COMMENTARY--Juniper Networks' first-quarter earnings and subsequent conference call were telling not because of the numbers, but how the company played the Wall Street game.
Juniper (Nasdaq: JNPR) met estimates last week with earnings of 25 cents a share. Sales were a bit light at $332.1 million. The networking company--and the biggest thorn in Cisco's side--also cut its sales projections for 2001, but you'd never know it unless you did some math and cut through the company's smokescreen.
Here's a look at the anatomy of spin:
7:34 a.m. EDT, April 12: Juniper's earnings release hits the wires. The company gives the results and a confident quote from CEO Scott Kriens. It keeps the release simple (five paragraphs) and doesn't provide a business outlook, like many companies do. Without the outlook, investors in premarket trading will cheer the results. And why not? Juniper didn't miss. Shares gain about 7 percent in premarket trading ahead of Juniper's conference call.
8:00 a.m: Kriens starts the conference call on a downright triumphant note. In an economic hailstorm, Juniper will hit its short-term and long-term estimates. No excuses here. "It is not for Juniper to declare that we are at the mercy of short-term market environments," says Kriens. "Our business will run successfully either way." Analysts are feeling good. Lots of "congratulations on a good quarter" comments are coming. Shares still up.
8:20 a.m. give or take a minute or two: Chief Financial Officer Marcel Gani steps up to the plate. The company will continue its research and development spending and be more selective about its hiring of new employees. Gani mentions that the company will report earnings of about 25 cents a share for the second quarter. We can live with that; it's only a penny shy of current estimates. He adds that sales growth will be 85 percent to 100 percent and acknowledges some macroeconomic wildcards.
8:35 a.m.: Analysts start breaking out the calculators. Wait a minute. If you do the math, Gani is projecting revenue of between $1.25 billion and $1.3 billion. Earnings for the year should be between 90 cents and $1, Gani said. First Call consensus for the year was for $1.59 billion in revenue, with earnings of $1.05 per share.
8:45 a.m. or so: "So you're talking $1.3 billion to $1.4 billion in total revenue for the year," an analyst asks Gani. "Our guidance is growth of 85 percent to 100 percent year over year," says Gani. Analysts talk about lower deferred revenue and other warning signs.
8:55 a.m.: Kriens tones down his cockiness somewhat, acknowledging visibility is tough, but adds that Juniper will be well managed in any environment.
9:30 a.m.: Market opens and Juniper shares are roughly flat with the prior day's closing price. Bulls and bears are in tug-of-war over this one. Valuation for Juniper shares are better, but the company did cut its outlook.
9:45 a.m. give or take a few minutes: Kriens shows up on CNBC's "Squawk Box." Kriens looks stunned by questions about the company's outlook and visibility. He ducks the question, but remains optimistic about the company and its ability to grow at least 50 percent for the next few years. After a rough start, Kriens wins the CNBC gang over with a golf analogy about shooting par at a driving range and playing in a storm. Gotta hand it to him--nice recovery while ducking any hard questions.
10:00 a.m. to 11:00 a.m.: After an early dip, Juniper shares head slightly higher. Internet message board mavens debate Kriens body language. The consensus: He was very evasive, but overall he seemed like a nice confident guy. Why not buy the stock?
11:00 a.m. to noon: Analyst reaction begins to trickle out. Merrill Lynch analyst Samuel Wilson dropped his 2001 earnings estimate from $1.05 to between 95 cents and $1, and 2002 earnings estimates from $1.35 to between $1.10 and $1.20. He reiterated his rating of “long-term buy” on the stock, but noted that “for the stock to do well, visibility needs to increase.” That refrain is common.
1 p.m. to market close: After bouncing around a bit, Juniper shares close up 17 percent on the day. Juniper execs have to be happy. They basically issued a sales warning, but managed to spin it as a positive in a series of interviews. The timing couldn't have been better. Trading was light Thursday ahead of a long weekend and investors were in no mood to be nit-picky.
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