Curiouser and curiouser! Despite reported relatively
healthier third-quarter earnings last night,
Juniper Networks (Nasdaq: JNPR) got no love
from Wall Street. Quite the opposite, in fact.
The numbers showed a company riding the same
turnaround waveeveryone else is enjoying today. Sales
dropped 13% year over year, but fattened up 5% from the
second quarter, landing at $824 million. Pro forma earnings
landed at $0.23 per share; that figure was down 28% from the
year-ago quarter, but it gained 21% sequentially.
Juniper's stock jumped a couple of percent in after-hours
trading, only to fall hard the morning after. That's despite
an analyst upgrade, several upward price target revisions on
the stock, and a generally
positive morningfor the market, buoyed by impressive
results from
Microsoft (Nasdaq: MSFT) and
Amazon.com (Nasdaq: AMZN). You can't even
blame Juniper's slump on a sector effect: Archrivals
Cisco Systems (Nasdaq: CSCO) and
Alcatel-Lucent (NYSE: ALU) are beating the
market today.
And management comments were positive, too. The clouds
around the future are clearing up, giving Juniper a better
picture of what's coming. Telecom providers like
Verizon (NYSE: VZ) are stepping up their
orders for network equipment. Internet data traffic
should
double every two yearsby Juniper's estimation (and Cisco
might concur), mostly thanks to online video and
mobile broadband conectivity.
The company's
brand-new distribution dealwith
IBM (NYSE: IBM) is off to the races, and CEO
Kevin Johnson believes that "long-term it's very key, we're
making good progress, and I think you will see continued
steps forward there. It is a key partnership for us."
Juniper even did its
emergency cost-cuttingcorrectly, scaling down its sales
and marketing while actually increasing headcount in the
all-important R&D side of the business. If you stop
innovating in the tech sector, you might as well file for
bankruptcy right away. In contrast, Juniper has been
hiringengineers over the last year.
Long story short, I can't explain why Juniper is cheaper
after this report than it was before. The stock has been
beating the market this year, so maybe we're seeing a bit of
opportunistic profit-taking. But the long-term health of this
business is blatantly obvious, even if Juniper is working in
the shadow of mighty Cisco. This industry is big enough for
several competitors to prosper.
Do you have a better explanation for Juniper's drop? Maybe
a different theory on the company's business prospects?
Please share in the comments below.
This article was originally published as
What's Wrong With Juniper?on
Fool.com
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