Despite a cloudy economic outlook, Juniper Networks Chief Executive Scott Kriens says he remains upbeat over the company's future as the network equipment maker matched Wall Street's earnings estimates Thursday.
Juniper raked in a first-quarter profit of $85.4 million, or 25 cents a share, on revenue of $332.1 million. But the company lowered its earnings projections for the
fiscal year, from a range of 90 cents to $1.05 per share to a range of 90 cents to $1 per share.
Kriens said the lowered forecasts do not mean that Juniper is suffering from the first financial hardship in its young life, nor is it afflicted by the telecommunications spending slowdown that has hurt its rivals. The
high-flying networking company continues to snag market share away from
Cisco Systems in the market for Internet routers, devices that ship data over the Net at high speeds. Juniper expects yearly revenue growth this
year to grow between 85 percent and 100 percent.
"In times of fast growth, we outperformed the industry growth rate. In today's declining market, we're still growing. There's demand for our products," Kriens said in an interview Thursday.
"But visibility is limited," he added. "No one can accurately predict what the future holds. Service providers are spending carefully. They're buying
what they need today, but they're not placing commitments beyond the present. That's different from last year. It's unclear whether they mean to spend less in total or order smaller amounts more often."
Cisco and Nortel executives, however, made similar rosy predictions last fall before they got hit with earnings warnings. Other networking companies such as Extreme Networks, Sycamore Networks, and Foundry
Networks have also announced profit warnings because of slumping sales to
telecommunications carriers, particularly struggling start-up service providers.
Unlike many rivals that are cutting costs and laying off workers, Kriens said Juniper plans to hire more employees this quarter to pump up staff in
engineering, marketing, and other areas. The company, which has about 1,100 employees, hired 235 people last quarter. Kriens said the company will hire
fewer people this quarter.
Unlike other networking companies, Juniper's revenue hasn't slipped because telecommunications carriers still need Juniper's equipment to speed their networks and increase bandwidth, said B. Alexander
Henderson, an analyst at Salomon Smith Barney.
But Henderson believes Juniper will soon move to new next-generation networking products as early as midyear. And because of that, some
carriers may hold off on some of their purchases and wait to buy new products. Such a scenario could hurt sales for the second quarter, for example, if people want to buy the newer products, he said.
"If I'm a capital-constrained service provider with needs, I'd rather wait for next-generation equipment than buy the old-generation equipment," Henderson said.
Kriens, in keeping with company policy, declined to comment on future products but added that the company is always developing new equipment.
Kriens also declined to comment on recent rumors that Juniper is interested in acquiring Redback Networks, a maker of broadband access equipment.
However, he said, the economic slowdown will result in acquisitions and consolidation throughout the networking and telecommunications industry.
"Today, there are too many companies, both equipment and service providers," he said. "So what this marketplace will do, which will be
healthy, is thin down the marginal companies. And in doing so, it will
create more opportunities for the really good companies to prevail."