Juniper Dims Sales Outlook, Cuts Workforce

Tuesday, 22 Oct 2013 07:21 PM

 

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Juniper Networks Inc. forecast revenue for the current quarter that may miss analyst estimates and is cutting 3 percent of its workforce, indicating that demand for telecommunications equipment remains inconsistent even though mobile-Internet traffic is surging.

Profit excluding certain items in the fiscal fourth quarter will be 35 cents to 37 cents a share on sales of $1.2 billion to $1.23 billion, Juniper said in a statement Tuesday. Analysts on average are projecting adjusted profit of 36 cents on $1.23 billion in revenue, according to data compiled by Bloomberg.

Kevin Johnson, chief executive officer of the second- biggest maker of computer-networking equipment behind Cisco Systems Inc., said in an interview that Juniper is cutting 280 jobs immediately. The cuts will take place across the business, he said. The company is being hurt by a shift in the networking industry to software for handling tasks instead of just hardware such as routers and switches, according to Scott Thompson, an analyst at FBR Capital Markets & Co.

“When we saw a guide that was essentially in-line to slightly below expectation, many are likely thinking there might be more risk to the fourth quarter than they might want to take on,” said Thompson, who has an underperform rating, the equivalent of a sell, on Juniper shares. “There’s a definite shift going on, especially in the service provider space. If you’re not benefiting from that shift, you’re probably losing out on the opportunities you might have otherwise.”

Job Cuts

Telecommunications companies spend billions of dollars upgrading their networks. It comes in chunks, and many have delayed costly network retrofitting to squeeze more profit out of existing infrastructure as economic troubles have hurt consumer spending.

In the fiscal third quarter ended Sept. 30, adjusted profit was 33 cents a share, versus analysts’ average projection for 31 cents. Sales were $1.19 billion, compared the average estimate of $1.17 billion.

Juniper declined as much as 4.5 percent in extended trading. The shares fell 2.4 percent to $20.36 at the close in New York, leaving them up 3.5 percent so far this year.

The CEO said the job cuts are a result of “looking at our top-line growth agenda for 2014.” Johnson declined to indicate the projected savings from the move.

Industry Challenges

Cisco also trimmed jobs earlier this year. With the latest round of 4,000 cuts, or 5 percent of staff, announced in August, Cisco will have eliminated 12,300 jobs over the past two years as it has exited consumer businesses and focused on technology services and software.

Demand from large service providers in Europe was “mixed” while U.S. enterprise sales were lower in part as customers held off on spending because of the government shutdown and debt- ceiling fight in Congress, Johnson said. The uncertainty was reflected in the fourth-quarter revenue forecast, he said.

Johnson also said the company is in the “final phases” of its search for his replacement. He declined to provide specifics. The Sunnyvale, California-based company said in July that Johnson, a former Microsoft Corp. executive who has been Juniper’s CEO for five years, is retiring.

Johnson said at the time that the decision was personal and unrelated to Juniper’s performance. Juniper’s stock has declined about 19 percent since Johnson’s arrival as CEO in September 2008.

Juniper disclosed in August that it’s being investigated by the U.S. Securities and Exchange Commission and Department of Justice for possible violations of the U.S. Foreign Corrupt Practices Act, which prohibits U.S. companies from paying bribes to foreign officials to win business. Juniper is cooperating with the investigations and “can’t predict the scope or duration,” Michael Busselen, a spokesman for the company, said in August.

© Copyright 2014 Bloomberg News. All rights reserved.

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