spending and continued caution by service providers," CFO Robyn Denholm said during the earnings call.

Service-provider caution is what triggered Juniper to tell analysts -- twice -- that fourth-quarter revenues would be lower than expected. (See Juniper's Getting Stalled on Revenues, Juniper's Q4 Got Even Worse and Is There More to Juniper's Earnings Miss?)

But AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ) both said this week that their 2012 spending would be about flat compared with 2011. In other words, they're not indicating any big slowdown, something analysts questioned CEO Kevin Johnson about during Thursday's earnings call.

He called it a matter of timing: "Oftentimes, they put a lot of capital first into the radio access network," he said. Juniper wouldn't see benefits to the parts of the network it would serve until later.

Another factor is that some customers might continue to delay receipt of routers. Some service providers that ordered routers in the fall didn't want delivery until after January -- something Juniper reported in October -- and those orders might continue to be delayed as customers eye the European financial crisis, Johnson said.

Finally, some customers "may have slowed T-series orders over the last six months," as they waited for the new T4000, which just started shipping, Johnson said.

Customers might also have been waiting for the PTX packet-optical system, which is due to start shipping this quarter. Some analysts expect the PTX to eat into the number of core-router ports its customers would use. (Johnson takes issue with the PTX being described as a core-router "replacement," though.)

The T4000 scored initial orders with Comcast Corp. (Nasdaq: CMCSA, CMCSK) and Telefónica SA (NYSE: TEF), among others, last quarter, Johnson said.

— Craig Matsumoto, West Coast Editor, Light Reading

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Pete Baldwin
Pete Baldwin
12/5/2012 | 5:44:21 PM
re: Juniper Points to the Economy


Some analysts are starting to wonder if something systemic is going on with Juniper, judging from the questions on the earnings call. We quoted Ed Zabitsky of ACI earlier, who thinks it's the start of the CDN effect.  And back in October, Mike Genovese of MKM was seeing evidence that the intentionally delayed router shipments might extend beyond Q2.


Conventional wisdom has been that Juniper will be OK in 2012 due to the new products coming. It'll be interesting to see if that POV holds up.


Separately: Juniper announced a customer for MobileNext -- it's Elisa, in Finland.

macster
macster
12/5/2012 | 5:44:20 PM
re: Juniper Points to the Economy


Seems like a classic declining revenue/profit consulting case. I'd look externally at the market and competitors first before saying it's Juniper-specific.

photon2
photon2
12/5/2012 | 5:44:20 PM
re: Juniper Points to the Economy


If Alcatel-Lucent IP division and Cisco SP routers are also down this much, then yes, it's the economy.  If they're flat to up....uh.....there's something else going on. 


I guess we'll know soon enough.


P2

Fsaterrats
Fsaterrats
12/5/2012 | 5:44:09 PM
re: Juniper Points to the Economy


Well, let's see...


The MX doesn't appear to be growing, and from Q2 "10" to Q2 "11" the line grew $130M.  In Q2 "11" the line did $279, and in the last quarter, I believe it did $255.


ERICY (who OEMs the MX series routers) announced their own replacement gear in August.  If I recall correctly, ERICY accounted for about 20% of the MX.


As LightReading pointed out, the new (RedBack) SSR 8000 line will achieve 400Gbit/s-per-slot, therefore, I think we can safely say it will be reliant on the EZCH NP-4, which went into production in December. 


I would guess/expect that ERICY's business may have tailored off in Q3 and Q4 in anticipation of them providing their own solution.  With 400Gbit/s-per-slot vs. the current MX960/Trio, I don't think it would be a long conversation to convince a customer to wait a few months...do you?


Of course, moving forward, Dell (another JNPR OEM partner) has acquired Force 10, and I've read that they are terminating that relationship this month.  Similarly, they too may have been scaling back.


Additionally, Nokia Siemens is diverging away from the fixed access market, and JNPER was focal to that effort, too.


Sounds like tough sledding to me!





 




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