Juniper: Slow But Steady Telecom Recovery

In a telecommunications sector searching for signs that the three-year
shakeout is waning, networking equipment maker Juniper Networks’ second quarter results are providing some evidence.

The telecom hardware maker said its net profit for the period was $13.6
million or 3 cents per share, up 54 percent compared to its net income of
$6.2 million, or 2 cents per share in the second quarter of last year.

The company cited the worldwide growth in high-speed broadband services
as one of the drivers of the results.

Net revenues for the quarter were $165.1 million, a jump of 41 percent
over the $117 million from last year’s second quarter, which was helped in
part by its edge router Uniphase division, which it acquired last May for $740 million.

“The second quarter was strong,” said Scott Kriens, chairman and CEO of
Juniper Networks. “We continue to be encouraged by both the broadband
momentum around the world as well as the sound financial footing of Juniper
Networks in the marketplace.”

But its outlook shows that the recovery that is showing up across
telecommunications makers is, at best, a steady-as-she-goes prospect.

For the rest of the year, seasonality will be the watchword for Juniper
and other telecommunications equipment companies. The company is sticking
with a flat outlook for the third quarter, compared to June guidance of
“flat to slightly up,” analysts said.

Deutsche Bank, in a research note, said the outlook reflects a belief on
the company’s part that European sales will be weak in the third quarter
through extended holidays. But “this should be offset by continued strong
demand from broadband deployments in Asia, while America is anticipated to
be flat for the quarter after building momentum in the June quarter.”

Strong selling spots for Juniper continue to be outside the U.S., the
analysts noted, citing recent contracts with Vietnam Post and
Telecommunications Corp., Brasil Telecom, Telecom New Zealand and a
Belgium-based telecommunications company.

But continued uncertainty among its core telecommunications base will
keep Juniper tethered to a cautious view in its outlook overall, as the
inklings of a recovery start to show. A company official, speaking during an
earnings discussion Thursday, said he was encouraged by uptick trends in the
industry, but not convinced that that sector’s woes were fully behind it.

Still, the results were enough for some analysts to raise their
expectations. Credit Suisse First Boston on Friday boosted its outlook from
9 cents per share to 11 cents per share for the year. Deutsche Bank raised
its expectations for the year from 8 cents per share to 11 cents per share.