Juniper revenue up 7% to $1.2B, but service provider delays could impact second-half results

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Juniper Networks reported that a new wave of service provider spending drove up the vendor's second-quarter 2014 revenue 7 percent year-over-year to $1.23 billion, up from $1.2 billion in the same period a year ago.  

Service provider revenues rose year-over-year to $832 million--an increase over $726 million it reported in the second quarter of 2103--while enterprise revenues declined 6 percent year-over-year to $398 million. 

Company net income rose year-over-year to $190.3 million, or 40 cents per share, from $142.6 million, or 29 cents per share.

Second-quarter operating margin increased to 9.4 percent on a GAAP basis, including $86 million of restructuring and other charges, from 0.5 percent in the first quarter of 2014, but down from 12 percent in the second quarter of 2013.

Juniper saw continual gains in its product and service sets. 

Routing and switching revenues were the stars, rising 12 percent year-over year to $618 million and 25 percent to $200 million, respectively. 

"We delivered good performance across our routing and switching product lines, both of which grew year-over-year," said Shaygan Kheradpir, CEO of Juniper, according to a Seeking Alpha transcript of the earnings call. "I am particularly pleased with our routing performance, which grew 7% year-over-year and if normalized for last year's deferred revenue recognition of $34 million, grew 14% year-over-year."

However, security declined 17 percent sequentially and 11 year-over-year to $112 million.

"In security, the decline of our legacy NetScreen product has accelerated and while we disappointed with overall growth rate, we are pleased that our Junos Space SRX portfolio was up 11% in the first half of the year," Kheradpir said. "The growth was driven by demands for high performance Firewalls, virtualized Firewalls, high IQ features for stress detection and mitigation and end to end management simplicity."

From a regional perspective, the Americas continues to be the dominant service provider market, rising 13 percent year-over-year driven by Web 2.0 customers.

The vendor also saw gains in Europe, Middle East and Africa (EMEA), which rose 8 percent over last year, while APAC remained flat.  

Robyn Denholm, chief financial and operations officer for Juniper attributes the uptick in EMEA results to "healthy growth in the service provider market with particular strength in Central and Eastern Europe and the Middle East." 

Looking forward to the third quarter, the vendor has forecast revenues to be in the range of $1.15 billion to $1.2 billion and non-GAAP gross margin will be approximately 64.0 percent, plus or minus 0.5 percent.

A number of issues including mergers and acquisitions were impacting the timing of projects of some U.S.-based service providers. 

Denholm said there were "delays in the timing of project with the few key U.S. service providers," adding that executives "expect these delays to impact second-half results." These delays are related to mergers and acquisition activities. 

Shares of Juniper were listed at $22.38, down $2.44 or 9.83 percent, in Wednesday morning trading on the New York Stock Exchange (NYSE).

For more:
- see the earnings release
- see the earnings transcript (sub. req.)

Special report: Wireline telecom earnings in the second quarter of 2014

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