Juniper Meets Revised Guidance

Juniper Networks Inc.'s (Nasdaq: JNPR) second-quarter sales rose 79 percent over the same period last year; but its pro forma profits rose only 2.45 percent, and total sales declined drastically from last quarter, providing yet more evidence that carrier spending on its routers, and other core networking gear, has slowed (see Juniper Posts Q2 Results).

The company’s second-quarter results were a penny better than Wall Street’s revised expectations and its own reduced guidance (see Core Slowdown Hits Juniper). Leading up to the announcement, investors pushed Juniper shares up 3.94 (16.06%) today, and the stock closed at 28.47, the highest it’s been since July 5. Juniper’s stock price climbed to $30 in after-hours trading on Island ECN.

After adding in a restructuring charge, write-downs in equity investments, and other charges against earnings, Juniper’s actual net loss for the quarter was $37.1 million or 12 cents a share. Its actual net income for the year-ago period was $19.6 million, or 6 cents a share.

Another bad sign: A look at the company’s six-month results showed that Juniper’s profits have declined 22 percent in just one year. Juniper reported profits of $21.4 million for the first six months of 2001 compared to profits of $27.7 million for the first six months of 2000.

However, Juniper’s net revenues for the first six months of this year were $534.3 million, up 202 percent over the reported $176.9 million in net revenues for the same period last year.

The company reported pro forma net income of $29.3 million for the quarter, or 9 cents a share, versus $28.6 million, or 8 cents a share, for the year-ago period. Sales were $202.2 million, compared to $113 million for the same period last year.

On June 8, Juniper lowered its expectations for the quarter to a $200-$210 million range from the $300-$310 million range it had previously expected. That announcement was the first time Juniper had reported a sequential decline in growth since the company went public in 1999.

In line with its cost cutting, Juniper reported that its headcount had dropped 7 percent from last quarter, to 1,080 employees. Juniper CFO Marcel Gani says the company’s operating expenses should decline about $5 million between the second and third quarter.

Juniper’s largest customers for the quarter -- those making up more than 10 percent of its sales -- were WorldCom Inc. (Nasdaq: WCOM) and Ericsson AB (Nasdaq: ERICY), which resells Juniper’s gear to carriers.

The company expects its revenues to be flat for the third quarter, with anticipated earnings of 9 cents a share. It expects 10 cents a share for the fourth quarter.

Though Juniper hasn’t articulated how or when it will enter the metro market, the company has been eyeing it as an area for potential growth for quite a while (see Juniper CEO: Low-Margin Metro?). Of course, while doing so, it is careful not to appear that it's losing faith in a business focused on the network’s core.

“There is no success at the edge of the network that doesn’t contribute to the core,” says CEO Scott Kriens.

- Phil Harvey, Senior Editor, Light Reading
http://www.lightreading.com