Juniper Networks Reports Preliminary Fourth Quarter and Fiscal Year 2011 Financial Results

Marketwired

SUNNYVALE, CA--(Marketwire -01/26/12)- Juniper Networks (NYSE: JNPR - News)

Q4 Financial Highlights:

  • Revenue: $1,120.8 million, down 6% from Q4'10 and up 1% from Q3'11
  • Operating Margin: 11.9% GAAP; 18.6% non-GAAP
  • GAAP Net Income Per Share: $0.18 diluted
  • Non-GAAP Net Income Per Share: $0.28 diluted, down 33% from Q4'10 and flat from Q3'11

2011 Financial Highlights:

  • Revenue: $4,448.7 million, up 9% from 2010
  • Operating Margin: 13.9% GAAP; 20.6% non-GAAP
  • GAAP Net Income Per Share: $0.79 diluted
  • Non-GAAP Net Income Per Share: $1.19 diluted, down 10% from 2010

Juniper Networks (NYSE: JNPR - News), the industry leader in network innovation, today reported preliminary financial results for the three and twelve months ended December 31, 2011, and provided its outlook for the three months ending March 31, 2012.

Net revenues for the fourth quarter of 2011 decreased 6% on a year-over-year basis, and increased 1% sequentially, to $1,120.8 million.

For the year ended December 31, 2011, Juniper's revenue increased 9% on a year-over-year basis to $4,448.7 million.

The Company posted GAAP net income of $96.2 million, or $0.18 per diluted share, and non-GAAP net income of $150.1 million, or $0.28 per diluted share, for the fourth quarter of 2011. Included in the GAAP diluted earnings per share was a $0.02 cents impact for restructuring and other charges. Non-GAAP net income per diluted share decreased 33% compared to the fourth quarter of 2010 and was flat compared to the third quarter of 2011.

For the year ended December 31, 2011, GAAP net income was $425.1 million, or $0.79 per diluted share, and non-GAAP net income was $644.6 million, or $1.19 per diluted share. Non-GAAP net income per diluted share for the year ended December 31, 2011 decreased 10% on a year-over-year basis. The reconciliation between GAAP and non-GAAP results of operations is provided in a table immediately following the Share-Based Compensation Related Payroll Tax by Category table below.

"While the fourth quarter was softer than we had anticipated primarily due to weak demand from service providers, Juniper delivered record revenues in a year where macro economic uncertainty increased as the year unfolded," said Kevin Johnson, president and CEO. "During the year, we introduced innovative new products across our portfolio that we believe will enable Juniper to continue to grow faster than the markets we serve. We are confident in our strategy and our innovation pipeline, and we remain committed to delivering differentiated solutions that are highly relevant to our customers."

Juniper's GAAP operating margin for the fourth quarter of 2011 was 11.9% compared to 12.4% in the third quarter of 2011, and 19.1% in the prior year fourth quarter. Non-GAAP operating margin for the fourth quarter of 2011 was 18.6% compared to 20.0% in the third quarter of 2011, and 24.5% in the prior year fourth quarter. For the fiscal year 2011, Juniper's GAAP operating margin was 13.9% compared to 18.8% for the prior fiscal year. Non-GAAP operating margin for the fiscal year 2011 was 20.6% compared to 24.0% in the fiscal year 2010.

"The December quarter was an atypical and unexpectedly weak finish to the year, with reduced spending by some of our largest customers," said Robyn Denholm, Juniper's chief financial officer. "While long-term industry fundamentals remain strong, we expect the near-term environment to remain challenging. We will invest in support of our strategy while continuing our focus on execution and prudent cost management."

Other Financial Highlights
Total cash, cash equivalents and investments as of the fourth quarter of 2011 was $4,292.4 million, compared to $4,130.3 million as of the third quarter of 2011 and $2,821.6 million as of the fourth quarter of 2010.

Juniper generated net cash from operations in the fourth quarter of 2011 of $243.6 million, compared to net cash provided by operations of $185.2 million in the third quarter of 2011, and $371.0 million in the fourth quarter of 2010. For the year ended December 31, 2011, Juniper generated net cash from operations of $986.7 million, compared to $812.3 million in 2010.

Days sales outstanding in accounts receivable ("DSO") was 46 days in the fourth quarter of 2011, compared to 36 days in the prior quarter and 45 days in the fourth quarter of 2010.

For the year ended December 31, 2011, Juniper repurchased 17.5 million shares, at an average share price of $30.93 per share, for a total of $541.2 million, which largely offset stock issued through our employee equity programs.

Capital expenditures, as well as depreciation and amortization of intangible assets expense during the fourth quarter of 2011, were $78.4 million and $43.3 million, respectively. Capital expenditures, as well as depreciation and amortization of intangible assets expense during the fiscal year 2011, were $266.3 million and $169.3 million, respectively.

Outlook
We believe the long-term demand fundamentals remain intact and we are confident about the growth potential of our new product portfolio. However, our outlook for the March quarter reflects near-term uncertainty in the macro-environment and the effect it may have on the level, timing, and prioritization of customer demand.

  • Juniper estimates revenue for the first quarter ending March 31, 2012, to be in the range of $960 million to $990 million.

  • Juniper estimates that its non-GAAP gross margin will be in the range of 63% and 64% in the first quarter.

  • Juniper estimates that its non-GAAP operating expenses will increase in the first quarter compared to the fourth quarter 2011, primarily due to typical fringe-related employee expenses and variable compensation.

  • Juniper expects its non-GAAP operating margin for the first quarter to be in the range of 11% and 13%.

