Sweet Quarter for Juniper

Updated from 4:27 p.m.

Juniper ( JNPR) kept its three-year earnings winning streak alive, beating third-quarter estimates and boosting fourth-quarter guidance.

The Sunnyvale, Calif., Internet gearmaker made $84 million, or 14 cents a share, up from the year-ago $49 million, or 8 cents a share. On a so-called adjusted basis, excluding certain costs, earnings rose to 19 cents a share from 13 cents a year earlier, beating the Thomson First Call estimate by a penny.

Revenue rose 46% from a year ago to $546.4 million, easing past the $531 million estimate. The quarter ended Sept. 30 marks the 12th consecutive quarter that Juniper's earnings and sales have exceeded Wall Street analysts' projections.

"Once again we're very pleased with the results for the quarter, our momentum in the market, and the positive impact we're seeing as a result of our ongoing focus and innovation," said CEO Scott Kriens, in a press release Wednesday.

On its postclose conference call, Juniper raised guidance for the fourth quarter. The company now expects an adjusted profit of 20 cents a share on revenue of $570 million to $575 million. That represents about a 5% sequential increase over third quarter levels. Analysts had been expecting a 20-cent profit on sales of $565 million.

The company expects fourth-quarter gross margin to be in the range of 68%, but Juniper cautioned that the margins will be "lumpy" due to changing product cycles and investments. For the third quarter, Juniper's gross margins were 68.7%, up from 68.4% in the second quarter.

The news comes as Juniper has emerged as one of the few upstart success stories in the networking industry. As a top supplier to the telcos' continually strong demand for Internet infrastructure like routers, or boxes that direct data traffic, Juniper has enjoyed three years of surprising growth.

"They always crank," says one Wall Street analyst. Selling routers to telcos "is about the best business on the planet and has been for the past six years, minus that one bad patch in 2001/2002," says the analyst, who has a neutral rating on the stock.

But the news wasn't all good from the analyst's perspective. "The question now is why they didn't breakout the security revenue in the press release," says the unnamed analyst. "People won't be happy if all the upside is only routers."

Noting that investors have been interested to hear about the progress of the company's security business, CEO Scott Kreins opened the earnings conference call on that theme. Though he didn't offer a dollar figure, Kreins says security product revenue grew 8% over the prior quarter and 32% above the year-ago period. He characterized that growth as nearly double the rate of some of Junipers' security industry competitors

Still, some investors continue to worry that when its telco order pace slows down, Juniper will have few places to turn to as it looks for new growth. The $3.3 billion acquisition of network defense specialist Netscreen last year was supposed to provide a potential solution to that problem. The computer networking security outfit gave Juniper a new line of gear to sell, and a new market to sell it to.

So far, though, the Netscreen investment hasn't exactly paid off. Among the setbacks have been the departure of Netscreen CEO Robert Thomas, who was expected to run Juniper's security business.

Analysts say cracking the security market and the so-called enterprise market is no easy feat, particularly for a smaller equipment company like Juniper vying with Cisco ( CSCO), which controls up to 80% of some categories.

After rising 68 cents in regular trading to finish Wednesday at $21.99, Juniper added 26 cents in postclose action to $22.25.

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