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Optical/IP

Juniper Readies Restatements

The stock-options scandal is deepening at Juniper Networks Inc. (NYSE: JNPR), as the company announced today that it will need to restate financial results going back to Jan. 1, 2003.

Juniper also noted it will be tardy with its Securities and Exchange Commission (SEC) Form 10-Q for its second quarter, which ended June 30. (See Juniper Updates Status.)

The restatements come on the heels of Juniper's discovery that some options measurement dates differed from their grant dates -- possibly signifying that some options were back-dated to increase profits.

That announcement, along with hints that restatements could be on the way, was made during Juniper's second-quarter earnings call with analysts. On that same call, Juniper officials said they're recalculating the goodwill associated with past acquisitions. That's not going to change the company's cash situation, but it will result in a $1.3 billion write-off that will affect net income. (See Juniper Dusts Off Its Eraser.)

Stock options have been a hot topic since March, when a Wall Street Journal article highlighted a study suggesting some firms had manipulated options dates in order to maximize profits, particularly for executives. The SEC and federal prosecutors have launched investigations of dozens of companies, many of them in the tech sector. (See Options Scare Hits SafeNet, Juniper.)

Juniper is hardly alone in restating earnings. Broadcom Corp. (Nasdaq: BRCM) recently made a similar announcement, and Vitesse Semiconductor Corp. (Nasdaq: VTSS) -- for a variety of reasons including stock-options worries -- will be restating earnings going back to 2003. (See Broadcom to Restate Earnings and Vitesse Woes Worsen.)

Juniper's case has led to the usual shareholder lawsuits and even some speculation that senior management -- including CEO Scott Kriens -- could be ousted. (See Backdating Could Bite Juniper Execs.)

Cisco Systems Inc. (Nasdaq: CSCO) could be chortling a bit over its rival's troubles. During Cisco's Aug. 8 earnings call, officials pointed out that the company has had strict stock-options processes in place for more than a decade, and that an internal investigation had revealed no problems. "Given the recent attention to this issue, Cisco thoroughly reviewed its issuance of stock-option grants, and I can state with confidence that we did not change stock-options grant dates to give employees a lower exercise price," Cisco CFO Dennis Powell said.

It's standard process for Nasdaq to send a delisting warning to an company that misses a 10-Q filing; Juniper, in a statement, said it expects to receive such a notice.

— Craig Matsumoto, Senior Editor, Light Reading

lightreceding 12/5/2012 | 3:44:29 AM
re: Juniper Readies Restatements So does any one have information on the strike price and options contract dates for Kriens and other Juniper Execs? The sales prices and the number of shares and execution dates are listed in the insider trading reports but that information isn't helpful without knowing the strike price and contract issue date so as to compare it with the historical prices. Given all the allegations it would be interesting to see what really happened.
chook0 12/5/2012 | 3:44:45 AM
re: Juniper Readies Restatements At 6.9B Market cap and at the moment probably a 75%+ control premium, Juniper is definitely something that a number of players cound consider buying right now.

However, approving a $1B share buyback is not the action of a leadership trying to get bought. That cash pile was one of the attractive features of Juniper from a buyer's perspective.

As a potential buyer I would also be extremely worried about the ability of a big company to retain people and keep the products competitive. $10B+ is a lot of money - more than the entire Juniper portfolio is worth as a cash cow. The share price is still betting that Juniper can stay at the leading edge of technology for years to come.

Assuming I could buy Juniper with stock, and I felt my stock was overvalued by 50% (still pretty typical in the telecoms area) then Juniper would become very attractive at about half its current stock price.

But then M&A activity rarely seems rational to me.

--chook

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Perhaps JNPR will get cheap enough to get bought. With diminishing job security, and a huge cash pile from earlier sales, what does Kriens have to lose?

materialgirl 12/5/2012 | 3:44:52 AM
re: Juniper Readies Restatements Perhaps JNPR will get cheap enough to get bought. With diminishing job security, and a huge cash pile from earlier sales, what does Kriens have to lose?
allidia 12/5/2012 | 3:45:01 AM
re: Juniper Readies Restatements an internal review as well. JNPR news clearly leaked as the stock was tumbling all week and especially today.
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