SOURCE: Juniper Networks

Juniper Networks

January 28, 2010 16:05 ET

Juniper Networks Reports Preliminary Fourth Quarter 2009 Financial Results

SUNNYVALE, CA--(Marketwire - January 28, 2010) - Juniper Networks, Inc. (NYSE: JNPR)

Q4 Financial Highlights

  • Revenue: $941.5 million, up 2% from Q4'08
  • Operating Margin: 18.6% GAAP; 24.4% non-GAAP
  • GAAP Net Income Per Share: $0.24 diluted
  • Non-GAAP Net Income Per Share: $0.32 flat from Q4'08

2009 Financial Highlights

  • Revenue: $3.32 billion, down 7% from 2008
  • Operating Margin: 14.5% GAAP; 20.2% non-GAAP
  • GAAP Net Income Per Share: $0.42 diluted
  • Non-GAAP Net Income Per Share: $0.92 diluted, down 22% from 2008

Juniper Networks, Inc. (NYSE: JNPR) today reported preliminary financial results for the three and twelve months ended December 31, 2009.

Net revenues for the fourth quarter of 2009 increased 2% on a year-over-year basis to $941.5 million. For the twelve months ended December 31, 2009, Juniper's revenue decreased 7% on a year-over-year basis to $3.32 billion.

The Company posted GAAP net income of $131.0 million, or $0.24 per diluted share, and non-GAAP net income of $173.7 million, or $0.32 per diluted share for the fourth quarter of 2009. Non-GAAP net income per share remained flat compared to the fourth quarter of 2008. For the twelve months ended December 31, 2009, GAAP net income was $225.1 million, or $0.42 per diluted share, and non-GAAP net income was $491.5 million, or $0.92 per diluted share. The non-GAAP EPS figure represents a decrease of 22% from the $1.18 per diluted share reported for the twelve months ended December 31, 2008. The reconciliation between GAAP and non-GAAP results of operations is provided in a table immediately following the Net Revenues by Market table below.

"Juniper enters 2010 with good operational execution, improved financial results, and a clear strategic direction centered on innovation and expanded routes to market," said Kevin Johnson, Juniper's Chief Executive Officer. "Our results for the year, capped by a strong fourth quarter, validate our commitment to managing the business carefully while maintaining investments in innovation that we believe will help us grow our share of the high-performance networking market. We see improving conditions in 2010 and are positioning Juniper to accelerate out of the downturn."

Juniper's operating margin for the fourth quarter of 2009 decreased to 18.6% on a GAAP basis from 20.6% in the same quarter a year ago. Non-GAAP operating margin for the fourth quarter of 2009 decreased slightly to 24.4% from 24.5% in the same quarter a year ago. For the fiscal year 2009 Juniper's operating margin decreased to 14.5% on a GAAP basis from 19.5% for the prior fiscal year. Non-GAAP operating margin for the fiscal year 2009 decreased to 20.2% from 24.2% in the fiscal year 2008.

Juniper generated net cash from operations for the fourth quarter of 2009 of $259.6 million, compared to net cash provided by operations of $215.1 million for the same quarter of 2008. For the year ended December 31, 2009, Juniper generated net cash from operations of $796.1 million, compared to $875.2 million in 2008.

Capital expenditures as well as depreciation and amortization expense during the fourth quarter of 2009 were $39.9 million and $36.6 million, respectively. Capital expenditures as well as depreciation and amortization expense during 2009 were $153.1 million and $148.4 million, respectively.

"During 2009, we focused on continuing to improve our operational execution while increasing investments in our product roadmap. Our fourth quarter results demonstrate good progress on both fronts. Revenue increased, we saw increased traction from our new products, and we managed expenses well," stated Robyn Denholm, Juniper's Chief Financial Officer. "We remain committed to thoughtfully managing our cost structure, and enter 2010 with optimism for an improved environment as the economy strengthens."

Juniper Networks will host a conference call web cast today, January 28, 2010 at 1:45 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 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 until March 15, 2010.

