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Will Juniper Miss Its Quarter?

With a little over two weeks left in the first quarter of 2002, investors question whether or not Juniper Networks Inc. (Nasdaq: JNPR) will be able to meet the flat revenue growth it predicted on its fourth quarter 2001 conference call in January.

Investors at the Merrill Lynch & Co. Inc. telecom investor conference yesterday said the company still has at least 40 percent to 45 percent of its business to do in the last two weeks of March, before the quarter ends. Such a "back-end loaded" quarter could be a tall order to fill, especially considering that many of Juniper’s key customers are continuing to cut their budgets.

Juniper CFO Marcel Gani, speaking at the conference yesterday, didn’t say much to comfort investors. Gani confirmed that the quarter would be heavily loaded into the last few weeks. In a break-out session after his presentation, he told several onlookers that many customers had put off buying gear earlier in the quarter. He said part of this could be attributed to the fact that many carrier budgets were still being finalized in January.

Some wonder if Juniper will really be able to pull through in these last weeks, especially since some of its key customers have again recently announced capital-spending cuts. For instance, Qwest Communications International Inc. (NYSE: Q) and WorldCom Inc. (Nasdaq: WCOM), which are both struggling with debt and accounting issues, have announced more spending cuts as they attempt to get their balance sheets under control (see Qwest Sees Light at End of the Tunnel and WorldCom Accounting: What's Up?).

Gani alluded to these cuts in his talk. "We don't comment on the quarter," he said. "There's no new information, carriers are still tightening their belts and investors are gloomy."

Gani did tell investors that he didn’t expect any big surprises in the quarter. Still, his words left many investors guessing and speculating. “I’d say you could take what you want out of his comments,” said one fund manager who didn’t want to be named. “If you’re short on the stock then he was negative. If you’re long, he was positive.”

In recent weeks, though, anxiety about Juniper's numbers appears to have risen in investment circles.

Back in January, when the company reported its disappointing Q4 figures, CEO Scott Kriens told investors he expected revenues to remain flat -- around $150 million for the quarter (see Juniper Meets Lowered Expectations). But word began circulating several weeks ago that Juniper had a terrible January, igniting rumors that the company would miss its numbers in Q1 of 2002. On the other hand, according to several sources, business picked up in February.

Gani also said that international sales will continue to be down from its historical level of 35 percent of total sales. It was the unexpected drop of the international sector to 24 percent that prompted the company’s shortfall from its original guidance last quarter.

“We won’t see a dramatic change in the international market this quarter, but our goal is to work back towards the 35 percent revenue this year,” said Gani. “Europe was a disappointment last quarter, but now others are saying Asia is still strong, so we will see if that is true. Even in North America all the deals are smaller than I would like them to be.”

But what about big wins like the Deutsche Telekom AG (NYSE: DT) deal announced on Tuesday and the new edge router Cable & Wireless PLC (NYSE: CWP) wins announced earlier in the quarter? While these are important wins for the company, much of the revenue from these deals was already recorded in the fourth quarter, according to Gani.

This morning, ABN AMRO downgraded the stock from Add to Hold and said it only expects Juniper to post first-quarter revenue of $110 million and second-quarter revenue of $100 million. It also said that Juniper will likely fall short of its second-half revenue guidance of $305 million to $315 million. Instead, it will likely post revenues of $250 million in the second half of this year.

Shares in the company dropped $1.42 (10.96%) to 11.54 today.

— Marguerite Reardon, Senior Editor, Light Reading
http://www.lightreading.com
lite_boy 12/4/2012 | 10:47:18 PM
re: Will Juniper Miss Its Quarter? have to be happy to know they will miss
the target this quarter. Are they waiting for
option repricing on 5/18/02 ?

While this might mean bad news for startups
like Procket, Caspian, Mahi, calix ...
this may be a temperary joy for Juniper
employees. If Juniper can not sell, can the startups ?
Pierre 12/4/2012 | 10:47:17 PM
re: Will Juniper Miss Its Quarter? I concur with Skeptic's opinion of the competitive landscape, but wanted to add one offering to the mix: Hyperchip.

Its product will be ready to market in Q3/Q4 02, and its business/value proposition makes it either a strong candidate for carrier upgrade of its core in early 2003, or an acquisition target for CSCO in late 2002.

With Caspian not ready with a next-gen offering, the horserace for the third (and, in my humble opinion, final) player in this category will be won by Hyperchip.

Regards,

Pierre
skeptic 12/4/2012 | 10:47:17 PM
re: Will Juniper Miss Its Quarter? While this might mean bad news for startups
like Procket, Caspian, Mahi, calix ...
this may be a temperary joy for Juniper
employees. If Juniper can not sell, can the startups ?
-------------
It depends on the timeline of the company.

