(JNPR) Juniper Beats The Street by a Penny – Revenues Fall

Juniper Networks Inc. (JNPR) posted adjusted earnings per share (EPS) of 22 cents in the fourth quarter of 2011, slivering past the Zacks Consensus Estimate by a penny.


Juniper Networks’ revenues declined 5.81% year over year to $1.12 billion in the reported quarter. The company generated 75.6% of its consolidated quarterly revenue from product sales, while the remaining 24.4% came from service revenues. Product revenues declined 11.9%, whereas services revenues increased 20.0%, from the year-ago quarter.

Revenue by Segment

Infrastructure revenue was $849.0 million, down 13.1% year over year. This segment secured a healthy competitive position and incremental wins in the Edge. However, the company witnessed a downfall in the T Series as a result of weaker overall demand from Service Providers and the unexpected pause as the company rolled out the T4000.  Within this segment, the company also shipped the first T4000 units this quarter and also expects the revenue from this to be recognized in the first quarter.

Total switching revenue was a recorded at $168.4 million, up 36.2% year over year. This was driven by good business from the company’s EX product, both in data center and campus deployment. The company also recorded the initial revenues from the implementation of its full QFabric solution.

Revenue by Region

As per geographic segments, Americas contributed around 46.5% of total revenue, EMEA was 35.7% and APAC was 17.8%. Reduction in demand by some of the largest Service Providers dragged the America’s revenue down 10.2% on a yearly basis. This year-over-year decline was partially offset by good Enterprise growth. EMEA revenue was up 11.1% year over year, as a result of both Service Provider and Enterprise gains. The company witnessed some revival in Eastern Europe and The Netherlands. APAC revenue decreased 20.0% year over year. This was primarily due to continued weakness in Japan and the push out of some demand in China.

Operating Results

On a GAAP basis, Juniper Networks’ gross margin was 62.4% in the fourth quarter, versus 66.6% in the year-ago quarter. Excluding amortization of intangibles, non-GAAP gross margin in the quarter was 63.3%, versus 67.2% in the year-ago quarter.

Operating margin on a GAAP basis was 11.9% versus 19.1% in the year-ago quarter. Non-GAAP operating margin was 18.6% versus 24.3% in the year-earlier quarter. Non-GAAP operating expenses declined 1.3% on a year-over-year basis. However, total operating expense remained almost constant.

Net income on a GAAP basis was $96.2 million compared with $190.2 million in the prior-year quarter. Excluding special items such as restructuring charges, amortization, acquisition related charges, non-recurring income tax adjustments, non-GAAP adjusted net income in the quarter was $117.3 million, or 22 cents.

Balance Sheet & Cash Flow

Total cash, cash equivalents and investments in the fourth quarter of 2011 were $3,551.7 million compared with $4,130.3 million in the third quarter of 2011. Juniper generated strong Cash from operations of $244 million in this quarter, up $58 million sequentially and down $127 million from the prior year. DSO was 46 days in the quarter, up from 36 days in the last quarter, but was in line with last-year quarter. The company repurchased 17.5 million shares, at an average share price of $30.93 per share, for a total of $541.2 million, which largely offset stock issued through our employee equity programs.

First Quarter 2012 Guidance

Juniper expects first quarter revenues in the range of $960 million to $990 million. Non-GAAP gross margin will expectedly be in the range of 63% to 64% in the first quarter.  The company expects non-GAAP operating expenses to increase sequentially, primarily due to typical fringe-related employee expenses and variable compensation. Non-GAAP operating margin is expected to be in the range of 11% to 13%. Juniper estimates non-GAAP net income per share in the range of 11 to 14 cents on a diluted basis, assuming a flat share count and estimated non-GAAP tax rate of 29%. This tax rate includes an estimated quarterly impact of one penny on non-GAAP earnings per share, assuming no renewal of the R&D tax credit.


Juniper delivered mixed fourth quarter results, with revenues declining on a year-over-year basis. However, EPS exceeded our expectation. The company’s operating performance was mediocre, and Juniper was not able to control its operating expense efficiently. Moreover, the company’s cash position has declined sequentially. The company also witnessed revenue decline in America and the Asia pacific region due to low business activity.

Although, strategic alliances and new acquisitions are positives for Juniper, stiff competition from industry stalwarts, such as Cisco Systems Inc. (CSCO) and Hewlett-Packard Company (HPQ), coupled with Juniper’s European exposure will likely weigh on the stock.

Juniper has a Zacks#4 Rank, implying a short-term Sell rating.

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