Juniper Sees a Flat Third Quarter

Updated from 4:55 p.m. EDT

Juniper (JNPR) beat Wall Street's second-quarter financial targets Thursday evening but warned that the third period will be seasonally soft.

The Sunnyvale, Calif., Internet gearmaker posted second-quarter earnings of $14 million, or 3 cents a share, up from $6.2 million, or 2 cents a share, a year earlier. Revenue jumped 41% from a year ago and 5% sequentially, hitting $165 million. Analysts were looking for Juniper to post a 2-cent profit on $159 million in sales, according to a Multex tally.

But investor optimism over the strong second-quarter performance faded when Juniper offered guidance for the rest of 2003. CEO Scott Kriens told analysts on a postclose conference call that third-quarter numbers would be flat with second-quarter levels, due primarily to what execs called seasonal weakness in Europe. The downturn is hardly surprising since Juniper's two largest customers and sales partners, Ericsson (ERICY) and Siemens (SI), are based in Europe.

The flat guidance wasn't far below Wall Street's expectations. But traders had been hoping for more from the company, which is seen as a proxy for larger trends within the closely watched communications equipment industry. Notably, a flat quarter would halt Juniper's streak of three sequential revenue improvements, a run that in itself was unusual in the growth-starved telecom business.

Juniper shares, which dropped 5% in regular trading Thursday, rallied slightly after the earnings report before falling back on the guidance disappointment. The stock slipped 34 cents to $13.77 in postclose action.

High Hopes

The back-and-forth points out the skittishness of investors who have been bidding up networking stocks on hopes of a second-half rebound in corporate information technology spending.

Underlying the rally has been the assumption that penny-pinching big corporate customers such as phone companies couldn't hold the line on equipment spending forever. The hope among investors in Juniper and some of its rivals is that with cash remaining scarce, big companies will spend more on technology that makes their networks more efficient.

"Carriers have been getting more explicit about moving toward [Internet protocol], and that's clear with Juniper's results," says CIBC World Markets analyst Steve Kamman, who has a buy rating on the stock. "It's their home turf."

And on that point, Juniper remained sanguine.

"The second quarter was strong," Kriens said in a press statement. "We continue to be encouraged by both the broadband momentum around the world as well as the sound financial footing of Juniper Networks in the marketplace."

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