Procket will not have anything available
this year anyway (even for trials probably)
and they have also supposedly changed
directions. Nobody really knows even when
they might be ready with their new-direction
product.

Caspian, despite their statements to the contrary,
isn't even in real trials yet and is unlikely to
sell anything this year.

I don't think Mahi is going anywhere. I don't
know about Calix.

So for some startups, whats going on now doesn't
really matter. Its what happens next year
and the year after for most of them.

Other startups (charlotte's networks and Pluris)
are going to have big problems because they
are too old (as startups) to wait around much
longer. Timing is everything.

Luddite 12/4/2012 | 10:47:17 PM
re: Will Juniper Miss Its Quarter? What about the Avici TSR/SSR in the core?

It doesn't sell well but it DOES work -- a rumored five 9s from AT&T over some period (5 months).

It's extremely difficult to get stable BGP and MPLS running...

I think these others will have a long road.

Lud


cruiser 12/4/2012 | 10:47:16 PM
re: Will Juniper Miss Its Quarter? skeptic, you seem fairly informed but in one case, you are buying into the rumor machine that is the lightreading message board community.

your assumptions on procket are incorrect (on the subject of availability).
skeptic 12/4/2012 | 10:47:14 PM
re: Will Juniper Miss Its Quarter? your assumptions on procket are incorrect (on the subject of availability).
-------------
They may be. All I can go by is what I hear.
The rumors are that the hardware for what
they were originally building went terribly
wrong and they have re-directed the company.

Obviously depending on the scale of what
they are now building, they could have faster
delivery. And to be honest, there was always
conflicting stories even before recent events
with regard to when exactly procket was going
to reach market.

skeptic 12/4/2012 | 10:47:13 PM
re: Will Juniper Miss Its Quarter? What about the Avici TSR/SSR in the core?

It doesn't sell well but it DOES work -- a rumored five 9s from AT&T over some period (5 months).
-----------------------------

Avici's problem is more than just not selling
well. There are people who just don't want to
deal with them and because of that they are
having a great deal of difficulty signing up
customers.

As far as 5-nines, you reach five nines by
the type of system you build, not by an
isolated instance of 5-nines of uptime over
several months.

If Avici were the solution, they would own the
market already and the startups would find it
almost impossible to survive in the space. That
isn't the case.
cruiser 12/4/2012 | 10:47:11 PM
re: Will Juniper Miss Its Quarter? those rumors are partly true. the initial hardware had problems. but then again, what procket is trying to do in hardware is non-trivial. so if the chips had worked perfectly first spin, you'd have to ask: "how ambitious is the design?" the reality is that no development program is ever totally on schedule or on track. there is always something that comes up that smells like disaster. what makes products work, and in small companies, the company itself work, is what management does to course correct when those things happen. let's just leave it at that.

be assured, procket is on track. and i wouldn't say they've "re-directed." maybe expanded their market opportunity somewhat.
greybeard 12/4/2012 | 10:47:11 PM
re: Will Juniper Miss Its Quarter? With Caspian not ready with a next-gen offering, the horserace for the third (and, in my humble opinion, final) player in this category will be won by Hyperchip. (Pierre)
--------------------------

I am not convinced that there will be a third successful player in the core router space.

However, if there is, then it will be someone who can build a BGP and an MPLS which is stable when deployed in real networks. I haven't heard anything which would make me believe that Hyperchip (or Caspian, or most of the other new startups) can do this, or even that they understand the issue.

(And yes, there are lots of other things which also need to be done right).
Pierre 12/4/2012 | 10:46:57 PM
re: Will Juniper Miss Its Quarter? Without going into the nitty-gritty technological details, which would only strengthen my argument (but which will not be substantiated until the actual end products hit market in 6-9 months), I wanted to add a few points:

The third "player" in the market need not grab a large share of the market (4% of the market would generate roughly $12 million, roughly Hyperchip's payroll). As we all know, carriers are quite reticent to invest heavily in new, unproven technologies. However, Hyperchip will only need to capture a few (one?) large contracts, prove itself in both the product and after-sale service component (install and troubleshooting), and the sales growth curve will be exponential.

In fact, I would expect revenues to be in the low 7-digit range in 2003, hitting 50-70mm in 2004, and the true measure of its success will be measured in 2005, when it will need to demonstrate that its R&D shop wasn't a one-hit wonder and bring a new core router/next-gen technology to market.

This issue may be academic, however, since I would not be surprised to see CSCO or another player (INTC) acquire market-stage companies once their final product is presented at the end of the year.

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