  • Juniper estimates that its non-GAAP net income per share will range between $0.11 and $0.14 on a diluted basis, assuming a flat share count and estimated non-GAAP tax rate of 29%. This tax rate includes an estimated $0.01 cent quarterly impact on non-GAAP earnings per share assuming no renewal of the R&D tax credit.

All forward-looking non-GAAP measures exclude estimates for amortization of intangible assets, share-based compensation expenses, acquisition related charges, restructuring charges, impairment charges, litigation settlement charges, gain or loss on equity investments, non-recurring income tax adjustments, valuation allowance on deferred tax assets, and income tax effect of non-GAAP exclusions. A reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis.

Conference Call Web Cast
Juniper Networks will host a conference call web cast today, January 26, 2012, at 2:00 p.m. (Pacific Time), to be broadcast live over the Internet at: http://www.juniper.net/company/investor/conferencecall.html.

To participate via telephone, in the U.S. the toll free dial-in number is 877-407-8033; outside of the U.S. dial +1-201-689-8033. Please call ten minutes prior to the scheduled conference call time. The webcast replay of the conference call will be archived on the Juniper Networks website.

About Juniper Networks
Juniper Networks is in the business of network innovation. From devices to data centers, from consumers to cloud providers, Juniper Networks delivers the software, silicon and systems that transform the experience and economics of networking. Additional information can be found at Juniper Networks (www.juniper.net).

Juniper Networks and Junos are registered trademarks of Juniper Networks, Inc. in the United States and other countries. The Juniper Networks and Junos logos are trademarks of Juniper Networks, Inc. All other trademarks, service marks, registered trademarks, or registered service marks are the property of their respective owners.

Statements in this release concerning Juniper Networks' business outlook, economic and market outlook, future financial and operating results, and overall future prospects are forward-looking statements that involve a number of uncertainties and risks. Actual results or events could differ materially from those anticipated in those forward-looking statements as a result of certain factors, including: general economic conditions globally or regionally; business and economic conditions in the networking industry; changes in overall technology spending and spending by communication service providers; the network capacity requirements of communication service providers; contractual terms that may result in the deferral of revenue; increases in and the effect of competition; the timing of orders and their fulfillment; manufacturing and supply chain constraints; ability to establish and maintain relationships with distributors, resellers and other partners; variations in the expected mix of products sold; changes in customer mix; changes in geography mix; customer and industry analyst perceptions of Juniper Networks and its technology, products and future prospects; delays in scheduled product availability; market acceptance of Juniper Networks products and services; rapid technological and market change; adoption of regulations or standards affecting Juniper Networks products, services or the networking industry; the ability to successfully acquire, integrate and manage businesses and technologies; product defects, returns or vulnerabilities; the ability to recruit and retain key personnel; significant effects of tax legislation and judicial or administrative interpretation of tax regulations; currency fluctuations; litigation; and other factors listed in Juniper Networks' most recent report on Form 10-Q filed with the Securities and Exchange Commission. All statements made in this press release are made only as of the date set forth at the beginning of this release. Juniper Networks undertakes no obligation to update the information in this release in the event facts or circumstances subsequently change after the date of this press release.

Juniper Networks believes that the presentation of non-GAAP financial information provides important supplemental information to management and investors regarding financial and business trends relating to the company's financial condition and results of operations. For further information regarding why Juniper Networks believes that these non-GAAP measures provide useful information to investors, the specific manner in which management uses these measures, and some of the limitations associated with the use of these measures, please refer to the discussion below.

 

Juniper Networks, Inc.
        Preliminary Condensed Consolidated Statements of Operations
                  (in thousands, except per share amounts)
                                (unaudited)

                                  Three Months Ended   Twelve Months Ended
                                     December 31,          December 31,
                                --------------------- ---------------------
                                   2011       2010       2011       2010
                                ---------- ---------- ---------- ----------
Net revenues:
  Product                       $  847,461 $  962,209 $3,478,264 $3,258,651
  Service                          273,296    227,732    970,445    834,615
                                ---------- ---------- ---------- ----------
    Total net revenues           1,120,757  1,189,941  4,448,709  4,093,266
Cost of revenues:
  Product                          310,537    299,699  1,155,283  1,000,865
  Service                          111,285     98,241    424,836    350,654
                                ---------- ---------- ---------- ----------
    Total cost of revenues         421,822    397,940  1,580,119  1,351,519
                                ---------- ---------- ---------- ----------
Gross margin                       698,935    792,001  2,868,590  2,741,747
Operating expenses:
  Research and development         250,465    254,942  1,026,790    917,855
  Sales and marketing              253,201    257,690  1,001,060    857,072
  General and administrative        45,493     45,068    179,132    177,859
  Amortization of purchased
   intangible assets                 1,227        972      5,366      4,230
  Restructuring and other
   charges                          15,014      2,255     30,564     10,805
  Acquisition-related and other
   charges                             350      4,276      7,154      6,342
                                ---------- ---------- ---------- ----------
    Total operating expenses       565,750    565,203  2,250,066  1,974,163
                                ---------- ---------- ---------- ----------
Operating income                   133,185    226,798    618,524    767,584
Other (expense) income, net        (10,701)     4,841    (46,808)    10,570
                                ---------- ---------- ---------- ----------
Income before income taxes and
 noncontrolling interest           122,484    231,639    571,716    778,154
Income tax provision                26,321     41,556    146,704    158,781
                                ---------- ---------- ---------- ----------
Consolidated net income             96,163    190,083    425,012    619,373
Adjust for net loss (income)
 attributable to noncontrolling
 interest                                -        150        124       (971)
                                ---------- ---------- ---------- ----------
Net income attributable to
 Juniper Networks               $   96,163 $  190,233 $  425,136 $  618,402
                                ========== ========== ========== ==========

