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Technology Stocks : Earnings: Networkers & Communications
CSCO 55.80+1.2%Oct 26 3:59 PM EDT

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To: 2MAR$ who wrote (2)1/23/2004 2:14:39 AM
From: 2MAR$   of 12
* JNPR ($22-31) Jumps After Raising the Bar

By Scott Moritz Senior Writer
01/16/2004 10:05 AM EST
Click here for more stories by Scott Moritz

Updated from Jan. 15

Juniper (JNPR:Nasdaq - commentary - research) is so confident nowadays that it's even raising guidance for its archrival.

After the market closed Thursday, the Sunnyvale, Calif., networking shop blew away Wall Street's targets, easily beating quarterly earnings and revenue estimates. The company also boosted first-quarter financial targets, saying it is seeing strong demand for its products. Its shares posted an off-hours rally that began modestly Thursday evening and steadily escalated through Friday morning, when early regular trading saw Juniper quoted a stunning 22% above its Thursday close.

The company's strong numbers and swaggering pose will certainly do nothing to undermine the telecom-spending-rebound thesis that has inflamed this smoking sector. In fact, CEO Scott Kriens was so sure of the industry's rising fortunes on his Thursday afternoon conference call that he even talked up his chief rival, router-making juggernaut Cisco (CSCO:Nasdaq - commentary - research).

"Cisco will have a strong quarter," Kriens said in response to a question about Juniper's market-share progress in the big router business. "It's a robust market."

As it has been throughout 2004, the entire communications-gear market was robust in the wake of Juniper's strong comments. Juniper surged $5.13 to $28.06, while Cisco rose 3%, and smaller gear peer Sycamore (SCMR:Nasdaq - commentary - research) jumped 7% in early action. Juniper earlier Friday set a 52-week high at $28.46.

Eye Candy
For the sector's many bulls, there was much to see. For its fourth quarter ended Dec. 31, Juniper posted a profit of $15 million, or 4 cents a share, up from $8.5 million, or 2 cents a share, a year earlier. Revenue surged 33% to $207 million, from $155 million a year earlier.

On a so-called non-GAAP basis, excluding certain costs, latest-quarter earnings surged to $28 million, or 7 cents a share, from $3 million, or a penny a share, a year earlier. The Wall Street consensus as polled by Reuters Research had called for earnings of 4 cents a share on revenue of $182 million.

On the postclose conference call, Juniper also boosted its first-quarter financial guidance. CEO Kriens essentially stuck with the consensus forecast of 2% sequential sales growth for the first quarter. But considering the much higher-than-expected fourth-quarter basis for those projections, the result was a strong upside surprise: Juniper projected a first-quarter non-GAAP profit of 8 cents a share on revenue of $210 million to $215 million. The First Call consensus called for a 5-cent profit on revenue of $186 million.

Investors were hardly shocked. "I think people are looking out ahead and feeling there is a bit of a new capex cycle coming," says hedge fund manager Manu Daftary with Woodrow Partners, who holds a small position in Juniper.

Budget Flush
On Juniper's call, CEO Kriens attributed a good portion of the strong fourth-quarter performance to a so-called budget flush, in which technology buyers use up their remaining allocated cash on year-end purchases. Kriens said he wasn't sure how much of that spending was one-time in nature, but he added that demand has been solid.

Tamping down speculation of a developing bubble in the telecom gear arena, Kriens said he believes the fundamentals are solid right now. The "difference between the late '90s and now is speculation vs. demand," he said.

To that end, Kriens noted that Juniper's book-to-bill ratio, reflecting products on order vs. those actually shipped, is above 1 -- a bullish signal. An equally sanguine sign from the fourth-quarter report was that strong sales volume pushed the company's gross margin to 65.9% from the third quarter's 63.4%.

"The fourth quarter was exceptionally strong, and the value Juniper brings to market is clearly reflected in all aspects of our financial results," Kriens said in the earnings press release. "We are pleased with our progress throughout 2003 and encouraged by the confidence our customers have placed in Juniper as we look forward to 2004."

Happy Days
Juniper investors have already enjoyed a happy start to 2004, as the stock has risen more than 20% amid increasing talk of a network spending revival by big telcos. And in contrast with big industry rivals such as Lucent (LU:NYSE - commentary - research) and Nortel (NT:NYSE - commentary - research), which have been among the main beneficiaries of the 2004 rally with gains of more than 40%, Juniper has actually been showing solid growth in recent quarters

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