Service Provider Networks / (none) / View from the Edge:

Juniper trips

Industry slump catches up to "nimble" high flier.

By Jim Duffy
The Edge, 06/13/01

The industry malaise has finally caught up to Juniper Networks, which until now had eluded the slump and seemed to be buffeted from the drop-off in business affecting its competitors.

Juniper late last week warned that revenue and earnings for the second quarter, which ends June 30, would be down drastically from previous estimates or expectations. Revenue will be $200 million to $210 million, instead of $300 million to $330 million from previous guidance; and earnings will now come in at 8 or 9 cents per share, instead of the 24 cents per share analysts expected.

This is still up almost 80% from the second quarter of 2000. But Juniper will also cut 8% to 9% of its workforce - between 93 and 104 people - and take a charge of $45 million in the second quarter to cover the headcount reduction and readjust its investment portfolio to better reflect reduced valuation.

This is in stark contrast to last quarter, when Juniper announced results in line with analyst expectations - earnings of 25 cents per share on sales of $332 million - while rival Cisco was posting its first loss ever as a public company. At that time, Juniper warned that the second quarter could be flat compared to the first quarter, but Juniper CEO Scott Kriens calmed jittery nerves by saying the company is "nimble" and "well-positioned to prosper during these times."

Well welcome to the party Scott, which, at 33% negative growth, must be a surprise party for Juniper. A 33% dip in revenue is much deeper than flat.

Juniper says the reduced forecast reflects a period of "capacity absorption" by its service provider and carrier customers, which seems to jibe with proclamations from analysts and other vendors of a bandwidth glut in the core. But the company is quick to add, "The underlying demand for bandwidth, Internet access and IP services, continues to increase."

Another textbook example of Juniper spin?

On the one hand, carriers are capacity rich and now need to utilize that resource rather than build it up. On the other hand, Juniper seems to be saying that they still need more capacity but have no money to continue their buildouts.

Which is it?