Net income per share
 attributable to Juniper
 Networks common stockholders:
  Basic                         $     0.18 $     0.36 $     0.80 $     1.18
                                ========== ========== ========== ==========
  Diluted                       $     0.18 $     0.35 $     0.79 $     1.15
                                ========== ========== ========== ==========
Shares used in computing net
 income per share:
  Basic                            526,124    523,556    529,768    522,444
                                ========== ========== ========== ==========
  Diluted                          533,335    541,464    541,417    538,790
                                ========== ========== ========== ==========



                           Juniper Networks, Inc.
               Preliminary Net Revenues by Reportable Segment
                               (in thousands)
                                 (unaudited)

                                   Three Months Ended   Twelve Months Ended
                                      December 31,          December 31,
                                 --------------------- ---------------------
                                    2011       2010       2011       2010
                                 ---------- ---------- ---------- ----------
Infrastructure:
  Routers - Product              $  506,573 $  639,289 $2,287,432 $2,134,488
  Routers - Service                 174,297    144,377    606,934    521,248
                                 ---------- ---------- ---------- ----------
    Infrastructure Revenue -
     Routers                        680,870    783,666  2,894,366  2,655,736
                                 ---------- ---------- ---------- ----------
  Switches - Product                157,053    118,363    493,149    377,096
  Switches - Service                 11,349      5,125     35,091     17,442
                                 ---------- ---------- ---------- ----------
    Infrastructure Revenue -
     Switches                       168,402    123,488    528,240    394,538
      Total Infrastructure
       Revenue                   $  849,272 $  907,154 $3,422,606 $3,050,274
                                 ========== ========== ========== ==========

Service Layer Technologies:
  Service Layer Technologies -
   Product                       $  183,835 $  204,557 $  697,683 $  747,067
  Service Layer Technologies -
   Service                           87,650     78,230    328,420    295,925
                                 ---------- ---------- ---------- ----------
    Total Service Layer
     Technologies Revenue        $  271,485 $  282,787 $1,026,103 $1,042,992
                                 ========== ========== ========== ==========

                                 ---------- ---------- ---------- ----------
Total Revenue                    $1,120,757 $1,189,941 $4,448,709 $4,093,266
                                 ========== ========== ========== ==========



                           Juniper Networks, Inc.
                Preliminary Net Revenues by Geographic Region
                               (in thousands)
                                 (unaudited)

                                   Three Months Ended   Twelve Months Ended
                                      December 31,          December 31,
                                 --------------------- ---------------------
                                    2011       2010       2011       2010
                                 ---------- ---------- ---------- ----------
Americas                         $  521,157 $  580,120 $2,238,049 $2,095,556
Europe, Middle East, and Africa     399,612    359,761  1,339,779  1,189,266
Asia Pacific                        199,988    250,060    870,881    808,444
                                 ---------- ---------- ---------- ----------
Total                            $1,120,757 $1,189,941 $4,448,709 $4,093,266
                                 ========== ========== ========== ==========



                           Juniper Networks, Inc.
                     Preliminary Net Revenues by Market
                               (in thousands)
                                 (unaudited)

                                   Three Months Ended   Twelve Months Ended
                                      December 31,          December 31,
                                 --------------------- ---------------------
                                    2011       2010       2011       2010
                                 ---------- ---------- ---------- ----------
Service Provider                 $  676,505 $  783,841 $2,833,035 $2,631,486
Enterprise                          444,252    406,100  1,615,674  1,461,780
                                 ---------- ---------- ---------- ----------
Total                            $1,120,757 $1,189,941 $4,448,709 $4,093,266
                                 ========== ========== ========== ==========



                           Juniper Networks, Inc.
              Preliminary Share-Based Compensation by Category
                               (in thousands)
                                 (unaudited)

                                   Three Months Ended   Twelve Months Ended
                                      December 31,          December 31,
                                 --------------------- ---------------------
                                    2011       2010       2011       2010
                                 ---------- ---------- ---------- ----------
Cost of revenues - Product       $    1,219 $    1,260 $    4,619 $    4,353
Cost of revenues - Service            3,626      3,632     15,736     13,523
Research and development             22,224     23,481     97,677     78,461
Sales and marketing                  17,899     15,929     70,868     54,949
General and administrative            7,557      8,100     33,258     30,671
                                 ---------- ---------- ---------- ----------
Total                            $   52,525 $   52,402 $  222,158 $  181,957
                                 ========== ========== ========== ==========



                           Juniper Networks, Inc.
    Preliminary Share-Based Compensation Related Payroll Tax by Category
                               (in thousands)
                                 (unaudited)

                                   Three Months Ended   Twelve Months Ended
                                      December 31,          December 31,
                                 --------------------- ---------------------
                                    2011       2010       2011       2010
                                 ---------- ---------- ---------- ----------
Cost of revenues - Product       $        2 $       66 $      301 $      197
Cost of revenues - Service                4        319        942        689
Research and development                 17        793      3,402      2,206
Sales and marketing                      52      1,177      4,100      2,912
General and administrative                8        182        501        429
                                 ---------- ---------- ---------- ----------
Total                            $       83 $    2,537 $    9,246 $    6,433
                                 ========== ========== ========== ==========



