Juniper Profit Dives, Seeks ‘Lighthouse’ Wins

The current state of the economy has punished networking vendor Juniper Networks, but the company’s CEO sees a light up ahead.

Juniper (NASDAQ: JNPR) reported its second-quarter financial results after market close Thursday. For the quarter, Juniper reported net income of only $14.8 million, or $0.03 per share, which is a steep decline from the $120 million it reported a year ago. Part of the decline involved a one-time tax charge of $52.1 million.

Minus charges, income totaled $0.19 per share, a drop from the $0.28 cent profit it posted a year ago, but a penny ahead of Wall Street forecasts, according to Reuters Estimates.

In terms of revenue, Juniper took in $786.4 million, a decline of 11 percent over the second quarter of 2008, but ahead of analyst estimates of $766.3 million. Juniper’s revenue was actually in line with the guidance it provided at the end of the first quarter of 2009.

Moving forward, Juniper provided guidance for third quarter revenue of $717 million to $805 million, in line with analyst consensus.

During the company’s earnings call, Juniper CFO Robyn Denholm noted that 65 percent of Juniper’s business in the quarter came from its service provider business while 35 percent came from its enterprise business. As was the case during the first quarter, it is on the enterprise side where Juniper continues to expect to see the greatest growth — albeit gradually.

“I think IT spending in the enterprise is still constrained and I think it’s going to be a long, slow recovery,” CEO Kevin Johnson said during the call. “However, we’re a new entrant in the switch market. Our value proposition is resonating. The pipeline is growing and so I think we can outgrow the IT spend recovery in the enterprise.”

Juniper officially entered the switch market in January 2008. A key part of Juniper’s switch strategy has been to grow the business by way of partnerships as well as what Johnson referred to as “lighthouse wins”.

During the quarter, Juniper announced that it would behelping the NYSE to build a high-speed network. Earlier this week, IBM announced that it would be OEM’ing Juniper switches and routers.

“We get the big design wins that … basically create a lighthouse for other customers to look and see what’s possible with kind of our vision for network datacenters of the future,” he said. “And as we do that, that creates a significant amount of demand from a number of other customers.”

Johnson said that Juniper’s ability to forecast enterprise sales is improving, while in the service provider business, “our sales teams are seeing more RFPs — there is more RFP activity and that’s an indication of the priorities that our customers have.”

Though the carriers are putting out RFPs, Johnson noted that the carriers aren’t as clear about the timing of when orders might come through.

“As a result, you look and say, hey, we’re kind of … bouncing on the bottom right now,” Johnson said. “And the view is there will be an uptick — it’s just a question of when.”

During the call, analysts asked Johnson to break down how he sees third-quarter growth split between Juniper’s service provider and enterprise businesses. He declined, noting that Juniper doesn’t provide that kind of detail.

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