Data Centre


Pour yourself a tall one, Juniper investors. It's lost money again

Gin Palace says cloud customers just aren't buying what it's selling

By Richard Chirgwin


Juniper Networks has announced a drop in revenue for Q4 2017 and predicted Q1 2018 will disappoint.

In the fourth quarter, the company turned in a US$148.1 million loss on revenue of $1,239.5, which was down 11 per cent compared to a year ago.

In a CFO commentary [PDF] the company's blamed “architectural shifts in the cloud” for falls in its key routing and switching product lines.

Juniper said those architectural shifts led to “ongoing deployment delays” in that segment.

CEO Rami Rahim sang the same song, telling the earnings call he believes the “short-term headwinds” are the result of the time it takes for customers to roll out new architectures, and “are likely to prove transitory”.

CFO Ken Miller added that lower routing sales dented the company's margins (although in switching, the PFX platform is performing strongly and grew 25 per cent).

Lower sales volume and the company's current product mix will impact margins for now, Miller said, but he believes those issues will be overcome in future quarters. To improve the margin position, he added, the company will work on “volume engineering, optimising our supply chain, pricing management, and increasing software and solution sales”.

The routing segment fell by 22 per cent year-on-year, to $509 million, while at $233m switching was down seven per cent. Growth in security (up eight per cent to $88m) and services (up two points to $409m) couldn't offset those declines.

Cloud customers were behind the fall, with that vertical shedding 37 per cent year-on-year to $259m. Telco customers ($607m) spent four per cent less than in Q4 2016, but the enterprise business grew 10 per cent to $373m.

The Gin Palace says it remains confident in its “competitive position and strong relationship” with “strategic customers”, but not so confident that it expects Q1 of 2018 to show much improvement.

Its forecasts for the quarter are revenue of $1.05bn and operating expenses of $485m, and “expects gross margins for the quarter to remain under pressure”. However, the longer-term outlook is more upbeat, with a return to year-on-year growth by the end of the year.

The Trump tax plan means Juniper will repatriate $3bn, which it will spend on acquisitions, business investment, “return of capital to shareholders” (by way of a $2bn share buyback) – oh, and there's a hint of more layoffs in the works, with a threat/promise to “increase operational efficiencies” through the year.

The company's full-year numbers don't offer happier news. Revenue of $5.03bn was an increase of one per cent year over year and earnings per share rose by the same amount. But net income was $306.2 million, a decrease of 48% year-over-year. Margins were also down however you measure it, albeit by less than one per cent. ®

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