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conference date: January 30, 2007
for quarter ending: December 31, 2006 (4th quarter)
Overview: Revenues show minimal growth; foggy presentation due to stock option review. But relatively strong guidance for full 2007.
Basic data:
Revenues of $595.8 million. Up 4% from Q4 2005.
$2.3 billion revenues for the entire year of 2006, up 12% from 2005.
Non-GAAP EPS of $0.19.
Cash ended at $2.6 billion, up $200 million during quarter.
No detailed financial results due to review of historic stock option practices.
Guidance:
Q1 2007, Non-GAAP: $615 to $625 million revenue. Will recognize some deferred revenue from Verizon. Gross margins to come down. $0.19 non-GAAP EPS. Expenses to grow in line with revenue.
Full 2007, Non-GAAP: $2.6 to $2.7 billion revenue. 28% tax rate.
Conference Highlights:
Main challenge for 2007 is to execute better in segments of market where they can add value for customers.
YouTube uses as much bandwidth itself as the entire Internet did in the year 2000, so they are in a growth area.
Still believes being the best and being the performance leader is the correct strategy; it has not yet become a commodity market. Will continue to invest to try to capture more of the $20 billion market. IP video a huge opportunity.
Revenues for the quarter are a record.
EPS would be $0.19 non-GAAP.
$352.6 infrastructure products revenue, up 2% from Q3. Up 3% for full year 2006 over 2005. Slower than historic revenue growth is mainly due to Verizon deferred revenue. But shipments grew 12% 2006 over 2005. Core represented greater than 50% relative to the edge. Over 200 T-series units sold. M120 multiservice edge router saw traction and already getting orders for M960, which will ship by end of Q1.
Service Layers Technologies (SLT) segment $130.5 million, up 7% sequentially. SSL, IDP and J-series showed good growth. Growth due to sales effort penetration of enterprise market.
$112.7 million service revenue, up 6% sequentially mainly due to growth of contract installed base.
Book-to-bill was greater than 1.
Siemens represented 13%, Erikson 10% of revenues in this quarter.
44% Americas (up 11% annual), EMEA 38% (up 33%), Asia 18% (declined 12%). Expects decisions in Japan in Q1 that will affect 2007.
Non-GAAP gross margins were up from Q3 due to good product mix. 8% increase in non-GAAP operating expenses compared with Q3. Increase in R&D and sales. Moved 30% of manufacturing to Asia, meeting goal. Operating margin decreased slightly.
Tax rate went down to 25%. 2006 tax rate overall was 28%.
$249 million accounts receivable, due to good collection efforts. $386 million deferred revenue due to increase in service contracts (up from $346 million Q3). Cap Ex $33 million. Depreciation $20.7 million.
4833 employees. Head count increase mainly in China and India.
Q&A:
Partner perspective for Alcatel-Lucent? Continued opportunities in support for existing networks and new markets and networks.
Strong guidance for 2007? Is not a function of a particular relationship; reflects diversity.
Verizon deferred? $40 million will be recognized during first half, but probably in one step.
Investments by segment? Doesn't really work that way, but investing heavily and consistently.
R&D tax credit for quarter? 29% run rate, Q4 was 25%. But accelerated investments into Q4 to use tax credit for R&D.
Operating margins consistent decline to 20%? Gross margins stayed stable, so operating margin decline is due to increased investment in the business, so they can hold it there.
Share count for EPS guidance? Nothing specific. At these stock prices the share buyback would have no effect on EPS.
Carrier Ethernet MX960 orders? Mostly represents new market opportunity rather than cannibalization. Mostly is in existing customer base, but top 40 customers are already Juniper customers. Jury will be out beyond the first quarter. But represents end of segment because deployable across networks.
Operating Expense? $280 million, how much for legal expenses? None for stock-option inquiry in non-GAAP results.
Q1 2007 guidance? Has historically been seasonally soft quarter, but has some visibility which shows diverse markets and products have some strength.
March quarter operating margins? Related to investments to gain market share, but will stay above 20% operating margin.
Buy back plans? Was announced July 2006, depends on market conditions.
Gross margin long term? Goal is 25%, but not until they see strong sustained revenue growth.
Market growth assumption? Low to mid teens is typical market prediction, our guidance is 13 to 17%, so that would be a market share gain. What they see in market is strategic value of Juniper's expertise.
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Disclaimer: Our analyst summaries may include both our condensations of statements made by company representatives and our own analysis. They are not covered by any warranty. We cannot guarantee anything said by company representatives is true. We try not to make errors, but it is possible. Before making or terminating an investment you should always verify any factual basis of your decision.
Copyright 2007 William P. Meyers
