Stung by low service-provider demand, Juniper has announced “additional cost reductions of approximately $100 million.”
The announcement, made today alongside Juniper’s third-quarter earnings, didn’t include a specific mention of layoffs but did say Juniper plans a “careful management of headcount.” Other measures the company will take include a “focus on improved efficiencies” (implying more cost-cutting) and “prioritization of revenue-generating products.”
That last point means Juniper might undergo more honing, even beyond CEO Shaygan Kheradpir’s goal of getting back to Juniper’s service-provider roots. So far this year, that’s meant a layoff of 6 percent and the culling of certain products, notably Junos Pulse.
Juniper had already notified investors, earlier this month, that earnings would be weak. For its third quarter, which ended Sept. 30, Juniper reported revenues of $1.126 billion, down 5 percent from $1.186 billion a year ago, and net income of $103.6 million, up 4.5 percent from $99.1 million a year ago.
Non-GAAP net income of $165.4 million, or 36 cents per diluted share, was at the high end of Juniper’s revised prediction of 34 to 36 cents. The company had previously predicted third-quarter earnings of 35 to 40 cents per share.
For its fourth quarter, which ends in December, Juniper is predicting revenues of $1.025 billion to $1.075 billion. Wall Street isn’t going to like that. Analyst Mark Sue of RBC Capital Markets, for one, was forecasting fourth-quarter revenues of $1.213 billion.
A major cause of the weaker-than-expected numbers is lower demand from service providers, particularly in the United States. AT&T, in particular, reported capex of $5.2 billion for the third quarter, down 13 percent from the second quarter. That’s steeper than the usual third-quarter decline and “leaves us cautious for an unseasonably weak [fourth quarter] that could decline by double digits,” writes Raymond James analyst Simon Leopold in a report issued today.
UPDATE 4:00 p.m.: Analyst Ehud Gelblum of Morgan Stanley brought up a good point during Juniper’s earnings call this afternoon. AT&T has said all year that it’s going to spend about $21 billion on capex. That figure hasn’t changed — and the math has pretty clearly shown that the third and fourth quarters would have a steep dropoff. Why did Juniper seemingly not take that into account sooner, he asked.
Kheradpir’s answer was that it was a function of AT&T’s “mix,” meaning the products it bought weren’t as pricey as Juniper had anticipated.
Juniper is being more frank about the next few quarters, though. The cycle of service-provider purchasing is sliding downward and probably won’t pick up until the second half of 2015, Kheradpir said.
In the meantime, Juniper is seeing some increase in its business with the big Web 2.0 types of companies, officials said, and that’s offset some of the carrier weakness.