                           Juniper Networks, Inc.
        Reconciliation between GAAP and non-GAAP Financial Measures
                     (in thousands, except percentages)
                                (unaudited)

                               Three Months Ended      Twelve Months Ended
                                  December 31,            December 31,
                             ----------------------  ----------------------
                                2011        2010        2011        2010
                             ----------  ----------  ----------  ----------
GAAP Cost of revenues -
 Product                     $  310,537  $  299,699  $1,155,283  $1,000,865
Share-based compensation
 expense                  C      (1,219)     (1,260)     (4,619)     (4,353)
Share-based compensation
 related payroll tax      C          (2)        (66)       (301)       (197)
Amortization of
 purchased intangible
 assets                   A      (5,693)     (2,554)    (21,767)     (4,301)
Acquisition-related and
 other charges           A,B          -           -      (2,487)          -
                             ----------  ----------  ----------  ----------
Non-GAAP Cost of
 revenues - Product             303,623     295,819   1,126,109     992,014
                             ==========  ==========  ==========  ==========

GAAP Cost of revenues -
 Service                        111,285      98,241     424,836     350,654
Share-based compensation
 expense                  C      (3,626)     (3,632)    (15,736)    (13,523)
Share-based compensation
 related payroll tax      C          (4)       (319)       (942)       (689)
                             ----------  ----------  ----------  ----------
Non-GAAP Cost of
 revenues - Service             107,655      94,290     408,158     336,442
                             ==========  ==========  ==========  ==========

GAAP Gross margin -
 Product                        536,924     662,510   2,322,981   2,257,786
Share-based compensation
 expense                  C       1,219       1,260       4,619       4,353
Share-based compensation
 related payroll tax      C           2          66         301         197
Amortization of
 purchased intangible
 assets                   A       5,693       2,554      21,767       4,301
Acquisition-related and
 other charges           A,B          -           -       2,487           -
                             ----------  ----------  ----------  ----------
Non-GAAP Gross margin -
 Product                        543,838     666,390   2,352,155   2,266,637
                             ==========  ==========  ==========  ==========

GAAP Product gross
 margin as a % of
 product revenue                   63.4%       68.9%       66.8%       69.3%
Share-based compensation
 expense as a % of
 product revenue          C         0.1%        0.1%        0.1%        0.2%
Share-based compensation
 related payroll tax as
 a % of product revenue   C           -%          -%          -%          -%
Amortization of
 purchased intangible
 assets as a % of
 product revenue          A         0.7%        0.3%        0.6%        0.1%
Acquisition-related and
 other charges as a % of
 product revenue         A,B          -%          -%        0.1%          -%
                             ----------  ----------  ----------  ----------
Non-GAAP Product gross
 margin as a % of
 product revenue                   64.2%       69.3%       67.6%       69.6%
                             ==========  ==========  ==========  ==========

GAAP Gross margin -
 Service                        162,011     129,491     545,609     483,961
Share-based compensation
 expense                  C       3,626       3,632      15,736      13,523
Share-based compensation
 related payroll tax      C           4         319         942         689
                             ----------  ----------  ----------  ----------
Non-GAAP Gross margin -
 Service                     $  165,641  $  133,442  $  562,287  $  498,173
                             ==========  ==========  ==========  ==========

GAAP Service gross
 margin as a % of
 service revenue                   59.3%       56.9%       56.2%       58.0%
Share-based compensation
 expense as a % of
 service revenue          C         1.3%        1.6%        1.6%        1.6%
Share-based compensation
 related payroll tax as
 a % of service revenue   C           -%        0.1%        0.1%        0.1%
                             ----------  ----------  ----------  ----------
Non-GAAP Service gross
 margin as a % of
 service revenue                   60.6%       58.6%       57.9%       59.7%
                             ==========  ==========  ==========  ==========



                           Juniper Networks, Inc.
        Reconciliation between GAAP and non-GAAP Financial Measures
                     (in thousands, except percentages)
                                (unaudited)

                               Three Months Ended      Twelve Months Ended
                                  December 31,            December 31,
                             ----------------------  ----------------------
                                2011        2010        2011        2010
                             ----------  ----------  ----------  ----------
GAAP Gross margin            $  698,935  $  792,001  $2,868,590  $2,741,747
Share-based compensation
 expense                  C       4,845       4,892      20,355      17,876
Share-based compensation
 related payroll tax      C           6         385       1,243         886
Amortization of
 purchased intangible
 assets                   A       5,693       2,554      21,767       4,301
Acquisition-related and
 other charges           A,B          -           -       2,487           -
                             ----------  ----------  ----------  ----------
Non-GAAP Gross margin           709,479     799,832   2,914,442   2,764,810
                             ==========  ==========  ==========  ==========

GAAP Gross margin as a %
 of revenue                        62.4%       66.6%       64.5%       67.0%
Share-based compensation
 expense as a % of
 revenue                  C         0.4%        0.4%        0.5%        0.4%
Share-based compensation
 related payroll tax as
 a % of revenue           C           -%          -%          -%          -%
Amortization of
 purchased intangible
 assets as a % of
 revenue                  A         0.5%        0.2%        0.4%        0.1%
Acquisition-related and
 other charges as a % of
 revenue                 A,B          -%          -%        0.1%          -%
                             ----------  ----------  ----------  ----------
Non-GAAP Gross margin as
 a % of revenue                    63.3%       67.2%       65.5%       67.5%
                             ==========  ==========  ==========  ==========

