Juniper took a hit Wednesday as it warned of a slowdown in US telco spending and continued its portfolio transformation under CEO Shaygan Kheradpir.
Despite a sequential and year-on-year increase in second-quarter revenues to $1.23 billion, the vendor saw its share price dip by more than 10% to $22.28 as it revealed how third-quarter revenues are set to be lower than previously expected due to "customer dynamics."
In its earnings release, Juniper Networks Inc. (NYSE: JNPR) noted that it expects third-quarter revenues to be in the range of $1.15 billion and $1.2 billion, and that "specifically, within US-based service providers, their market dynamics, including M&A activity, are impacting both sequencing and timing of projects." (See Juniper Reports Q2 Numbers, Sells Unit and Comcast-TWC: Merger of Equals in Poor Service?)
Financial analysts believe, quite reasonably, that the hit is coming from a change (which may or may not be temporary) in the spending habits of AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ).
In an emailed research note, George Notter at Jefferies & Company Inc. wonders if the two US operator giants might have "made good progress on routing capacity," and so do not need quite as much in the way of upgrades from Juniper. He believes that Juniper might be taking a combined hit of about $100 million from these two customers alone.
Mike Genovese at MKM Partners , meanwhile, believes that operator considerations around NFV could already be affecting their capex strategies. "The company is seeing lower 2H14 demand in North America due to the large cable merger, increased wireless focus at Tier 1 Service Providers and also, we believe, because of the NFV transition," he stated in a research note.
However, the consensus is that Juniper is doing well in other areas -- with the Internet giants and in federal accounts -– and that it is also doing well with its corporate cost controls, part of its new Integrated Operating Plan. (See Juniper Bows to Investor Pressure, Refocuses and Juniper Cuts Headcount by 6%, Axes ADC .)
As part of that plan, Juniper has sold its Junos Pulse mobile security portfolio for $250 million to Siris Capital, noting that this is consistent with its strategy to focus on "where its customers and the market is heading with High-IQ networks and building the next-generation of clouds."
Analysts noted that this sale wouldn't affect Juniper's profitability very much on an ongoing basis -- the Junos Pulse business is believed to be running at about break even -- but it does signal a step back from mobile security, an increasingly important sector for many of Juniper's network operator customers.
— Ray Le Maistre, , Editor-in-Chief, Light Reading