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Optical/IP

Juniper's Good News Fails to Impress

Juniper Networks Inc. (Nasdaq: JNPR) just hit expectations with its third-quarter earnings announcement last night, and it announced its first contract with a regional Bell operating company (RBOC) (see Juniper Reports Q3).

On the surface, this looks like pretty good news for the routing company. In fact, some might even say it’s rather surprising that Juniper was able to meet expectations and announce BellSouth Corp. (NYSE: BLS) as its first U.S. incumbent carrier win in such a dismal carrier market. But digging into the details, it’s clear that Juniper is not yet out of the woods.

For the third quarter of 2002, Juniper recorded $152 million in revenues, down 25 percent from $202 million for the same quarter a year ago. While Juniper posted a $0.10 profit for the same quarter a year ago, its actual net loss this quarter was $0.84 per share, or $88.3 million. The net loss figures included amortization of deferred stock compensation and restructuring and integration charges associated with Juniper’s acquisition of Unisphere Networks. The deal was for $375 million in cash and 36.5 million shares of Juniper stock (see Juniper Nabs Unisphere for $740M).

The BellSouth contract, which Juniper CEO Scott Kriens said was for deployment of several large T640 routers, is definitely a big deal for the company. Juniper and the rest of the IP/MPLS vendor community have been pinning their hopes on the promise that the RBOCs will win the right to move into the long-distance market. The idea is that these carriers will need to build new infrastructure to do this and that they will use Internet Protocol (IP) and Multiprotocol Label Switching (MPLS) technology.

Rumors had been flying around during the quarter that Juniper had won business with BellSouth and was about to close a big deal with Verizon Communications Inc. (NYSE: VZ) (see Ericsson Sells R&D Ops). BellSouth confirmed that Juniper is supplying it with T640 and M160 routers for the buildout of its IP/MPLS core network. But David Sutton, a spokesperson for the carrier, says Juniper won't be the only supplier for the buildout. Deployments have already begun and are expected to be completed in the first quarter of 2003.

Almost as quickly as Kriens announced the win, he was back-pedaling and dodging questions about its significance.

“It was a rigorous process,” he said, evading a question about the size of the contract. “The test process required a great deal of work from us and them. Other than that, it’s never been our practice to comment on volumes or plans for network transformation. We let our customers comment for themselves.”

Kriens acknowledged that revenue had already been recognized on the deal. As far as future business with the RBOC, he again declined to comment. But Sutton of BellSouth characterizes the contract as one based on "performance and business need."

As a result, BellSouth isn’t expected to be a large contributor to Juniper’s bottom line anytime in the near future. Like the rest of the RBOCs, BellSouth probably won’t be making any significant IP routing deployments until late 2003 or 2004, according to vendors at the MPLScon Conference in Denver this week (see MPLS vs ATM? Vendors Weigh In).

Clearly, Kriens knows which side his bread will be buttered on down the road. He offered his future potential customers a plug at the end of the conference call, as he discussed the unfair burdens placed on RBOCs by regulations that require them to share their network elements with competitors. He described broadband deployment in the U.S. as an “embarrassing situation.”

“I think we rank 12th in the world,” he said. “There’s a clear opportunity for broadband in the U.S. market, but it has less to do with technology and more to do with other factors.”

Even with BellSouth’s deployment of the T640, Juniper’s traditional core router business dropped roughly 17 percent this quarter. The company hit its stated revenue target, but that was in large part due to the success of Unisphere’s ERX platform, which generated about $47.7 million or 37 percent of Juniper’s overall product revenue. Much of the traction came from Asia, where revenues grew to 30 percent of total revenues from 15 percent in the previous quarter.

Juniper’s two resellers, Ericsson AB (Nasdaq: ERICY) and Siemens AG (NYSE: SI; Frankfurt: SIE), were the only 10 percent customers. The third quarter was the first in which Siemens had resold Juniper gear. Most of it was the Unisphere ERX platform.

“Now we know why Juniper paid so much for Unisphere,” says Sam Wilson, an analyst with Merrill Lynch & Co. Inc.

As for the future, Juniper says it expects revenues to remain flat, and the company should return to cash flow positive in the next quarter. But analysts are still skeptical, given that carrier capex issues seem to be worsening. David Jackson of Morgan Stanley Dean Witter & Co. raised his revenue expectations for Juniper in Q4 to $152 million from $145 million, but he admits in the research note he published this morning that there is a reasonable chance the company could miss that target.