About Juniper Networks
From devices to data centers, from consumers to the cloud, Juniper Networks delivers innovative software, silicon and systems that transform the experience and economics of networking. The company serves more than 30,000 customers and partners worldwide, and generated more than $3 billion in revenue over the last year. Additional information can be found at 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 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; 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,
                        ------------------------  ------------------------
                            2009         2008         2009         2008
                        -----------  -----------  -----------  -----------
Net revenues:
   Product              $   739,096  $   745,860  $ 2,567,992  $ 2,910,960
   Service                  202,358      177,633      747,920      661,416
                        -----------  -----------  -----------  -----------
     Total net revenues     941,454      923,493    3,315,912    3,572,376

Cost of revenues:
   Product                  234,756      230,610      841,722      867,595
   Service                   81,865       73,660      316,080      298,371
                        -----------  -----------  -----------  -----------
     Total cost of
      revenues              316,621      304,270    1,157,802    1,165,966
                        -----------  -----------  -----------  -----------
Gross margin                624,833      619,223    2,158,110    2,406,410
Operating expenses:
   Research and
    development             187,210      180,134      741,708      731,151
   Sales and marketing      204,875      206,054      734,038      782,940
   General and
    administrative           41,196       37,971      159,459      144,837
   Amortization of
    purchased
    intangible assets         1,157        5,190       10,416       43,508
   Restructuring
    charges                   3,212           --       19,463           --
   Other charges             12,000           --       13,000        9,000
                        -----------  -----------  -----------  -----------
     Total operating
      expenses              449,650      429,349    1,678,084    1,711,436
                        -----------  -----------  -----------  -----------
Operating income            175,183      189,874      480,026      694,974
Interest and other
 income, net                    347        8,232        6,928       48,749
Loss on equity
 investments                 (2,251)     (13,333)      (5,562)     (14,832)
                        -----------  -----------  -----------  -----------
Income before income
 taxes and
 noncontrolling
 interest*                  173,279      184,773      481,392      728,891
Provision for income
 taxes                       44,093       52,297      258,111      217,142
                        -----------  -----------  -----------  -----------
Consolidated net income $   129,186  $   132,476  $   223,281  $   511,749
Plus: Net loss
 attributable to
 noncontrolling
 interest*                    1,771           --        1,771           --
                        -----------  -----------  -----------  -----------
Net income attributable
 to Juniper Networks    $   130,957  $   132,476  $   225,052  $   511,749
                        ===========  ===========  ===========  ===========
Net income per share
 attributable to
 Juniper Networks
 common stockholders:
     Basic              $      0.25  $      0.25  $      0.43  $      0.96
                        ===========  ===========  ===========  ===========
     Diluted            $      0.24  $      0.25  $      0.42  $      0.93
                        ===========  ===========  ===========  ===========
Shares used in
 computing net income
 per share:
     Basic                  523,200      527,634      523,603      530,337
                        ===========  ===========  ===========  ===========
     Diluted                538,887      534,817      534,015      551,433
                        ===========  ===========  ===========  ===========

* Reflects noncontrolling interest in a joint venture.




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

                                 Three Months Ended   Twelve Months Ended
                                    December 31,          December 31,
                                --------------------- --------------------- 
                                  2009       2008       2009       2008
                                ---------- ---------- ---------- ----------
Cost of revenues - Product      $    1,074 $      727 $    3,906 $    2,952
Cost of revenues - Service           3,192      2,240     11,705      9,249
Research and development            15,294     12,042     59,282     46,963
Sales and marketing                 11,070      9,475     41,930     36,228
General and administrative           7,584      4,770     22,836     12,741
                                ---------- ---------- ---------- ----------
Total                           $   38,214 $   29,254 $  139,659 $  108,133
                                ========== ========== ========== ==========




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

                                 Three Months Ended   Twelve Months Ended
                                    December 31,          December 31,
                                --------------------- ---------------------
                                  2009       2008       2009       2008
                                ---------  ---------- ---------- ----------
Cost of revenues - Product      $     (23) $        1 $       25 $       65
Cost of revenues - Service            (70)          2         75        202
Research and development             (407)         16        133        679
Sales and marketing                  (155)        140        514      1,705
General and administrative              4           1         85        112
                                ---------  ---------- ---------- ----------
Total                           $    (651) $      160 $      832 $    2,763
                                =========  ========== ========== ==========




