Juniper's Warning: Why You Should Have Seen It Coming

Jan.10.12 | About: Juniper Networks (JNPR)

After the bell, network innovation leader Juniper Networks (NYSE:JNPR) declined after it issued a warning on fourth-quarter results. This warning seemed rather obvious that it was coming, and if you didn't, it's unfortunate. Why do I say it was rather obvious? Well, just last Tuesday, fellow network solutions company Acme Packet (NASDAQ:APKT) warned on its fourth-quarter results. At that time, I said that Juniper was the truest competitor for Acme Packet, so this warning is not much of a surprise. In both cases, the companies blamed weakness from US and North American service providers.

Here's what Juniper said:

  • Revenue in the range of $1.11 to $1.12 billion, below the previous guidance of $1.16 to $1.22 billion. Current estimates from analysts called for $1.19 billion.
  • Non-GAAP EPS in the range of $0.26 to $0.28, below the previous guidance of $0.32 to $0.36. Current analyst estimates were for $0.34.
  • Non-GAAP operating margins expected to be below prior outlook of 21% to 23% due to decreased revenue.

Juniper said that no one geographical location was to blame, but that US weakness contributed heavily to the less-than-expected growth. In fact, due to the reduced guidance, revenue for the quarter are expected to be down year over year. However, the company did state that 2011 was a record year for the company.

I'm curious to see what impact this warning will have on the other names I discussed in the previous article, Riverbed Technology (NASDAQ:RVBD), Cisco Systems (NASDAQ:CSCO), and F5 Networks (NASDAQ:FFIV). Strangely enough, JP Morgan analysts just upgraded Cisco last week from Neutral to Buy, but if the US weakness is widespread, I'm not sure they'll be immune. Obviously, the smaller names will see more impact since they don't have the best product diversification, so expect them to see the most weakness and price losses.

At time of writing, here's how these stocks were trading in after hours.

  • Juniper was down 2.1%.
  • Cisco was down 0.1%.
  • F5 was down 0.6%.
  • Riverbed was down 0.5%.
  • Acme Packet was up 0.1%.

Since Acme Packet's warning last week, it is the only name of the five that is down. In fact, a couple of the names are up decent amounts.

Juniper's warning today was not shocking to me, and it shouldn't have been to you either. Acme Packet told us about weakness in North America last week, which was echoed after the bell today. I'm not sure if we'll see any warnings from the other three names I've mentioned, but if we do, I won't be surprised, and neither should you.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.