GAAP Research and
 development expense            250,465     254,942   1,026,790     917,855
Share-based compensation
 expense                  C     (22,224)    (23,481)    (97,677)    (78,461)
Share-based compensation
 related payroll tax      C         (17)       (793)     (3,402)     (2,206)
                             ----------  ----------  ----------  ----------
Non-GAAP Research and
 development expense            228,224     230,668     925,711     837,188
                             ==========  ==========  ==========  ==========

GAAP Sales and marketing
 expense                        253,201     257,690   1,001,060     857,072
Share-based compensation
 expense                  C     (17,899)    (15,929)    (70,868)    (54,949)
Share-based compensation
 related payroll tax      C         (52)     (1,177)     (4,100)     (2,912)
                             ----------  ----------  ----------  ----------
Non-GAAP Sales and
 marketing expense              235,250     240,584     926,092     799,211
                             ==========  ==========  ==========  ==========

GAAP General and
 administrative expense          45,493      45,068     179,132     177,859
Share-based compensation
 expense                  C      (7,557)     (8,100)    (33,258)    (30,671)
Share-based compensation
 related payroll tax      C          (8)       (182)       (501)       (429)
                             ----------  ----------  ----------  ----------
Non-GAAP General and
 administrative expense          37,928      36,786     145,373     146,759
                             ==========  ==========  ==========  ==========

GAAP Operating expense          565,750     565,203   2,250,066   1,974,163
Share-based compensation
 expense                  C     (47,680)    (47,510)   (201,803)   (164,081)
Share-based compensation
 related payroll tax      C         (77)     (2,152)     (8,003)     (5,547)
Amortization of
 purchased intangible
 assets                   A      (1,227)       (972)     (5,366)     (4,230)
Restructuring and other
 charges                  B     (15,014)     (2,255)    (30,564)    (10,805)
Acquisition-related and
 other charges           A,B       (350)     (4,276)     (7,154)     (6,342)
                             ----------  ----------  ----------  ----------
Non-GAAP Operating
 expense                     $  501,402  $  508,038  $1,997,176  $1,783,158
                             ==========  ==========  ==========  ==========



                           Juniper Networks, Inc.
        Reconciliation between GAAP and non-GAAP Financial Measures
                     (in thousands, except percentages)
                                (unaudited)

                               Three Months Ended      Twelve Months Ended
                                  December 31,            December 31,
                             ----------------------  ----------------------
                                2011        2010        2011        2010
                             ----------  ----------  ----------  ----------
GAAP Operating income        $  133,185  $  226,798  $  618,524  $  767,584
Share-based compensation
 expense                  C      52,525      52,402     222,158     181,957
Share-based compensation
 related payroll tax      C          83       2,537       9,246       6,433
Amortization of
 purchased intangible
 assets                   A       6,920       3,526      27,133       8,531
Restructuring and other
 charges                  B      15,014       2,255      30,564      10,805
Acquisition-related and
 other charges           A,B        350       4,276       9,641       6,342
                             ----------  ----------  ----------  ----------
Non-GAAP Operating
 income                         208,077     291,794     917,266     981,652
                             ==========  ==========  ==========  ==========

GAAP Operating margin              11.9%       19.1%       13.9%       18.8%
Share-based compensation
 expense as a % of
 revenue                  C         4.7%        4.3%        5.0%        4.3%
Share-based compensation
 related payroll tax as
 a % of revenue           C           -%        0.2%        0.2%        0.2%
Amortization of
 purchased intangible
 assets as a % of
 revenue                  A         0.7%        0.3%        0.6%        0.2%
Restructuring and other
 charges as a % of
 revenue                  B         1.3%        0.2%        0.7%        0.3%
Acquisition-related and
 other charges as a % of
 revenue                 A,B          -%        0.4%        0.2%        0.2%
                             ----------  ----------  ----------  ----------
Non-GAAP Operating
 margin                            18.6%       24.5%       20.6%       24.0%
                             ==========  ==========  ==========  ==========

GAAP Other (expense)
 income, net              E     (10,701)      4,841     (46,808)     10,570
(Gain)/loss on equity
 investments              B        (656)     (5,421)        326      (8,653)
                             ----------  ----------  ----------  ----------
Non-GAAP Other (expense)
 income, net              E     (11,357)       (580)    (46,482)      1,917
                             ==========  ==========  ==========  ==========

GAAP Income tax
 provision                       26,321      41,556     146,704     158,781
Non-recurring income tax
 adjustment               B           -           -           -      54,069
Income tax effect of
 non-GAAP exclusions      B      20,282      21,219      79,579      59,258
                             ----------  ----------  ----------  ----------
Non-GAAP Provision for
 income tax                      46,603      62,775     226,283     272,108
                             ==========  ==========  ==========  ==========
Non-GAAP Income tax rate           23.7%       21.6%       26.0%       27.7%
                             ==========  ==========  ==========  ==========
Non-GAAP Income before
 income taxes and
 noncontrolling
 interest*                   $  196,720  $  291,214  $  870,784  $  983,569
                             ==========  ==========  ==========  ==========

*Consists of non-GAAP operating income plus non-GAAP net other income and
expense.



