Jumpin’ Juniper

Juniper Networks gave tech investors some rare good news after the close last night.

The company topped 7-cent estimates with 10-cent pro forma earnings. However, on a GAAP accounting basis – the standard under which the company will report earnings to the SEC and be valued by data services – the company lost 9 cents a share. But the good news was that the company topped sales estimates by $12 million, with $201.7 million in revenues, and raised estimates for next quarter. As we’ve said before, sales are much harder to fudge, and are thus a much clearer indication of the state of a company’s business.

If you picked up Juniper at last week’s breakout point of $12-$13, you’re doing well. If you didn’t, don’t chase it. It could easily hit 22.50 before running into resistance, but at a PE of 38 and price-to-sales and price-to-book ratios of 5-6 before today, it’s getting pretty pricey again.

But it’s clear that Juniper is well positioned in the telecom equipment sector going forward, and is poised to benefit from an eventual rebound in CapEx spending.

Management even said the right things on the conference call. If you think that’s easy to do during a bear market, then you missed John Chambers striving for most of the year to find his voice at Cisco. Only recently has Chambers begun to sound like a CEO in control of his company.

Here’s the one quote from the conference call we really liked: “There is still a public network being built. It’s not speculators or unfunded companies, but businesses are building it because the benefit is greater than the cost.”

Could it be that after all this wild speculation and endless “me-too” investments, that we’re back to real businesses making prudent decisions based on real business needs? Nah, can’t be, but we’ll keep our ears open for more of the same anyway.

In the meantime, the quest for value continues. Bear markets are famous for producing ridiculously undervalued companies.

Of the companies reporting last night, here are the two most interesting on a fundamental basis. Neither is quite undervalued, but they’re interesting nonetheless.

DoubleClick has a price-to-sales ratio of 1.8 and price-to-book of about 1, with $600 million in cash and low debt.

RSA Security trades at 2.2 times sales and 1.4 times book, has no debt, and $167 million in cash.

However, both companies’ business continues to stall or deteriorate, so caution is advised.

Finally, the futures are down on much weaker than expected retail sales for the month of September. However, the Michigan consumer sentiment number coming out at 10 a.m. is much more important – it could be the first real indicator of post-September 11 conditions.

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