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The Face of the New Juniper

Heads have already begun to roll at Juniper Networks Inc. (Nasdaq: JNPR). According to sources close to the company, workers who are part of the expected 10 percent headcount reduction in the company already started receiving pink slips this morning.

The news will be officially announced this evening when Juniper releases its second-quarter 2002 earnings, sources say. The company is also expected to tell investors that at least one of its products will be eliminated from the lineup. All of the moves are part of a repositioning of the company, following its $740 million merger with edge routing player Unisphere Networks (see Juniper Acquires Unisphere).

This will be the company's first earnings conference call since the merger. It's also the first conference call since the WorldCom Inc. (Nasdaq: WCOM) accounting troubles developed at the end of June. WorldCom has always been a significant Juniper customer.

While analysts aren’t expecting any big surprises tonight, most are awaiting details about which products and workforces will survive the merger. And everybody is looking for a little more information on what the new face of the combined “Junisphere” will look like.

Sources close to the company say that most of the layoffs are expected to be in areas like finance and billing, human resources, public relations, marketing and sales. As a combined company, these functions need to be streamlined. Offices on both coasts will likely be hit.

“It’s not a surprise to see them rationalizing their cost structure,” says Sam Wilson, an analyst with Merrill Lynch & Co. Inc. “That’s what you do in an acquisition. You don’t need double accounting and double human resources.”

Even though Juniper’s and Unisphere’s products complement each other very well, there is some product overlap. Rumors have been floating around for weeks that Juniper will cut at least one of these products from its roster (see What to Expect From 'Junisphere'). The big question is which one will get the axe. Stephen Kamman, an analyst with CIBC World Markets, says that mergers of this kind are as much about people and personalities as they are about strategy, suggesting that which products stay and which go are often based on company politics. He predicts that Unisphere’s MRX, a multiservice switch, is the likely victim.

”Much of the excitement surrounding multiservice-over-IP has lost its luster,” says Kamman. “Juniper may look to take their own approach to the project. Having gone through a merger myself and watching other companies go through them, I’d say that making a merger work is about making people happy. Other factors come into play all the time.”

As for the M5 and M10 Juniper routers, which compete directly with Unisphere’s hot-selling ERX, he predicts they won’t be canceled. Instead, he says, Juniper will probably discontinue developing enhancements for the line and will concentrate its sales efforts more on the ERX.

One element of the deal is starting to emerge -- that is, this deal looks more like a merger than an acquisition. Both Juniper and Unipshere employees are being laid off, but Unisphere's Boston-based presence will remain significant. This makes sense, because Unisphere is a well-established player in the edge routing market, which is consdered one of the healthier telecom markets at the moment. The company is believed to have more than $150 million in annual revenues.

The Unisphere team is expected to remain on the East Coast, where it will head up marketing and development of the edge routing portfolio. Juniper's West Coast team will likely handle the core routing products. The two camps are expected to have a unified sales force that will sell both product lines.

Lloyd Carney, executive vice president of operations for Juniper, and former Unisphere CEO Jim Dolce will be working closely together to keep the two bookends of the company working in sync. Dolce now has the title of executive vice president of worldwide field operations. Carney will handle engineering and operations, while Dolce will be in charge of sales and marketing.

Both executives are well versed in acquisitions. Prior to Juniper, Carney was president of the wireless division at Nortel Networks Corp. (NYSE/Toronto: NT). He came to Nortel via the Bay Networks acquisition and came to Bay through its acquisition of Wellfleet. Dolce had founded Redstone Communications, which was acquired by Unisphere. He also served as vice president at Cascade Communications, which was acquired by Lucent Technologies Inc. (NYSE: LU).

"Dolce and Carney both have scars from past mergers,” says Kamman. "I’m relatively confident that they will be able to work together to make the integration work.”

As far as the numbers go, Juniper isn’t expected to announce any big surprises. Analysts are expecting a one-cent loss, according to First Call, compared to a nine-cent profit for the same quarter a year ago. Analysts are also expecting revenues to be down from the $122 million reported in the first quarter -- this quarter’s revenue are expected to be closer to $108 million.

The shortfall can be blamed in large part on Juniper’s association with WorldCom, which made up about $12 million of Juniper’s revenue in the first quarter. Late last month, Juniper issued a statement saying WorldCom would account for close to $7 million worth of revenue in the second quarter. Juniper also has significant exposure to other troubled service providers, such as Qwest Communications International Inc. (NYSE: Q).

”I’m not expecting any fireworks tonight on the call,” says Merrill Lynch’s Wilson. “Everybody already knows the bad news. The carrier landscape is still tough, and Juniper sells 100 percent of its products there.” In after-hours trading, Juniper was up $0.82 (11.36%) to $8.04.