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

                              Three Months Ended      Twelve Months Ended
                                 December 31,             December 31,
                            ----------------------- -----------------------
                               2009        2008        2009        2008
                            ----------- ----------- ----------- -----------
Infrastructure - Product    $   562,978 $   586,945 $ 1,959,198 $ 2,301,844
Infrastructure - Service        132,363     115,349     482,437     424,012
                            ----------- ----------- ----------- -----------
  Total Infrastructure      $   695,341 $   702,294 $ 2,441,635 $ 2,725,856
                            =========== =========== =========== ===========

Service Layer Technologies
 - Product                  $   176,118 $   158,915 $   608,794 $   609,116
Service Layer Technologies
 - Service                       69,995      62,284     265,483     237,404
                            ----------- ----------- ----------- -----------
  Total Service Layer
   Technologies             $   246,113 $   221,199 $   874,277 $   846,520
                            =========== =========== =========== ===========

Total Infrastructure and
 Service Layer Technologies $   941,454 $   923,493 $ 3,315,912 $ 3,572,376
                            =========== =========== =========== ===========




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

                              Three Months Ended      Twelve Months Ended
                                 December 31,             December 31,
                            ----------------------- -----------------------
                               2009        2008        2009        2008
                            ----------- ----------- ----------- -----------
Americas                    $   514,482 $   481,158 $ 1,687,857 $ 1,766,225
Europe, Middle East, and
 Africa                         254,899     274,384     953,218   1,077,654
Asia Pacific                    172,073     167,951     674,837     728,497
                            ----------- ----------- ----------- -----------
Total                       $   941,454 $   923,493 $ 3,315,912 $ 3,572,376
                            =========== =========== =========== ===========




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

                              Three Months Ended      Twelve Months Ended
                                 December 31,             December 31,
                            ----------------------- -----------------------
                               2009        2008        2009        2008
                            ----------- ----------- ----------- -----------
Service Provider            $   639,269 $   634,868 $ 2,197,069 $ 2,568,159
Enterprise                      302,185     288,625   1,118,843   1,004,217
                            ----------- ----------- ----------- -----------
Total                       $   941,454 $   923,493 $ 3,315,912 $ 3,572,376
                            =========== =========== =========== ===========




                          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,
                                --------------------  --------------------
                                  2009       2008       2009       2008
                                ---------  ---------  ---------  ---------
GAAP Cost of revenues -
 Product                        $ 234,756  $ 230,610  $ 841,722  $ 867,595
Stock-based compensation
 expense                      C    (1,074)      (727)    (3,906)    (2,952)
Stock-based compensation
 related payroll tax          C        23         (1)       (25)       (65)
Amortization of purchased
 intangible assets            A      (904)    (1,369)    (5,011)    (5,476)
                                ---------  ---------  ---------  ---------
Non-GAAP Cost of revenues -
 Product                          232,801    228,513    832,780    859,102
                                =========  =========  =========  =========

GAAP Cost of revenues -
 Service                           81,865     73,660    316,080    298,371
Stock-based compensation
 expense                      C    (3,192)    (2,240)   (11,705)    (9,249)
Stock-based compensation
 related payroll tax          C        70         (2)       (75)      (202)
                                ---------  ---------  ---------  ---------
Non-GAAP Cost of revenues -
 Service                           78,743     71,418    304,300    288,920
                                =========  =========  =========  =========

GAAP Gross margin - Product       504,340    515,250  1,726,270  2,043,365
Stock-based compensation
 expense                      C     1,074        727      3,906      2,952
Stock-based compensation
 related payroll tax          C       (23)         1         25         65
Amortization of purchased
 intangible assets            A       904      1,369      5,011      5,476
                                ---------  ---------  ---------  ---------
Non-GAAP Gross margin -
 Product                          506,295    517,347  1,735,212  2,051,858
                                =========  =========  =========  =========

GAAP Product gross margin as
 a % of product revenue              68.2%      69.1%      67.2%      70.2%
Stock-based compensation
 expense as a % of product
 revenue                      C       0.2%       0.1%       0.2%       0.1%
Stock-based compensation
 related payroll tax as a %
 of product revenue           C        --         --         --         --
Amortization of purchased
 intangible assets as a % of
 product revenue              A       0.1%       0.2%       0.2%       0.2%
                                ---------  ---------  ---------  ---------
Non-GAAP Product gross margin
 as a % of product revenue           68.5%      69.4%      67.6%      70.5%
                                =========  =========  =========  =========

