Juniper plans more cost reductions as Q3 revenues slide 5% to $1.1B

Juniper said it plans to conduct additional cost reductions after reporting that third-quarter 2014 revenues fell 5 percent year-over-year and 8 percent sequentially to $1.13 billion amidst falling U.S. service provider sales.

"While we have made significant progress executing beyond our IOP commitments associated with capital return and operating expenses, we are disappointed with our revenue performance this quarter. Our Q3 revenue declined 5 percent year-over-year and 8 percent sequentially," said Shaygan Kheradpir, CEO and director for Juniper, during the earnings call, according to a Seeking Alpha transcript. "The primary driver was lower-than-expected demand and slower ramp-up of new projects from service providers, particularly in the U.S."

Kheradpir added that "our traction with Web 2.0 leaders has allowed us to partially offset the decline in carrier spending and increase the diversity of our revenue base."

Juniper said it will conduct $100 million in additional cost reductions while increasing its annualized commitment $260 million, which it says is "designed to lower operating expenses while improving profitability and long-term growth."

News of the disappointing results should not be that much of a surprise. Earlier this month, Juniper lowered its profit and revenue forecast citing lower-than anticipated demand from U.S. service providers.

During the quarter, Juniper's service provider revenues were $742 million, down 6 percent year-over-year due to declines in EMEA, Asia-Pacific and the United States. On a sequential basis, Juniper said that service provider revenue for the quarter was down 11 percent due to declines across all three geographies.

EMEA revenue declined 5 percent year-over-year and 11 percent sequentially due to what Juniper said were declines in Western Europe and the Middle East, primarily in service providers, while the sequential decrease was driven by weakness in Eastern Europe. Likewise, Asia-Pacific revenue declined 28 percent year-over-year and 19 percent sequentially due to lower service provider sales in China and Japan.

However, one bright spot was the Americas region, where service provider revenues rose 1 percent year-over-year, but declined 7 percent sequentially.

"The year-over-year increase was driven primarily by Web 2.0 and cable provider growth, partially offset by decline from carrier demand," said Robyn Denholm, CFO and EVP for Juniper, in the earnings call, according to the transcript. "The sequential decline was driven by weak demand by large carriers and a significant reduction in Web 2.0 switching revenue in the quarter, partially offset by continued strength in cable providers and Web 2.0 routing."

From a product point of view, Juniper reported losses in its routing and security units, which declined to $533 million and $121 million, respectively, while switching saw a slight gain to $155 million.

Looking toward the fourth quarter, Juniper has forecast revenues will be in the range of $1.02 billion to $1.07 billion. However, it added that the overall revenue environment will be challenging over the next several quarters. For the full year 2014, using the midpoint of fourth-quarter guidance, Juniper expects revenues to be about $4.57 billion.

"The demand environment for our largest U.S. carrier customers continues to be challenging," Denholm said. "We have good relationships and design wins with these customers. However, the timing of deployments and improved demand is uncertain. At this stage, we are taking a prudent and cautious stance on revenue over the next several quarters."

Shares of Juniper were listed at $20, down 32 cents, or 1.57 percent, in Friday morning pre-trading on the Nasdaq stock exchange.

For more:
- see the earnings release
- and the earnings transcript (sub. req.)
- Reuters has this article

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

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