— Marguerite Reardon, Senior Editor, Light Reading
http://www.lightreading.com
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Yogi 12/4/2012 | 10:07:12 PM
re: The Face of the New Juniper Just to clarify Dolce's past with acquisitions:

I believe he headed up Arris, a remote Dial access concentrator startup that was acquired by Cascade. He left around the time of the Ascend acquisition of Cascade.
wilecoyote 12/4/2012 | 10:07:12 PM
re: The Face of the New Juniper So besides the obvious core and edge plays they have, they have a cable system (Pacific). Anyone know how well that line is doing?

Juniper needs a wireless solution, and they need an enterprise solution. With Riverstone or Extreme in their lineup with maybe Megisto or Tahoe Networks in the wireless line, plus maybe an access play (White Rock?), they would be well positioned for any turnaround. Of course they have plenty of time as no general recovery is coming until probably mid-04 at best.
Lightmare 12/4/2012 | 10:07:11 PM
re: The Face of the New Juniper Wireless will be Airvana- just a guess but with Haley now on BOD it makes some sense.
wilecoyote 12/4/2012 | 10:07:09 PM
re: The Face of the New Juniper Haley's presence doesn't help them in this regard. He hates the CFO at JNPR (who doesn't).
docsisdude 12/4/2012 | 10:07:05 PM
re: The Face of the New Juniper they just passed 1.1 certification and are in the process for eurodocsis. I'd expect them to report under the unisphere group, given that they're and edge product. if they can be there early for docsis 2.0 they should be in good shape, given how lousy terayon is ... of course TI is another player who seems to be doing well heading toward docsis 2.0
whateva 12/4/2012 | 10:07:01 PM
re: The Face of the New Juniper They have one deal announced i'm pretty sure they have nothing else.

<http: 02jul10-1.htm="" news="" www.sciatl.com="">

It has been stated before on these boards that certain juniper execs had a vested interest in buying that company out.

Considering the current estimated value of the DOCSIS headend market anywhere between 150 to 250 million annually and the PB buy price 200 million this is probably not going to pay off. Cisco dominates this sector with around 70 - 80 percent of the market. And this will not change until DOCSIS 2.0 and only if other people can execute. Cable also requires quite a different skill set to what most of the engineers that the company has in their Pre-Sales/Support line up. I would suggest that what Juniper was really hoping to do was crack the cable system backends which appear to be mostly Crisco and RS/Cabletron

On the actual product side their only value is that they have there own DOCSIS silicon which is higher density than the current silicon types but even this will probably not save the product

What i think will be interesting to see is if Juniper tries to go to a common software platform and how they are going to get a decent OSS story.

As to TI's progress it's not disclosed who the other DOCSIS2.0 silicon vendors are though probably will be TI and Broadcom (after Terayon's Imedia) but TI has only announced an ATDMA chip and as SCDMA is part of the standard that ain't going to get them to DOCSIS2.0 the chips must include both. Terayon has the lead but they have to execute and they know nothing about routing. The good thing for the competing vendors is that Cablelabs probably will not certify 2.0 vendors without at least 2 competing products available.</http:>
scooby 12/4/2012 | 10:07:00 PM
re: The Face of the New Juniper Yeah, that extra ten or twelve million they'll get from cable will save them.

NOT!!!

Hey, gimme a hand with these deck chairs.
CogswellCogs 12/4/2012 | 10:06:58 PM
re: The Face of the New Juniper Could Jim be related to Joe Dolce, famous for the 1981 hit song "Shaddap You Face"? Do you remember those touching lyics:

What'sa matta you, hey,
Gotta no respect, whatta you think you do,
Why you looka so sad?
It's-a not so bad, it's-a nice-a place,
Ah, Shaddap You Face.

Feel free to make your own joke here.

Hope this helps,

Cogs
reoptic 12/4/2012 | 10:06:58 PM
re: The Face of the New Juniper Gee, what about the 10% layoff? What about the East Coast West Coast integration issues that still aren't sorted out like what does the organization look like now? Which product is canceled?

Good thing the veterans of the Ascend/Cascade and Bay/Synoptics mergers are going to lead the integration, as those went so well...
tet109 12/4/2012 | 10:06:55 PM
re: The Face of the New Juniper EXPECTING RISING REVENUE

Juniper Chairman and Chief Executive Scott Kriens said he was confident the company could post revenues of $155 million to $160 million in the third quarter for a loss, excluding charges, of 2 cents per share
```````````````````````````

I hope revenue rise with Unisphere. With Unisphere say they at $50M for quarter run rate, $200M this year, does that mean JNPR is going to do $105M-$110M next quarter. If JNPR stay flat or gain then Unisphere not doing $50M quarter. Why investors excited about this revenue rise statement ?
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