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Is Juniper's Cautious Confidence Justified?

Carol Wilson
1/28/2015

Juniper's 2014 earnings announcement capped a tumultuous year for the network and security gear maker and the results themselves reflected that tumult. The company reported a fourth-quarter loss, admitted its security business had been overvalued, and remained cautious about the immediate future, yet saw its stock price rise in response. (See Juniper Reports Q4 Sales Dip.)

The loss of $769.6 million, or $1.81 a share, compared with a profit of $151.8 million, or 30 cents a share, for the fourth quarter of 2013, largely reflected an $850 million goodwill-impairment charge for Juniper Networks Inc. (NYSE: JNPR)'s security-tracking business. The company took that charge as part of its security strategy overhaul that included selling off its mobile security unit. (See Juniper Cuts Headcount by 6%, Axes ADC and Juniper Sells Security Unit, Feels Carrier Pinch.)

Separate from the mobile security sell-off, revenues were down 11%, yet the market rallied behind Juniper shares because the adjusted income was 40 cents a share, well above Wall Street expectations. Shares rose about 5% Tuesday evening,

Two months into his job as Juniper's new CEO, Rami Rahim, is promising to energize the company and get it refocused on winning market share away from rival Cisco, but remained cautious about first-quarter prospects, saying seasonally this is a down period. Rahim told investment analysts he expects the second half of the year to be better, especially for service provider sales. (See New Juniper CEO Can Be Thankful for $14.5M and Turmoil at Juniper as CEO Quits.)


Zoom in on carrier SDN strategies in our SDN section here on Light Reading.

Calling 2014 "a year of change" for Juniper, the former head of product development for Juniper promised the company has successfully streamlined its organization and reduced its costs to focus on high-growth areas. Rahim added he isn't happy with the performance of the security business and thinks Juniper can do better but didn't provide specifics.

Michael Genovese of MKM Partners said in an investment note that Juniper is expecting router demand from US Tier 1 carriers to improve significantly in the second half of 2015, but added that this expectation seems to be based on Juniper's past relationships and a belief that carriers will have to spend money on their networks, not on "specific revenue visibility on specific large projects in 2H15, as far as we can tell."

— Carol Wilson, Editor-at-Large, Light Reading

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Joe Stanganelli
Joe Stanganelli
1/28/2015 | 10:43:37 PM
Maybe just a correction?
I suspect that a not-insignificant part of that stock rise was the continued tide of excitement over Juniper's beneficial settlement with Palo Alto last year in their vicious, multi-jurisdictional dispute over approximately 800 zillion patents.  Investors had been very, very cautious before the end of that legal hullaballoo, so perhaps the stock rise is but a correction.
nasimson
nasimson
1/28/2015 | 10:43:06 PM
from Telecom Network hardware to IT hardware
Juniper would find it difficult to snatch market share back from Cisco. As network modernizations take place from 3G to 4G, old network players like ZTE & Huawei are increasingly penetrating into IT hardware space. 
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