Juniper Beats Q3 Expectations, Will Push R&D, Not M&A

Juniper CEO Kevin Johnson professed optimism on the company's earnings conference call and said that Juniper would continue to focus on "organic growth" through research and development instead of acquisitions to grow Juniper's market share.

For the quarter ended September 30, Juniper posted net revenues of $823.9 million, an increase of 5 percent from the second quarter's revenues of $786.4 million, but a decline of 13 percent from the third quarter of 2008. Revenues were higher than the $799.5 million average predicted by analysts polled by Thomson Reuters.

Juniper reported quarterly profit of $83.8 million at 16 cents per share, which was down from $148.5 percent (27 cents per share) a year ago, but up 21 percent from the second quarter. Excluding items, profit was 23 cents per share, which was down from 32 cents per share the previous year, but better than the 21 cents per share forecasted by analysts.

"Juniper delivered solid results that featured sequential growth in our service provider and enterprise markets, as well as improved operating margins and good cash from operations," said Robyn Denholm, Juniper's Chief Financial Officer, on the call.

Sponsored post

Johnson, who became Juniper's CEO in September 2008 after more than 15 years at Microsoft, said the earnings were enough to convince him that the industry is in the "early phases of economic recovery" and that Juniper was seeing improvement in the U.S. economy that was faster than the recovery in Europe.

He credited Juniper's build-out of its JUNOS operating system for helping grow the company, saying Juniper would continue to use JUNOS as a base for its networking and security product portfolio. Juniper will continue to draw strength, he said, from "significant uptake" coming from product lines like its SRX Series Services Gateway, and would stay focused on enterprise, service providers and mobility among other growth areas.

"We're investing in the right places and controlling expenses thoughtfully throughout the business," Johnson said. "We continue to be agile as we set up for accelerated growth. Our strategy is working and we're being disciplined and I'm confident we're coming out of the economic downturn stronger."

Johnson further highlighted Juniper's partnership with IBM -- a deal, announced in July, that sees IBM OEM-ing and rebranding Juniper Ethernet switches -- and said Juniper has "very high aspirations" for the relationship in the long-term.

Johnson has reiterated Juniper's continued investment in research and development all year, and struck a similar tone throughout the earnings call, saying that Juniper would remain focused on "organic growth" on its JUNOS platform and in other areas.

"What we find is that approach to that horizontal platform really simplifies things for customers while dramatically lowering the cost of ownership," he said. "We will be continuing to propagate that."

Juniper's strategy drew skepticism on the earnings call from some observers who wondered about how Juniper would continue grow without acquisitions when so much of the networking market was consolidating.

Johnson was unfazed.

"It's not to say we don't look at acquisitions, we do look at them," he said. "We do look at acquisition opportunities but we expect organic R&D to be our primary growth indicator."

Juniper recently lost a key strategic partner in Starent Networks, which was last week acquired by rival Cisco, but Johnson didn't feel the loss would be enough to compromise Juniper's partnering strategy.

"We have more partners coming to us to partners on JUNOS and that's because we have a platform that can scale," Johnson added. "Some partners are partners that through consolidation may be a partner one day and get acquired another day. That doesn't change our strategy a bit. We're very confident we've got the line of site on how to deliver the mobility solution and we look forward to sharing that with you in the near future."

Juniper recently confirmed it would switch over its stock listing to the New York Stock Exchange from the Nasdaq. That change takes effect Oct. 29, the same day that Juniper will be holding a meeting -- expected to include new product announcements -- for analysts and partners in New York.