                          Juniper Networks, Inc.
        Reconciliation between GAAP and non-GAAP Financial Measures
         (in thousands, except per share amounts and percentages)
                                (unaudited)

                            Three Months Ended       Twelve Months Ended
                               December 31,              December 31,
                         -----------------------   -----------------------
                            2011         2010         2011         2010
                         ----------   ----------   ----------   ----------
GAAP Net income
 attributable to
 Juniper Networks        $   96,163   $  190,233   $  425,136   $  618,402
Share-based
 compensation
 expense              C      52,525       52,402      222,158      181,957
Share-based
 compensation
 related payroll tax  C          83        2,537        9,246        6,433
Amortization of
 purchased
 intangible assets    A       6,920        3,526       27,133        8,531
Restructuring and
 other charges        B      15,014        2,255       30,564       10,805
Acquisition-related
 and other charges   A,B        350        4,276        9,641        6,342
(Gain)/loss on
 equity investments   B        (656)      (5,421)         326       (8,653)
Non-recurring income
 tax adjustments      B           -            -            -      (54,069)
Income tax effect of
 non-GAAP exclusions  B     (20,282)     (21,219)     (79,579)     (59,258)
                         ----------   ----------   ----------   ----------
Non-GAAP Net income      $  150,117   $  228,589   $  644,625   $  710,490
                         ==========   ==========   ==========   ==========

Non-GAAP Net income
 per share:
Basic                 D  $     0.29   $     0.44   $     1.22   $     1.36
                         ==========   ==========   ==========   ==========
Diluted               D  $     0.28   $     0.42   $     1.19   $     1.32
                         ==========   ==========   ==========   ==========
Shares used in
 computing non-GAAP
 net income per
 share:
Basic                 D     526,124      523,556      529,768      522,444
                         ==========   ==========   ==========   ==========
Diluted               D     533,335      541,464      541,417      538,790
                         ==========   ==========   ==========   ==========

GAAP Net income
 attributable to
 Juniper Networks as
 a % of revenue                 8.6%        16.0%         9.6%        15.1%
Share-based
 compensation
 expense as a % of
 revenue              C         4.7%         4.4%         5.0%         4.4%
Share-based
 compensation
 related payroll tax
 as a % of revenue    C           -%         0.2%         0.2%         0.2%
Amortization of
 purchased
 intangible assets
 as a % of revenue    A         0.7%         0.3%         0.6%         0.2%
Restructuring and
 other charges as a
 % of revenue         B         1.3%         0.2%         0.7%         0.3%
Acquisition-related
 and other charges
 as a % of revenue   A,B          -%         0.4%         0.2%         0.2%
(Gain)/loss on
 equity investments   B        (0.1)%       (0.5)%          -%        (0.2)%
Non-recurring income
 tax adjustments as
 a % of revenue       B           -%           -%           -%        (1.3)%
Income tax effect of
 non-GAAP exclusions
 as a % of revenue    B        (1.8)%       (1.8)%       (1.8)%       (1.5)%
                         ----------   ----------   ----------   ----------
Non-GAAP Net income
 as a % of revenue             13.4%        19.2%        14.5%        17.4%
                         ==========   ==========   ==========   ==========

Discussion of Non-GAAP Financial Measures

The table above includes the following non-GAAP financial measures derived from our Preliminary Condensed Consolidated Statements of Operations: cost of product revenue; cost of service revenue; product gross margin; product gross margin as a percentage of product revenue; service gross margin; service gross margin as a percentage of service revenue; gross margin; gross margin as a percentage of revenue; research and development expense; sales and marketing expense; general and administrative expense; operating expense; operating income; operating margin; other income and expense, net; income before income taxes and noncontrolling interest; provision for income taxes; income tax rate; net income; net income per share and net income as a percentage of revenue. These measures are not presented in accordance with, nor are they a substitute for U.S. generally accepted accounting principles or GAAP. In addition, these measures may be different from non-GAAP measures used by other companies, limiting their usefulness for comparison purposes. The non-GAAP financial measures used in the table above should not be considered in isolation from measures of financial performance prepared in accordance with GAAP. Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an analytical tool. In particular, many of the adjustments to our GAAP financial measures reflect the exclusion of items that are recurring and will be reflected in our financial results for the foreseeable future.

We utilize a number of different financial measures, both GAAP and non-GAAP, in analyzing and assessing the overall performance of our business, in making operating decisions, forecasting and planning for future periods, and determining payments under compensation programs. We consider the use of the non-GAAP measures presented above to be helpful in assessing the performance of the continuing operation of our business. By continuing operations we mean the ongoing revenue and expenses of the business excluding certain items that render comparisons with prior periods or analysis of on-going operating trends more difficult, such as expenses not directly related to the actual cash costs of development, sale, delivery or support of our products and services, or expenses that are reflected in periods unrelated to when the actual amounts were incurred or paid. Consistent with this approach, we believe that disclosing non-GAAP financial measures to the readers of our financial statements provides such readers with useful supplemental data that, while not a substitute for financial measures prepared in accordance with GAAP, allows for greater transparency in the review of our financial and operational performance. In addition, we have historically reported non-GAAP results to the investment community and believe that continuing to provide non-GAAP measures provides investors with a tool for comparing results over time. In assessing the overall health of our business for the periods covered by the table above and, in particular, in evaluating the financial line items presented in the table above, we have excluded items in the following three general categories, each of which are described below: Acquisition-Related Charges, Other Items, and Share-Based Compensation Related Items. We also provide additional detail below regarding the shares used to calculate our non-GAAP net income per share. Notes identified for line items in the table above correspond to the appropriate note description below. Additionally, with respect to future financial guidance provided on a non-GAAP basis, we have excluded estimates for amortization of intangible assets, share based compensation expenses, acquisition related charges, restructuring charges, litigation settlement charges, gain or loss on equity investments, non-recurring income tax adjustments, valuation allowance on deferred tax assets, and income tax effect of non-GAAP exclusions.

