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conference date: April 23, 2007 @ 1:45 PM PT
for quarter ending: March 31, 2007 (1st quarter)
Overview: Rising revenues, but falling GAAP net income and EPS.
Basic data:
Revenues were $626.9 million, up 5% sequentially from $595.8 million and up 11% from Q1 2006 revenues of $566.7 million.
GAAP net income was $66.6 million, down from $75.8 million in Q1 2006.
GAAP EPS was $0.11 per share, down from $0.13 per share.
Non-GAAP net income was $112.4 million or $0.19 per share, flat sequentially and against year-earlier quarter.
$2.7 billion cash and equivalents.
Guidance:
[Non-GAAP]. Q2 640 to 650 million. Flat gross margins. $0.20 EPS.
2007 total revenues $2.6 to 2.7 billion. Non-GAAP EPS $0.80 to $0.81. 28% tax rate. Expenses to grow slower than income.
No share count projections because of buy-back program.
Conference Highlights:
Net cash flow from operations was $152.6 million. Results "in line with expectations."
Stock compensation expenses
Pleased with customer wins.
T and M-series routers selling well. Introduced SRC (Session and Resource Control) solutions. Security devices also sold well; many new customers. M-120 saw 90% increase in revenues. Early MX-960
Service provider market $385 million revenue up 6% year-over-year. Edge products were more than one-half of business, but saw good growth in the core. Video growth was an important factor. E-series edge portfolio showed good growth, including $50 million in previously deferred revenue. MSN almost 12% of revenue. 15% from Verizon, but that is one-time because it includes unusual conversion of deferred revenue. Juniper is number 2 in market share in this sector.
$410 million up from $386 million deferred revenue prior quarter.
Enterprise market grew 25% year-over-year. SLT (Service Layer Technologies) $124.5 million down 5% sequentially but up 12% over year-earlier. Firewall products and security grew rapidly. Stand-alone IDP was flat. Increased market share in enterprise routers.
Services business (distinct from service provider segment) $117.2 million up 4% sequentially and 26% year over year.
Book to bill greater than one.
Geographic: 47% Americas. EMEA (Europe Middle East Africa) 33%. Asia 20%. Expecting decisions soon in Japan.
Stock buy-back used $30 million at $19.16 per share.
Interviewing candidates for open executive positions.
67% gross margin, non-GAAP.
$130 million R&D expense. $143 million sales and marketing expense. $23.5 million general and administrative. $296.6 million total operating expense non-GAAP. 28% non-GAAP tax rate. $34 million interest income. $32.4 million capital expenditure.
5099 employees end of quarter.
Q&A:
Enterprise spending attitudes? Global market realizes network is strategic element for business success. But cautious with spending. No change in last quarter.
SLT margins, operating at a loss? Yes, enterprise business is not contributing as much. Expect it to be a positive contributor as it grows, some time in 2007.
Backlog color? Has more backlog available for shipments. Helps with efficiency.
Operating expense changes? No significant change in Q1. Slower growth in expenses v. revenues does not mean they are not investing heavily in R&D. Employee tax is always high in Q1, but no real trend.
If you take out Verizon deferred revenue, was there any growth? Despite Verizon deferral, new deferred lifted total. So subtracting it out is not a way to determine underlying revenue. In aggregate Ethernet market did grow faster than Juniper did in 2006, but now MX products provide a segment opportunity that was not there before.
Japan? Little change from previous. Competitive position about the same. Just have to wait for decisions to be made.
Buy back color? Bought about 1.5 million shares. Discloses purchases, but not decision making criteria for purchases.
Juniper focuses on high end for both service providers and enterprises. The reason they buy high-end is because it actually reduces their cap ex costs.
SLT breakdown for enterprise v. service provider? Some products are shipped to service providers who resell to enterprise users. Or use in managed services, which are sort of enterprise. So report on product basis and market basis as best they can.
Gross margin declined, cause? Verizon deferal did not impact gross margins. Mix of products within categories.
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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
