JNPR: Market Cheers Over 'Less Bad'

NEW YORK ( TheStreet) -- For years, the prevailing debate among the networking companies has always centered on two companies, market leader Cisco ( CSCO) or Juniper Networks ( JNPR). At one point, the comparison between the two was not even close as Cisco was one of the largest companies in the world, according to market cap. But some questionable business moves allowed Juniper and lesser known names to encroach on its territory, becoming a new growth story within the sector. It is remarkable how things have changed.

These days, questions surface about the overall health of Juniper's business -- meanwhile Cisco has been resurgent, demonstrating it has not forgotten how to execute and deserves to regain its "Wall Street darling" status. However, networking companies like Juniper that are approaching the status of expensive need to be evaluated not only for growth prospects, but also for the overall health of carrier spending. A significant portion of its revenue is drawn from names such as AT&T ( T) and Verizon ( VZ).

Even though Cisco, the market leader now appears to present the better value, Juniper continues to offer some tantalizing hopes. Investors looking for a "Cisco-like recovery" may find this may not be entirely out of the question.

In addition to an improvement in carrier spending, Juniper is poised to release several new products that should reinforce its commitment to growth and refute the argument that it is no longer capable of running its business effectively. But did it do enough convincing in its most recent earnings announcement?

The Quarter That Was

Last week the company reported first-quarter earnings that beat Wall Street estimates but showed a drop in profits -- remarkably, it was also the fifth consecutive quarter in which Juniper showed shrinking gross margins.

The company reported a profit of $16.27 million or 3 cents per share -- representing a decline of over 87% from the previous year. So as much as I want to make a bullish case for the stock, this trend does not inspire enough confidence to warrant it.

Revenue arrived at $1.03 billion -- also down from the $1.10 billion it reported the previous year -- while reporting 16 cents per share in adjusted income.

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