Operating in two segments, Platform Systems Division and Software Solutions Division, Juniper Networks, Inc. (NYSE:JNPR) caters to the networking requirements of service providers, enterprises, governments, and research and public sector organizations across the globe. The two segments of company taken together provide complete solutions ranging from routing and switching hardware to network security software solutions.
Juniper Networks, Inc. (NYSE:JNPR)‘s presence in these businesses helped it announced a very strong set of 2Q 2013 results recently which beat consensus estimates on earnings.
Revenue & earnings
Second-quarter results reflected strong revenue growth and even stronger growth in earnings. The service provider segment has been witnessing an increased momentum in spending by Juniper Networks, Inc. (NYSE:JNPR)‘s customers. Also, there has been increase in demand from enterprises. These two factors together accounted for contributing around half of growth in revenue which exceeded all expectations. The other half of the growth in revenue came from earlier-than-expected recognition of some U.S. federal business.
The company maintained a book-to-bill ratio of greater than 1 due to demand for its products and the product backlog also increased year-over-year. As a result, total revenue stood at $1.15 billion, which turned out to be an increase of 7% year-over-year.
75.1% of quarterly revenue came from product sales, which witnessed a growth of 7.3% and the rest was contributed by the services segment which grew 6.6% on a year-over-year basis.
Net income stood at $97.9 million, which worked out to $0.19 per share, up from the year-ago quarter’s $57.7 million, or $0.11 per share. The company is focused on cost reduction initiatives and operating expense as a percentage of revenue stood at 44.8% as compared to 48.4% in year-ago quarter. Juniper Networks, Inc. (NYSE:JNPR) is also managing expenses efficiently to improve margins. The company is well on course to achieving a $50 million year-over-year OpEx reduction in absolute terms.
There has been a gradual but steady recovery in network spending worldwide and the current mood seems to sustain itself in the coming quarters, which is a good sign. As capital expenses on networks increase, so will the revenue of Juniper Networks, Inc. (NYSE:JNPR). Increase in demand of data is driven by the growth trends in mobile and cloud computing. Mobile data traffic has grown exponentially which, as per CISCO VNI report, is expected to grow at CAGR of 65% over the next five years.
Service providers, who will need to buy networking gear to upgrade their existing mobile network or replace aging hardware in order to handle the burgeoning demand for data, account for almost two-thirds of Juniper’s revenue. So, Juniper has a bright future ahead in this segment. Verizon and AT&T are two big clients of Juniper in the U.S. and each account for around 10% of Juniper’s revenue. As they expand their network, revenue of Juniper should also increase.
The company foresees a good quarter ahead as far as the service provider segment is concerned and also expects some improvement in the EMEA region. Revenue for the third quarter is likely to be in $1.14 billion-$1.18 billion range. Also, Juniper is seeing increased traction for its new products, especially in routing and that should help product gross margins improve further.
The early signs of success with new products like P4000, PTX, and QFabric are already good, going by the fact that these accounted for around 10% of revenue in the last quarter. Juniper is also confident of meeting the targets of a quarterly revenue run rate of $150 million for the new products by the end of the year, when they would account for almost 20% of total revenue.