Juniper Spooks the Street
In another sign that the telecom slowdown has not yet bottomed, Juniper Networks Inc. (Nasdaq: JNPR) today substantially lowered its outlook for fourth-quarter revenues and profits (see Juniper Warns).
Juniper said this morning it now sees revenues of $150 million to $155 million for the fourth quarter, down from the original guidance of $200 million. Pro forma earnings are expected to be approximately $0.05 per share.
Juniper officials said the reduced sales were a result of a decline in spending by telecom carriers.
"As many service providers have previously indicated, these are very tenuous times. The service providers are moving very cautiously with spending, and when they have any doubt, they are not spending," said Juniper CEO Scott Kriens on a conference call Thursday morning.
The size of the shortfall took Wall Street by surprise, considering that Juniper shares had run up sharply since reaching all-time lows in September. Juniper was down 3.76 (16.40%) to 19.17. Competitor Cisco Systems Inc. (Nasdaq: CSCO) lost 0.47 (2.43%) to 18.88; and Riverstone Networks Inc. (Nasdaq: RSTN), which reported earnings that beat expectations on Wednesday night, sank 0.95 (5.54%) to 16.20 (see Riverstone Reports Record Q3).
Kriens described the carrier spending decline as a "disruption" but said that service providers were still committed to long-term investments in IP-based data networks. He also reiterated that Juniper will be focusing on new markets, including wireless and cable, in 2002.
"They're doing as much to keep dry powder and cash as they can," said Kriens of the carriers. "We're seeing increasing variance in the behavior, where some people are stretched and doing unnatural acts to stretch the capital that they've already spent."
Juniper CFO Marcel Gani said that despite the revenue shortfall, Juniper still expected gross margins of 61 percent in the quarter, up slightly from 60 percent in the third quarter.
"On the pricing front we're not seeing any drastic change in terms of competitive behavior, and that's evidenced by the fact that our margin will be up from Q3 to Q4," said Gani.
— R. Scott Raynovich, Executive Editor, Light Reading