Juniper Networks said its current financial struggles will continue into the first quarter of its fiscal 2012, and it projected lower-than-expected revenue for Q1 during its disappointing Q4 2011 earnings report.
Juniper continued to trumpet a brighter long-term outlook, however, and said it expects bigger revenue contributions from some of the major new product lines it's just now getting to the market. Its strategy of being a pure-play networking vendor focused on the "megatrends" of mobile and cloud computing is the right one, said Juniper CEO Kevin Johnson.
"We are on the right track," Johnson said during a conference call with financial analysts Thursday. "[We] must maintain our investments and continue to innovate faster than our competition."
For its fiscal Q4, Juniper posted revenue of $1.12 billion, down 6 percent from the $1.19 billion it reported a year ago, though up about 1 percent from $1.1 billion in Juniper's fiscal Q3. Revenue fell short of a consensus of analyst estimates citing $1.13 billion.
For the fiscal year 2011, Juniper reported about $4.45 billion, up 9 percent from the $4.09 billion it reported for fiscal 2010.
Juniper's Q4 net income fell to $96.2 million from $190.2 million. For the year ended December 31, 2011, net income was $425.1 million.
Its Q1 forecast was most concerning. Juniper projected Q1 revenue of $960 million to $990 billion, well below Wall Street analysts' projections of $1.1 billion.
"The near term environment remains challenging," Johnson said Thursday.
Robyn Denholm, Juniper's chief financial officer, added that Juniper had slowed hiring.
"We expect Q1 to be challenging," Denholm said.
Juniper in early January warned the Street that its Q4 revenues would be lower than anticipated based on weaker-than-expected service provider demand, particularly among U.S.-based service providers.
Analysts at the time said the revised guidance was further proof Juniper is too exposed to the service provider market, from which it draws about two thirds of its revenue, although Johnson recently told CRN that the revenue mix wasn't a concern.
"The strategy is right," Johnson said in an interview last week at Juniper's Global Partner Conference in Las Vegas. "We innovate in the domain of networking in a way that has a high degree of relevance in customer value in both service provider and enterprise, and we continue to grow in both these sectors as we continue to evolve as a company."
The two-thirds-to-one-third-mix has tilted slightly. According to Juniper, it derived 60 percent of revenue from the service provider segment in its Q4 and 40 percent from enterprise. For the full fiscal year 2011, the split was about 64 percent to 36 percent.
Juniper said the Q4 shortfall came from reduced spending on the part of large service provider customers, especially in the U.S., as well as what Johnson described as "increased macro volatility." Juniper's enterprise revenue helped offset those service provider reductions, he noted, buoyed by a stronger-than-expected trend from federal government customers.
Service provider slowdown was in part also expected, Juniper's executives noted, as customers await shipment of Juniper's T4000 core router and other products hitting the market in Q1 2012, such as its PTX transport core line. Juniper's major data center infrastructure product, QFabric, also began contributing to Juniper's revenue this quarter, and is expected to be a bigger contributor in the new year.
In the fourth quarter, Juniper's Americas revenue accounted for 46 percent of the overall pie, and was down 6 percent sequentially and 10 percent year-over-year. Notable product revenue segments included a 21 percent year-over-year decline in routing revenue for the quarter, a 36 percent year-over-year increase in switching revenue for the quarter, and a 33 percent year-over-year quarterly increase in the category of infrastructure products that includes QFabric and Juniper's wireless LAN products.
Juniper is also getting its first revenue contributions from its Junos Pulse mobile security suite and MobileNext, the open mobile core it introduced in February 2011.
In his remarks, Johnson alluded to customer challenges with Juniper's SRX security services gateways, which have been a sore point with Juniper VARs in the past year. He said two of Juniper's top product executives, Bob Muglia, EVP, software solutions, and Stefan Dyckerhoff, EVP, platform systems, would be rolling out an "action plan" for Juniper's security innovation at Mobile World Congress in Barcelona next month.