Juniper Shows Strong Q4, Proceeds With Caution

"We will work to be stronger than the smaller niche competitors and more agile than our larger competitors," said Juniper CEO Kevin Johnson in a call Thursday discussing the networking vendor's fourth-quarter earnings.

Johnson said R&D operating expenses could grow as much as 15 percent year over year in 2009 as the company looks to capture more market share with innovative product releases.

Even with the R&D increase, Juniper will be cautious going into the first quarter of 2009, forecasting revenue for the quarter will be flat or down around 3 percent to $800 million to $830 million compared to the first quarter of 2008. Juniper did not offer full-year revenue guidance for 2009.

Overall, Juniper's revenue increased 14 percent from $809 million to $923.5 million in the fourth quarter, hitting the low end of Juniper's fourth-quarter forecast of $921 million to $971 million and shy of Thomson Financial estimates of about $936.2 million. Quarter-to-quarter revenue dipped 2.5 percent from the third to fourth quarter. Juniper's net profit rose to $132.5 million from $122.9 million a year earlier.

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For the full year, Juniper's revenue was up 26 percent to $3.57 billion from 2007, while net income hit $511.7 million.

Johnson said focusing on product development is what helped Juniper post strong fourth-quarter numbers, especially in the enterprise market, where Johnson said revenue grew 17 percent between 2007 and 2008, even in the face of a widespread decline in IT spending. Enterprise sales now account for more than 30 percent of Juniper's annual revenue.

Johnson credited new products like the EX switching line, Intelligent Services Edge offerings and the SRX security services gateway for growing Juniper's enterprise business. The EX Ethernet switching series, which was announced at the beginning of 2008, drove $28 million in revenue in the fourth quarter on its own, Johnson said.

Johnson said that Juniper's strong mix of enterprise products also helped push Juniper's orders to a company record, with its book-to-bill ratio exceeding $1 billion in the fourth quarter. Johnson was quick to note that $1 billion in orders is no small feat in one of the most challenging quarters in the company's history.

"We strengthened our product portfolio, captured market share and improved operating efficiency and execution," Johnson said.

Juniper's success in a difficult climate was largely due to improved sales in all core router categories over 2007 and the EX switch offerings, which will include the new EX 8208 model that will be widely available in early February and the EX 8016 that will hit later in the year.

Juniper cautioned that its revenue numbers are preliminary and subject to change once it completes a review of the operations of some of its Japanese distributors.

During routine distributor audits in December 2008, Juniper said it became aware of facts that prompted it to question the accuracy of POS reports of a few distributors in Japan relating to a small number of transactions. Based on that discovery and the subsequent investigation, Juniper has deferred an additional $3 million of revenue for sales through Japanese distributors.

Because of the review, Juniper has not made a final determination of its revenue from distributor sales in Japan and preliminary earnings results could change. Juniper expects to complete the review prior to the filing of its annual report on Form 10-K with the SEC.