Juniper Networks (NYSE: JNPR) reported that third quarter 2013 earnings rose 6 percent year over year to $1.2 billion due to an uptick in service provider router sales, but the networking industry's movement to software-based systems is driving the vendor to slash 3 percent of its workforce.
Kevin Johnson, CEO of Juniper, told Bloomberg in an interview that it will cut 280 jobs in order to keep costs under control. He added that the company is in the "final phases" of finding a replacement. After five years with the company, Johnson announced in July he plans to retire.
The vendor's Q3 2013 operating margin increased to 12.2 percent on a GAAP basis from 3.8 percent in Q3 2012 and was essentially flat from 12 percent in Q2 2013.
While the Americas region revenues declined 2 percent sequentially to $661 million due to a dip in enterprise sales, the service provider segment had its third quarter in a row of double-digit year-over-year growth. Service provider revenues rose 9 percent sequentially across all three of its key regions--the Americas, EMEA and Asia Pacific--to $788 million.
In EMEA, revenues rose 2 percent sequentially to $307 million due to strong service provider design wins in both the UK and Middle East. Asia Pacific's enterprise and service provider segments, particularly in China, Australia, and South Korea, grew 25 percent sequentially to $218 million.
"We continue to see strength in the service provider market, the enterprise tracked largely as we expected, and security continued its trend towards stabilization, with sequential growth in the third quarter," Johnson said during the earnings call.
From a product segment standpoint, the Platform Systems Division (PSD) reported that revenues rose 3 percent sequentially to $939 million driven by routing growth.
Driven by the second successive record quarter of growth for its MX platform, routing revenue was $609 million, up 5 percent sequentially. Juniper said that quarterly routing growth was the result of core and edge routing, while the year-over-year growth in routing was driven primarily by edge routing sales. However, switching sales declined 8 percent sequentially to $148 million.
"The sequential increase in PSD revenues overall was driven primarily by growth in routing and strength in service providers globally," said Rami Rahim, executive vice president and general manager of PSD for Juniper, during the call.
Rahim added that in "routing, we saw strong spending among our Tier 1 service providers, as well as strength among our cable and Web 2.0 customers."
However, switching sales declined 8 percent sequentially to $148 million.
"This quarter's switching results were mixed, up slightly year-over-year, but down sequentially due to lumpiness in service provider demand for data center solutions," Rahim said. "While switching revenue declined sequentially, our switching bookings were healthy."
Besides its hardware platforms, Juniper reported sequential revenue gains in both its Software Service Division (SSD) and security division. SSD revenue was $246 million, up 5 percent sequentially, but down 15 percent year-over-year. Likewise, security product revenue was $144 million, up 14 percent sequentially.
Speaking of software, the vendor announced the general availability of its software defined networking (SDN) product Contrail Controller, which it says can provide integration between physical and virtual networks for both service providers and enterprises.
Rahim said that Contrail "had been in trials with roughly 40 customers across the world."
Taking into account the impacts in federal spending from the recent U.S. government shutdown, Juniper has forecast Q4 revenue to be in range of $1.2 billion to $1.23 billion. Analysts forecast the vendor would report adjusted profit of 36 cents on $1.23 billion in revenue.
Shares of Juniper closed at $20.36, down 49 cents, or 2.35 percent, at the close of Tuesday trading on the New York Stock Exchange.
Earnings summary: Wireline telecom earnings in the third quarter of 2013
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Updated article on Oct. 23 to reflect sequential gains.