The wind is whipping and the rain is picking up, but
keeps driving the middle of the fairway as customers step up to buy its gear to build the Internet.
Juniper Thursday dodged a first-quarter lightning strike, in the form of a dramatic
spending pullback from top customers such as
, by adding enough new customers to keep first-quarter earnings in line with estimates. Still, the Internet router manufacturer acknowledged it is feeling the pinch, cutting its full-year sales target to between $1.2 billion and $1.3 billion, from the $1.5 billion to $1.6 billion it had projected in January.
Admitting that uncertainty is about the only thing it's sure of for now, Juniper also forecast flat sales and profit for the second quarter. The company cut its second-quarter earnings forecast to 25 cents a share, from the 26 cents analysts had expected, according to the
Thomson Financial/First Call
survey. Still, analysts were refreshed by the candor, and relieved investors pushed the stock up 19%.
Rain on Me
"I'd say the guidance reflects a conservative, slower-growth scenario, which makes sense in an uncertain environment," says
CIBC World Markets
analyst Steve Kamman, who boosted his rating on Juniper to strong buy from buy Thursday. CIBC has had no underwriting business with Juniper.
The cautious tone of the preopening conference call was a significant departure for the brash
challenger that only three months ago termed the industry's spending slowdown "self-inflicted."
Notably, the company said sales growth for the year would be in the 85% to 100% range, down from the 135% it had predicted in January. Juniper's 2000 sales were $673 million. To reach the low end of the forecast range, the company will have to average a little more than $300 million in sales over the next three periods to hit the $1.25 billion target.
With $332 million in the first-quarter sales already on the books, Juniper's guidance eliminates the need for an stronger-than-trend second half. That puts Juniper ahead of big gear rivals Cisco and
, which are still banking on a second-half bounceback scenario that appears optimistic, to say the least.
"Juniper's management deserves high praise for their willingness to commit to real growth targets," CIBC's Kamman says. "It's something that seems to have evaporated with the current downturn." For example, Cisco's has repeatedly insisted that investors
allow for a "wider range" of financial performance, rather than simply cutting its estimates. Last month Nortel, for its part,
threw up its hands, telling investors their guess is as good as any.
Bigger Picture Guy
But some investors aren't letting go of their skepticism regarding Juniper just yet. The overall weakening of the economy and the claw-for-survival mentality among the telcos suggest that spending will continue to slow for the foreseeable future.
"People are focusing on the fact that it was not that bad, but looking forward, how can you be comfy with that, based on what's going on?" asks a New York buy-side analyst whose firm has no position in Juniper.
Among the weak points in Juniper's earnings report was a 26% reduction in deferred revenue, to $25.5 million, a drop the company attributed to shorter sales cycles. Big reductions in deferred revenue can alert investors to coming shortfalls, as companies pull money from future quarters to make current targets.
Juniper also said its book-to-bill ratio, a gauge of orders coming in vs. shipments going out, was less than 1, meaning the company is seeing a slowdown in sales.
On the bright side, Juniper met Wall Street's expectations with first-quarter earnings of $85.4 million, or 25 cents a share, compared with $10.5 million, or 3 cents a share, for the first quarter of 2000. The company also carried no inventory. This is a major distinction, since foes including Cisco and Nortel are soaking in an oversupply of parts and will likely have to write of the excess in huge one-time charges.
Juniper shares fell initially after the company lowered its revenue forecast, but have since risen in midday trading by $8.09, or 19%, to $50.84.
Of course, in all the prudent discussion on the conference call with analysts Thursday morning, Juniper Chairman and CEO Scott Kriens didn't waste an opportunity to tout his company's relative strength. Even as he described the shriveling of his big customers' spending habits -- analysts say Worldcom,
Cable & Wireless
all trimmed way back on router purchases -- he pointed to a rush of new customers filling the void.
In an interview after the conference call, Kriens likened Juniper to golf star Tiger Woods. "It's kind of like shooting even par in the driving rain," Kriens said of the latest quarter's results. "It's a pretty good score in a rainstorm. ... And since we can't predict the weather, we believe that is a prudent way to build the business."