Juniper, Foundry Surprise to the Upside

Two data networking upstarts post strong first quarters and Juniper makes mildly bullish projections.
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Updated from 5:04 p.m. EDT

The numbers are looking good for data networking upstarts, but Wall Street will no doubt spend much of Friday slugging it out over just how good.

The best news of the day came late Thursday afternoon, when

Juniper

(JNPR) - Get Report

said second-quarter sales would rise as much as 2% from first-quarter levels as the order outlook for new gear improves. Though 2% growth might seem tepid, in the midst of a years-long communications spending freeze investors will gladly take it.

Meanwhile, computer networking rival

Foundry

(FDRY)

also pleasantly surprised Wall Street Thursday afternoon. Both companies' shares surged in after-hours trading.

The party wasn't without its detractors. Some observers, skeptical of any good tidings in the gloomy tech spending environment that has taken hold, questioned whether Juniper's trends actually signal an eventual turnaround. Accordingly, a postclose earnings call found analysts probing for details on the company's backlog and deferred revenue numbers.

But Juniper mostly rose to the occasion. Executives reported a book-to-bill ratio of greater than 1, meaning orders are coming in faster than shipments are going out. And deferred revenues increased slightly, by about $5 million. Juniper says the bulk of that increase came from service revenues, not products. Service contract proceeds are spread over the length of the contract and not prone to much by way of significant changes.

The call came after Juniper exceeded Wall Street expectations by posting a first-quarter adjusted profit of 2 cents a share. Sales jumped 29% to $157 million, beating analysts' expectations by $2 million.

The Sunnyvale, Calif., networking gearmaker said that excluding one-time items, earnings rose to $6.3 million from $400,000, or less than a penny a share, a year ago. On a GAAP basis, Juniper's profit was $3.7 million, or a penny a share, reversing a year-ago loss of $46 million, or 14 cents a share.

"The first quarter was solid," said Juniper CEO Scott Kriens. "We are in a unique position to help our customers transform their business of networking."

At San Jose-based Foundry, the news was happy as well. The company told investors its first quarter would show a 10-cent profit on sales of $90 million. Analysts had been looking for adjusted earnings of 7 cents per share on $85 million in sales, according to a Multex survey.

Juniper, which closed at $8.41 during regular trading Thursday, rose 32 cents in postclose trading to $8.75. Foundry, which closed at $8, added 52 cents to $8.52.