Juniper Smiles Through Q3

Aside from that whole stock options thing, Juniper Networks Inc. (NYSE: JNPR) seems pretty happy about its financials these days.

CEO Scott Kriens was chipper during the company's third-quarter earnings call with analysts yesterday, much of which he spent touting the MX960 Ethernet box that had been announced yesterday morning. (See Juniper Antes Up on Ethernet (Finally).)

It's a change from the past couple of quarters, when Juniper seemed to be layering on bad news. (See Juniper Dusts Off Its Eraser.) For the second consecutive quarter, Juniper didn't provide full financials, as the company is still awaiting some earnings restatements triggered by the discovery of apparent backdating of stock options. (See Juniper Readies Restatements.) Speaking on a conference call with analysts yesterday, Juniper officials said they expect to complete those restatements by the end of the year.

The company also expects to file its second-quarter 10-Q form -- the quarterly report required by the Securities and Exchange Commission (SEC) -- by the end of the year. Nasdaq has warned Juniper of possible delisting due to the late 10-Q, as it has done with many other public companies snared by stock options woes.

Dykes told analysts Juniper has presented Nasdaq with a plan to get back on schedule and hasn't received a decision yet.

Juniper's overall revenues presented no surprises. Revenues of $573.6 million for the quarter ending Sept. 30 were on par with the consensus estimate of $573.1 million tallied by Reuters Research . Juniper's fourth-quarter revenue forecast of $590 million to $595 million was likewise on target with expectations. (See Juniper Reports Q3.)

Dykes told analysts Juniper would have met its own non-GAAP forecast of 18 cents per share, not including any potential options restatements.

Juniper stock was up 23 cents (1.3%) to $17.85 in after-hours trading last night.

Kriens deflected a few questions about Juniper's router revenues, which haven't grown as quickly as services revenues lately. Services accounted for $106.3 million during the third quarter, up 7.8 percent from the previous quarter.

By contrast, revenues from "infrastructure" -- routers, basically -- fell for the third time in a row, to $345.6 million compared with $352.2 million in the second quarter.

Table 1: Juniper Infrastructure Revenues, by Quarter
Quarter $(M)
Sept. '05 $358.3
Dec. '05 $376.0
March '06 $363.0
June '06 $352.2
Sept. '06 $345.6
Source: Juniper Networks Inc.

Kriens said only that the infrastructure revenues reported are "less than what has been shipped and paid for," as some of those shipments initially land in the category of deferred revenue.

As for future router demand, Kriens gave no quantitative peeks behind the curtain but did say he expects Juniper to benefit from general increases in bandwidth and network usage.

"Strategically I'm probably more confident today than I've ever been," Kriens said.

Juniper still sees itself as being on the cusp of huge market gains, particularly in the enterprise, where Kriens likes to talk of the company being a $2 billion player in a $20 billion market. But being a relative newcomer to the enterprise, Juniper is having to spend some money to strengthen its foothold there.

"We're currently experiencing a reduction in our operating margins as a result of investment in the enterprise opportunity," Kriens said on the call. But he said Juniper will have to continue that investment, because "some of that opportunity cannot be ignored."

On the service provider side, a stall in Japan's next-generation network buildouts -- noted in Juniper's recent earnings calls -- is still in effect, Kriens said.

Kriens also noted that Juniper has extended its reseller relationship with Lucent Technologies Inc. (NYSE: LU), partly addressing concerns about what might happen to that relationship after the merger with Alcatel (NYSE: ALA; Paris: CGEP:PA). (See Juniper Defends Core Business in Q1.)

The extension was partly motivated by the fact that Alcatel, Lucent, and Juniper would have a number of large common customers like BT Group plc (NYSE: BT; London: BTA) and Embarq Corp. (NYSE: EQ), Kriens said. The contract extension "reinforces in unambiguous terms to our common customers that the relationship is intact," and it does include the possibility of Alcatel Lucent selling Juniper routers to new customers, Kriens said.

— Craig Matsumoto, Senior Editor, Light Reading

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