Juniper in Free Fall

Updated from Jan. 25

Juniper (JNPR Quote) plunged 19% Thursday after the networking company blindsided Wall Street with sour guidance for the first half of 2006.

Juniper gave investors a letdown soon after the close Wednesday, when it posted a rise in fourth-quarter profit but missed Wall Street's revenue target. But the news got much worse in a postclose conference call when the company guided its profit outlook lower for the first and second quarters, citing weak sales in Japan.

Worse yet, the company guided for its first sequential sales decline in four years. Calling for a 1% revenue decline in the current quarter from fourth-quarter levels, Juniper effectively called the end to the runaway success of the company's Internet gear.

"This implies that overall growth in the routing market is reaching a point where the market is not strong enough to overcome seasonal swings in spending," says JPMorgan Chase analyst Ehud Gelblum, who has a neutral rating on the stock.

On Thursday, Juniper plummeted $4.10 to $17.42.

The Sunnyvale, Calif., maker of communications networking gear earned $106 million, or 17 cents a share, for the quarter ended Dec. 31, up from the year-ago $66 million, or 11 cents a share. On a pro forma basis, excluding certain costs, earnings rose to 20 cents a share from 15 cents a year earlier, in line with the Thomson First Call analyst consensus estimate.

Revenue rose 34% from a year ago to $575 million, falling short of the $579 million analyst view.

Cash provided by operations rose to $197.5 million from $142.5 million a year ago. Capital expenditures and depreciation were $39.3 million and $15.4 million, respectively.

"I'm pleased to report another strong quarter and the completion of a year characterized by growth across multiple dimensions," said CEO Scott Kriens. "Juniper remains at the intersection of opportunity, where the increasing and strategic importance of today's network demands the integrated best-in-class solutions that the company was built to deliver. As we surpass annual revenues of $2 billion on the eve of our 10th anniversary we see a bright future, founded in the confidence our customers have placed in Juniper."