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Routing

Analysts Jump on Juniper

Juniper Networks Inc. (NYSE: JNPR) seems to be suffering from a business malaise these days: A slumping share price, an options investigation, and now, lower analyst estimates for earnings.

In early morning trading, Juniper shares hit a new 52-week low, losing $0.26 (1.73%) to $14.77. Shares of the IP routing company are down 33 percent year to date.

Analysts scrambled to lower estimates today after Juniper CEO Scott Kriens gave a presentation at a Lehman Brothers conference Tuesday that didn't quite live up to expectations. Analysts had been expecting third-quarter revenues to increase by more than 5 percent sequentially.

This morning, Prudential Equity Group LLC analyst Inder Singh lowered his revenue estimates for 2006 and 2007. Lehman analyst Jiong Shao also knocked down estimates, putting 2006 revenues at $2.31 billion, down from $2.365 billion, and forecasting 2007 revenues of $2.61 billion instead of $2.75 billion.

In a research note issued this morning, Singh said Juniper was expecting third-quarter revenues to be similar to the second quarter's numbers (expected to be between $560 million and $570 million), with the fourth quarter seeing the majority of second-half growth.

"We have not heard such specific guidance for Q3 before and feel that the much-anticipated second-half ramp may be developing slower than expected," notes the analyst. "We believe that this weakness could persist into early 2007, although the company seems to be signaling a recovery for full-year 2007."

As a result, Singh has lowered his revenue growth estimates to 13 percent for 2006 and 14 percent for 2007, down from 17 percent and 18 percent.

Juniper reported 2005 full-year revenues of $2.064 billion, so Singh expects 2006 revenues to be about $2.33 billion and 2007's sales to hit $2.69 billion. (See Juniper Reports Q4.)

Lehman's Shao cut his earnings forecast to $0.75 for 2006 and $0.85 for 2007, down from $0.80 and $0.95, respectively.

Juniper's share price closed down 43 cents, about 3 percent, Tuesday at $15.03. It recovered slightly, by 4 cents to $15.07, in pre-market trading this morning.

The analyst revisions come only days after Juniper said it was cooperating with the United States Attorney for the Eastern District of New York regarding a request for information about stock-options grants. (See Feds Call on Juniper.)

So what's going wrong at Juniper? Prudential's Singh cites concerns he raised in January, including the age of the vendor's routing platform; competitive pressure from Cisco Systems Inc. (Nasdaq: CSCO) and Alcatel (NYSE: ALA; Paris: CGEP:PA); and management upheaval. (See Analyst: Juniper Faces Tougher Times, Dolce & Others out at Juniper, and Juniper Fills Marketing Void (3 Times).)

He doesn't see things picking up in the short term. "We feel that the hope that the company could stage a product rollout in time to stage a material second-half ramp appears increasingly tenuous."

Singh reckons the core router market, a sector it shares with Cisco, offers Juniper's best chance of a comeback, with the edge router market offering greater potential as IPTV deployments ramp up: "Juniper has a long history of product innovation, and we feel that the company has the ability to introduce successful product upgrades."

But can it deliver? With Cisco's strength, Alcatel's growing influence in the IP router market, the resurgence of Redback Networks Inc. , and the ongoing emergence of Asian vendors such as Huawei Technologies Co. Ltd. , Juniper needs to "refresh its product portfolio. However, we feel this may require a sharper focus of R&D investment on routing, and wonder how easily the company can pull off this investment at a time when it is also pursuing what is likely a resource-intensive enterprise growth strategy," states the Prudential man. (See Alcatel Router Revenues Surge.)

So while Singh reckons Juniper is among the "top-tier" of telecom equipment vendors, the near-term outlook isn't so good, so he has cut his stock target price to $18 from $24. But... wait... Isn't it now at $15?

The Lehman team has also cut its target to $21 from $25 -- which also now seems to be a moot point with the stock trading below $15. Like Prudential, it sees a brighter longer-term future for Juniper, as major carriers upgrade their IP networks and the vendor gets its house in order.

Juniper's growth should accelerate into 2007, writes Shao, "helped by new product announcements [and] increased penetration in enterprise and IPTV deployments," while a more customer-centric approach to sales and marketing, with separate teams for enterprise and carrier customers, "should improve its focus and its results, particularly in the enterprise over time."

— Ray Le Maistre, International News Editor, Light Reading

lightreceding 12/5/2012 | 3:53:22 AM
re: Analysts Jump on Juniper This article is full of idle speculation based on past performance. So they need a faster core router, like that happens overnight. Has there even been talk of it so far? IPTV plays on the E-Series? Really? Didn't Siemens reject that idea recently? Juniper is saying they are getting in to Enterprise? What do they have to sell there that is new and better. Ageing Netscreen, same old M-Series? Some WAN ports on a firewall? A bit of application acceleration. Rumors of a switch. Comeon Juniper. What are you going to do?
SRILANKA 12/5/2012 | 3:53:21 AM
re: Analysts Jump on Juniper I wonder how Kriens sleep at night,worrying about
the back dating scandal,reading his CFO making
feeble staments about earnigs and erosion of
growth prospects?JNPR having aging products,that can not compete with the competition and coping with an ongoing management upheaval and churn?
Poor near-term fundamentals and growth weakness
to persist trhu 2007?
In the mean time scotty is enjoying his compensation increase and extra 700k stock grand,
using his private plane for Co. business and get
450k refunded and thinking about another stock
buy back that can be put right back in his pocket.
The back dating scandal already has put ten
executives of four companies out of their jobs,
let us hope that Scotty get nailed and boot the
rascal out.Only a new guy can clean up this hornet
nest!
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