Juniper Decides It Digs the Flat Look - TheStreet

Juniper Decides It Digs the Flat Look

Earnings guidance for 2002 suggests a first-half holding pattern.
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Updated from 4:58 p.m. EST

Given the plague that has taken root in the networking industry,

Juniper

(JNPR) - Get Report

has decided that any kind of profit looks pretty healthy.

So don't get all disappointed when you hear that the San Jose-based gearmaker projects that earnings and revenue over the next two quarters will be flat with the fourth quarter's levels. On the one hand, those levels look pretty pallid compared with a year ago. On the other, you could argue that the straight-line aspect of Juniper's forecast serves to reinforce

the increasingly widely held view that perhaps telecom's most devastating spending declines are nearly over.

Looking ahead to the first quarter, Juniper forecasts a 3-cent pro forma profit on revenue of about $152 million. The company expects to essentially repeat those results in the second quarter, yielding a 4-cent profit on $155 million in sales. This outlook is roughly in line with analysts' expectations, according to Thomson Financial/First Call.

CEO Scott Kriens repeated the oft-made comment that long-range financial visibility was limited, but said his short-term forecast was aided by telcos compiling their half-year budgets.

"I'd love to tell you there is some bounce in all this and it's imminent and growth in the top line is around the corner, but the more important comment is that this business doesn't depend on that," says Kriens. "It runs profitably, generates cash, innovates technology and grows its customer base regardless."

The stock traded up 2% in the aftermarket, boosted by some reasonable numbers. Gross margins, for example, actually increased by a point last quarter to 61%, and the company held to a 61% forecast for the next two quarters, dispelling concerns that an all-out price war with rivals including

Cisco

(CSCO) - Get Report

would take its toll on profitability.

Of course, not all the news was good. In the with-customers-like-these category, Juniper said cost-slashing, revenue-shrinking

WorldCom

was its largest customer last quarter. Meanwhile, debt-plagued

XO

was one of the newest customers.

The router maker had warned investors on Dec. 20 that it was expecting to post a 25% revenue shortfall in the fourth quarter. The 17-month telecom recession and a slowdown in the nation's economy have eroded Juniper's earnings -- and, perhaps more important, its stock price -- by some 80% from year-ago levels.

As is the trend in tech, Juniper took a slew of charges in the quarter totaling $32 million to adjust its balance sheet for various goodwill writedowns, deferred compensation, and research and development costs. Using generally accepted accounting principles, Juniper lost $5.1 million, or 2 cents a share, in the latest period. Investors should get ready to see these kinds of charges in earnings reports all across tech, since many of these costs stem from the use of inflated stock in widespread bubble-era acquisitions.

Kriens acknowledged the challenges of the past year and cited several accomplishments: "We more than doubled our customer base, we expanded our product capabilities globally in multiple markets, and increased our revenues by more than 30% over the prior year."

Some observers note that the company cut research and development spending in the quarter by $5 million, saving it a penny in EPS -- perhaps suggesting that Juniper struggled to make its number. Meanwhile, archrival Cisco has been boasting about its dramatic market share gains of late.

For now, Juniper seems happy to respond that the world is flat.