Juniper was trading down $0.20 (3.86%) to $4.98 today.

— Marguerite Reardon, Senior Editor, Light Reading
www.lightreading.com
rjmcmahon 12/4/2012 | 9:33:17 PM
re: Juniper's Good News Fails to Impress The following excerpt reveals poor judgment by a prominent tech CEO. Productivity must be enabled before bread will become plentiful again.

"Clearly, Kriens knows which side his bread will be buttered on down the road. He offered his future potential customers a plug at the end of the conference call, as he discussed the unfair burdens placed on RBOCs by regulations that require them to share their network elements with competitors. He described broadband deployment in the U.S. as an Gǣembarrassing situation.Gǥ

Most importantly, rereading Lincoln's second inaugural adress may help technology leadership understand that a nation founded on freedom must accept war against those who make it, regardless of the profits generated by the denial of others' freedoms.

"Fellow-Countrymen:

AT this second appearing to take the oath of the Presidential office there is less occasion for an extended address than there was at the first. Then a statement somewhat in detail of a course to be pursued seemed fitting and proper. Now, at the expiration of four years, during which public declarations have been constantly called forth on every point and phase of the great contest which still absorbs the attention and engrosses the energies of the nation, little that is new could be presented. The progress of our arms, upon which all else chiefly depends, is as well known to the public as to myself, and it is, I trust, reasonably satisfactory and encouraging to all. With high hope for the future, no prediction in regard to it is ventured. 1
On the occasion corresponding to this four years ago all thoughts were anxiously directed to an impending civil war. All dreaded it, all sought to avert it. While the inaugural address was being delivered from this place, devoted altogether to saving the Union without war, urgent agents were in the city seeking to destroy it without warGseeking to dissolve the Union and divide effects by negotiation. Both parties deprecated war, but one of them would make war rather than let the nation survive, and the other would accept war rather than let it perish, and the war came.
One-eighth of the whole population were colored slaves, not distributed generally over the Union, but localized in the southern part of it. These slaves constituted a peculiar and powerful interest. All knew that this interest was somehow the cause of the war. To strengthen, perpetuate, and extend this interest was the object for which the insurgents would rend the Union even by war, while the Government claimed no right to do more than to restrict the territorial enlargement of it. Neither party expected for the war the magnitude or the duration which it has already attained. Neither anticipated that the cause of the conflict might cease with or even before the conflict itself should cease. Each looked for an easier triumph, and a result less fundamental and astounding. Both read the same Bible and pray to the same God, and each invokes His aid against the other. It may seem strange that any men should dare to ask a just God's assistance in wringing their bread from the sweat of other men's faces, but let us judge not, that we be not judged. The prayers of both could not be answered. That of neither has been answered fully. The Almighty has His own purposes. "Woe unto the world because of offenses; for it must needs be that offenses come, but woe to that man by whom the offense cometh." If we shall suppose that American slavery is one of those offenses which, in the providence of God, must needs come, but which, having continued through His appointed time, He now wills to remove, and that He gives to both North and South this terrible war as the woe due to those by whom the offense came, shall we discern therein any departure from those divine attributes which the believers in a living God always ascribe to Him? Fondly do we hope, fervently do we pray, that this mighty scourge of war may speedily pass away. Yet, if God wills that it continue until all the wealth piled by the bondsman's two hundred and fifty years of unrequited toil shall be sunk, and until every drop of blood drawn with the lash shall be paid by another drawn with the sword, as was said three thousand years ago, so still it must be said "the judgments of the Lord are true and righteous altogether." 3
With malice toward none, with charity for all, with firmness in the right as God gives us to see the right, let us strive on to finish the work we are in, to bind up the nation's wounds, to care for him who shall have borne the battle and for his widow and his orphan, to do all which may achieve and cherish a just and lasting peace among ourselves and with all nations."
BobbyMax 12/4/2012 | 9:33:13 PM
re: Juniper's Good News Fails to Impress There is nothing wrong on the part of Juniper to secure a part of the businees at Bell South. Public carriers mostly buy from very established carriers, so this was an exception. If the product performs and interoperate, Juni[er would have more business from Bell South and other public carriers.
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