Note A: Acquisition-Related Charges. We exclude certain expense items resulting from acquisitions including the following, when applicable: (i) amortization of purchased intangible assets associated with our acquisitions; (ii) compensation related to acquisitions; and (iii) acquisition-related charges. The amortization of purchased intangible assets associated with our acquisitions results in our recording expenses in our GAAP financial statements that were already expensed by the acquired company before the acquisition and for which we have not expended cash. Moreover, had we internally developed the products acquired, the amortization of intangible assets, and the expenses of uncompleted research and development would have been expensed in prior periods. Accordingly, we analyze the performance of our operations in each period without regard to such expenses. In addition, acquisitions result in non-continuing operating expenses, which would not otherwise have been incurred by us in the normal course of our business operations. For example, we have incurred deferred compensation charges related to assumed options and transition and integration costs such as retention bonuses and acquisition-related milestone payments to acquired employees. We believe that providing non-GAAP information for acquisition-related expense items in addition to the corresponding GAAP information allows the users of our financial statements to better review and understand the historic and current results of our continuing operations, and also facilitates comparisons to less acquisitive peer companies.

Note B: Other Items. We exclude certain other items that are the result of either unique or unplanned events including the following, when applicable: (i) restructuring and related costs; (ii) impairment charges; (iii) gain or loss on legal settlement, net of related transaction costs; (iv) retroactive impacts of certain tax settlements; (v) significant effects of tax legislation and judicial or administrative interpretation of tax regulations; (vi) gain or loss on equity investments; and (vii) the income tax effect on our financial statements of excluding items related to our non-GAAP financial measures. It is difficult to estimate the amount or timing of these items in advance. Restructuring and impairment charges result from events, which arise from unforeseen circumstances, which often occur outside of the ordinary course of continuing operations. Although these events are reflected in our GAAP financials, these unique transactions may limit the comparability of our on-going operations with prior and future periods. In the case of legal settlements, these gains or losses are recorded in the period in which the matter is concluded or resolved even though the subject matter of the underlying dispute may relate to multiple or different periods. As such, we believe that these expenses do not accurately reflect the underlying performance of our continuing operations for the period in which they are incurred. Similarly, the retroactive impacts of certain tax settlements and significant effects of retroactive tax legislation are unique events that occur in periods that are generally unrelated to the level of business activity to which such settlement or legislation applies. We believe this limits comparability with prior periods and that these expenses do not accurately reflect the underlying performance of our continuing business operations for the period in which they are incurred. Whether we realize gains or losses on equity investments is based primarily on the performance and market value of those independent companies. Accordingly, we believe that these gains and losses do not reflect the underlying performance of our continuing operations. We also believe providing financial information with and without the income tax effect of excluding items related to our non-GAAP financial measures provide our management and users of the financial statements with better clarity regarding the on-going performance and future liquidity of our business. Because of these factors, we assess our operating performance both with these amounts included and excluded, and by providing this information, we believe the users of our financial statements are better able to understand the financial results of what we consider our continuing operations.

Note C: Share-Based Compensation Related Items. We provide non-GAAP information relative to our expense for share-based compensation and related payroll tax. We began to include share-based compensation expense in our GAAP financial measures in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 718, Compensation - Stock Compensation ("FASB ASC Topic 718"), in January 2006. Because of varying available valuation methodologies, subjective assumptions and the variety of award types, which affect the calculations of share-based compensation, we believe that the exclusion of share-based compensation allows for more accurate comparisons of our operating results to our peer companies. Share-based compensation is very different from other forms of compensation. A cash salary or bonus has a fixed and unvarying cash cost. For example, the expense associated with a $10,000 bonus is equal to exactly $10,000 in cash regardless of when it is awarded and who it is awarded by. In contrast, the expense associated with an award of an option for 1,000 shares of common stock is unrelated to the amount of compensation ultimately received by the employee; and the cost to the company is based on a share-based compensation valuation methodology and underlying assumptions that may vary over time and that does not reflect any cash expenditure by the company because no cash is expended. Furthermore, the expense associated with granting an employee an option is spread over multiple years unlike other compensation expenses which are more proximate to the time of award or payment. For example, we may be recognizing expense in a year where the stock option is significantly underwater and is not going to be exercised or generate any compensation for the employee. The expense associated with an award of an option for 1,000 shares of stock by us in one quarter may have a very different expense than an award of an identical number of shares in a different quarter. Finally, the expense recognized by us for such an option may be very different than the expense to other companies for awarding a comparable option, which makes it difficult to assess our operating performance relative to our competitors. Similar to share-based compensation, payroll tax on stock option exercises is dependent on our stock price and the timing and exercise by employees of our share-based compensation, over which our management has little control, and as such does not correlate to the operation of our business. Because of these unique characteristics of share-based compensation and the related payroll tax, management excludes these expenses when analyzing the organization's business performance. We also believe that presentation of such non-GAAP information is important to enable readers of our financial statements to compare current period results with periods prior to the adoption of FASB ASC Topic 718.

Note D: Non-GAAP Net Income Per Share Items. We provide basic non-GAAP net income per share and diluted non-GAAP net income per share. The basic non-GAAP net income per share amount was calculated based on our non-GAAP net income and the weighted-average number of shares outstanding during the reporting period. The diluted non-GAAP income per share included additional dilution from potential issuance of common stock, except when such issuances would be anti-dilutive.

