Earnings Preview

Juniper Networks Inc. is scheduled to announce its first quarter 2011 results on April 19 afterwards the market closes, and we do not see major variation in analyst estimates at this stage.

Juniper reported fourth quarter 2010 revenue of $1.19 billion, up 26.4% from the year-previously quarter. The revenue upside was attributable to strong Product sales in the quarter, which increased 30.2%. In addition, the company as well witnessed an improvement in Services revenue, which was up 12.5%.

Juniper generated good overall gross margin, even though it tumbled slightly on a year-over- year basis, supported by an encouraging gross margin from the Product segment. Service segment gross margin, but, tempered down to some extent. Even though there was a modest increase in operating expenses, the operating margin out performed based on higher revenue growth.

Management expects customer demand to remain healthy going forward, which would subsequently drive furthermore gains in the networking and cloud computing space. To this end, Juniper expects to launch new security, routing and switching products in fiscal 2011.

However, the company faces stiff competition from Chinese networking companies, which is expected to temper revenues going forward. Juniper expects first quarter earnings in the range of $1.06–$1.11 billion.

The enterprise market

In the enterprise market, some analysts expect the company to grab market share primarily through favorable pricing. But, a recent study by some analysts indicates a decline in momentum for switching and routing solutions as they expect that 60% of IT managers are expected to upgrade their switching innovation to a new level.

On the other hand, some analysts are worried about Juniper’s European exposure, which generates around 29% of the total revenue. The prevailing economic turmoil in Europe could keep capex spending in accordance with pressure.

The continuous launch of new products

The continuous launch of new products and entry into new markets will keep Juniper ahead of its networking peers. We believe that increased spending by key carriers, just as AT&T Inc. and Verizon Inc. as so then as ongoing enterprise share gains, fueled by the EX switch and SRX security platforms, will pave the way for healthy profitability going forward.