Walloping Expectations, Juniper Sees Telecom Slowdown as 'Self-Inflicted'

Earnings Scorecard
Actual	Estimated*	Year-Ago
24 cents	18 cents	1 cent
*By First Call/Thomson Financial

Updated from 4:58 p.m. EST:

Juniper JNPR Tuesday easily surpassed Wall Street's earnings expectations and spotted a silver lining in the clouds gathering behind the telecom-equipment spending slowdown.

The router maker said fourth-quarter earnings jumped to 24 cents a share, 6 cents better than estimates. Fourth-quarter revenue rose 47% from third-quarter levels, to $295.4 million.

In a largely bullish conference call following the late-afternoon report, Juniper boosted its 2001 revenue target to $1.5 billion to $1.6 billion, from $1.3 billion to $1.4 billion. For the year just ended, Juniper reported revenue of $674 million.

Chairman and CEO Scott Kriens said he observed a bit of buying caution from customers but termed it a potentially "self-inflicted" spending slowdown. The comment was meant to lift some of the gathering gloom that hovers over the equipment-selling sector. Cisco CSCO added to slowdown concerns last week when CEO John Chambers referred to the challenges his company encountered last month as spending dropped dramatically.

To be absolutely certain, Juniper appears to be at an early stage of its growth, so smaller positive trends could provide proportionally larger impact. The law of small numbers, if you will.

I Can See for Miles

Kriens said visibility -- a company's ability to forecast its customers' spending habits -- decreased during the quarter ended Dec. 31. Some investors said Wall Street's unofficial revenue target was as high as $330 million, leaving some to wonder whether the spending slowdown that finally caught up with Cisco in December may have hit Juniper as well. This may explain how Juniper failed to beat the so-called whisper number, which reflects investors' most bullish numerical fantasies.

But Kriens dispelled as much of that sentiment as he could by telling analysts on a conference call that though the view wasn't as good as before, it was nonetheless quite pretty. "Our guidance wouldn't be going up if we didn't believe in the visibility that we have," said Kriens.

Backing up the growth forecast, Juniper said it will double its staff by the end of the year, to 1,854 workers from 927 now.

In after-hours trading on Island, Juniper shares jumped at one point $9.40, or nearly 7%, to $137.40, more than reversing their slide during regular trading.

Juniper makes core routers, the massive electronic mail-sorting gear used to manage Internet traffic. Juniper has been rapidly taking market share from archrival Cisco, which has helped bolster Juniper's share price. But increasingly, investors have grown fearful that Juniper will begin to feel the impact of a broad slowdown in equipment spending and cash crunch among network operators.