Juniper Cuts Q4 Guidance, Citing Weak Service Provider Demand

Juniper Networks said its fiscal fourth-quarter 2011 results would come in lower than expected due to what the company said is weaker-than-expected router demand from service providers, particularly U.S.-based service providers.

In a statement, Juniper said fourth-quarter revenue is now expected to be between $1.11 billion and $1.12 billion, short of its previous expectation of revenue between $1.16 billion and $1.22 billion. Juniper's non-GAAP operating margin is also expected to be below Juniper's prior outlook of 21 percent to 23 percent, the company said.

"2011 was a record year of revenue for Juniper, even though our fourth-quarter revenue was weaker than expected due to service provider demand," Kevin Johnson, Juniper's CEO, said in a statement. "We remain committed to our strategy of innovation in high-performance networking as we continue to manage costs and drive excellence in execution."

Juniper, which will host its first annual global partner conference in Las Vegas next week, is scheduled to report full fourth-quarter 2011 results Jan. 26.

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Financial analysts were quick to point out that Juniper's revised guidance underscores just how exposed it is to trends in the service provider market. Juniper derives about two-thirds of overall revenue from service providers and the rest from enterprise customers.

"Given a macroeconomic environment that continues to be challenging, sustained negative commentary from other service provider equipment vendors over the past few weeks and [Juniper] management's remarks on the October conference call regarding a push-out of orders to 2012, we are not entirely surprised by Juniper's latest revision," wrote Jayson Noland, senior research analyst for IT systems and networking at Robert W. Baird & Co., in a Tuesday note.

Ehud Gelblum, managing director at Morgan Stanley, suggested Juniper's citing of weak U.S. service provider demand is related to the ill-fated merger of AT&T and T-Mobile USA, which was still pending during Juniper's fourth quarter.

"As we stated in December, while calling off the merger is a positive for Juniper, we believe it could take 1 to 2 quarters before spending actually resumes," Gelblum wrote in a note to subscribers.