Note E: Other Income and Expense. GAAP and non-GAAP other (expense) income, net, consist primarily of interest income, interest expense and other non-operational income and expense items. As noted in Note B above, we exclude gains or losses from equity investments in our computation of non-GAAP other (expense) income.

 


                           Juniper Networks, Inc.
              Preliminary Condensed Consolidated Balance Sheets
                               (in thousands)
                                 (unaudited)

                                                 December 31,  December 31,
                                                      2011          2010
                                                 ------------- -------------
                     ASSETS
Current assets:
  Cash and cash equivalents                      $   2,910,420 $   1,811,887
  Short-term investments                               641,323       474,514
  Accounts receivable, net of allowances               577,386       596,622
  Deferred tax assets, net                             154,310       161,535
  Prepaid expenses and other current assets            156,222       169,812
                                                 ------------- -------------
    Total current assets                             4,439,661     3,214,370
Property and equipment, net                            598,581       493,881
Long-term investments                                  740,659       535,178
Restricted cash                                         78,307       119,346
Purchased intangible assets, net                       123,114       121,803
Goodwill                                             3,928,144     3,927,807
Other long-term assets                                  75,354        55,466
                                                 ------------- -------------
    Total assets                                 $   9,983,820 $   8,467,851
                                                 ============= =============

             LIABILITIES AND EQUITY
Current liabilities:
  Accounts payable                               $     324,843 $     292,270
  Accrued compensation                                 223,018       256,746
  Deferred revenue                                     712,663       660,264
  Other accrued liabilities                            206,179       262,696
                                                 ------------- -------------
    Total current liabilities                        1,466,703     1,471,976
Long-term debt                                         999,034            --
Long-term deferred revenue                             254,364       224,165
Long-term income tax payable                           108,471       103,823
Other long-term liabilities                             65,590        59,087
                                                 ------------- -------------
Total liabilities                                    2,894,162     1,859,051
Total equity                                         7,089,658     6,608,800
                                                 ------------- -------------
    Total liabilities and equity                 $   9,983,820 $   8,467,851
                                                 ============= =============



                           Juniper Networks, Inc.
        Preliminary Condensed Consolidated Statements of Cash Flows
                               (in thousands)
                                (unaudited)

                                                   Years Ended December 31,
                                                  -------------------------
                                                      2011         2010
                                                  ------------ ------------
Cash flows from operating activities:
Consolidated net income                           $    425,012 $    619,373
Adjustments to reconcile consolidated net income
 to net cash from operating activities:
  Depreciation and amortization                        170,038      155,288
  Non-cash portion of share-based compensation         217,761      177,825
  Loss/(gain) on equity investments                        326       (8,653)
  Deferred income taxes                                  7,225       64,035
  Excess tax benefits from share-based
   compensation                                        (44,961)     (48,500)
  Other charges                                         13,462           --
Changes in operating assets and liabilities:
  Accounts receivable, net                              18,633     (129,199)
  Prepaid expenses and other assets                     28,488     (129,292)
  Accounts payable                                      33,871       48,217
  Accrued compensation                                 (32,228)      78,071
  Accrued litigation settlements                            --     (169,330)
  Other accrued liabilities                             66,852       26,606
  Deferred revenue                                      82,247      127,894
                                                  ------------ ------------
    Net cash provided by operating activities          986,726      812,335

Cash flows from investing activities:
Purchases of property and equipment, net              (266,314)    (185,291)
Purchases of trading investments                        (5,214)      (2,754)
Purchases of available-for-sale investments         (2,297,363)  (1,577,758)
Proceeds from sales of available-for-sale
 investments                                         1,281,236      537,916
Proceeds from maturities of available-for-sale
 investments                                           645,362    1,086,514
Payment for business acquisition, net of cash and
 cash equivalents acquired                             (30,720)    (374,765)
Changes in restricted cash                              (1,174)     (12,424)
Purchases of privately-held and other equity
 investments, net                                      (33,051)      (4,188)
                                                  ------------ ------------
  Net cash used in investing activities               (707,238)    (532,750)

Cash flows from financing activities:
Proceeds from issuance of common stock                 346,951      451,039
Purchases and retirement of common stock              (548,590)    (565,473)
Issuance of long-term debt, net                        991,556           --
Change in customer financing arrangements              (15,833)      (3,487)
Excess tax benefits from share-based compensation       44,961       48,500
Return of capital to noncontrolling interest                --       (3,000)
                                                  ------------ ------------
  Net cash provided by (used in) financing
   activities                                          819,045      (72,421)
                                                  ------------ ------------
  Net increase in cash and cash equivalents          1,098,533      207,164
Cash and cash equivalents at beginning of period     1,811,887    1,604,723
                                                  ------------ ------------
Cash and cash equivalents at end of period        $  2,910,420 $  1,811,887
                                                  ============ ============

 


                           Juniper Networks, Inc.
                   Cash, Cash Equivalents, and Investments
                               (in thousands)
                                 (unaudited)

                                                 December 31,  December 31,
                                                      2011          2010
                                                 ------------- -------------
Cash and cash equivalents                        $   2,910,420 $   1,811,887
Short-term investments                                 641,323       474,514
Long-term investments                                  740,659       535,178
                                                 ------------- -------------
  Total                                          $   4,292,402 $   2,821,579
                                                 ============= =============

Contact:
Investor Relations:
Kathleen Nemeth
Juniper Networks
(408) 936-5397
kbela@juniper.net
Media Relations:
David Shane
Juniper Networks
(408) 936-4872
dshane@juniper.net
Cindy Ta
Juniper Networks
(408) 936-6131
cta@juniper.net

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