GAAP Gross margin - Service       120,493    103,973    431,840    363,045
Stock-based compensation
 expense                      C     3,192      2,240     11,705      9,249
Stock-based compensation
 related payroll tax          C       (70)         2         75        202
                                ---------  ---------  ---------  ---------
Non-GAAP Gross margin -
 Service                          123,615    106,215    443,620    372,496
                                =========  =========  =========  =========




                            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,
                            --------------------  ------------------------
                               2009       2008        2009         2008
                            ---------  ---------  -----------  -----------
GAAP Service gross
 margin as a % of
 service revenue                 59.5%      58.5%        57.7%        54.9%
Stock-based compensation
 expense as a % of
 service revenue          C       1.6%       1.3%         1.6%         1.4%
Stock-based compensation
 related payroll tax as
 a % of service revenue   C        --         --           --           --
                            ---------  ---------  -----------  -----------
Non-GAAP Service gross
 margin as a % of
 service revenue                 61.1%      59.8%        59.3%        56.3%
                            =========  =========  ===========  ===========

GAAP Gross margin           $ 624,833  $ 619,223  $ 2,158,110  $ 2,406,410
Stock-based compensation
 expense                  C     4,266      2,967       15,611       12,201
Stock-based compensation
 related payroll tax      C       (93)         3          100          267
Amortization of
 purchased intangible
 assets                   A       904      1,369        5,011        5,476
                            ---------  ---------  -----------  -----------
Non-GAAP Gross margin         629,910    623,562    2,178,832    2,424,354
                            =========  =========  ===========  ===========

GAAP Gross margin as a %
 of revenue                      66.4%      67.1%        65.1%        67.4%
Stock-based compensation
 expense as a % of
 revenue                  C       0.4%       0.3%         0.4%         0.3%
Stock-based compensation
 related payroll tax as
 a % of revenue           C        --         --           --           --
Amortization of
 purchased intangible
 assets as a % of
 revenue                  A       0.1%       0.1%         0.2%         0.2%
                            ---------  ---------  -----------  -----------
Non-GAAP Gross margin as
 a % of revenue                  66.9%      67.5%        65.7%        67.9%
                            =========  =========  ===========  ===========

GAAP Research and
 development expense          187,210    180,134      741,708      731,151
Stock-based compensation
 expense                  C   (15,294)   (12,042)     (59,282)     (46,963)
Stock-based compensation
 related payroll tax      C       407        (16)        (133)        (679)
                            ---------  ---------  -----------  -----------
Non-GAAP Research and
 development expense          172,323    168,076      682,293      683,509
                            =========  =========  ===========  ===========

GAAP Sales and marketing
 expense                      204,875    206,054      734,038      782,940
Stock-based compensation
 expense                  C   (11,070)    (9,475)     (41,930)     (36,228)
Stock-based compensation
 related payroll tax      C       155       (140)        (514)      (1,705)
                            ---------  ---------  -----------  -----------
Non-GAAP Sales and
 marketing expense            193,960    196,439      691,594      745,007
                            =========  =========  ===========  ===========

GAAP General and
 administrative expense        41,196     37,971      159,459      144,837
Stock-based compensation
 expense                  C    (7,584)    (4,770)     (22,836)     (12,741)
Stock-based compensation
 related payroll tax      C        (4)        (1)         (85)        (112)
                            ---------  ---------  -----------  -----------
Non-GAAP General and
 administrative expense        33,608     33,200      136,538      131,984
                            =========  =========  ===========  ===========

GAAP Operating expense        449,650    429,349    1,678,084    1,711,436
Stock-based compensation
 expense                  C   (33,948)   (26,287)    (124,048)     (95,932)
Stock-based compensation
 related payroll tax      C       558       (157)        (732)      (2,496)
Amortization of
 purchased intangible
 assets                   A    (1,157)    (5,190)     (10,416)     (43,508)
Restructuring charges     B    (3,212)        --      (19,463)          --
Other charges - legal
 settlement               B   (12,000)        --      (13,000)      (9,000)
                            ---------  ---------  -----------  -----------
Non-GAAP Operating
 expense                    $ 399,891  $ 397,715  $ 1,510,425  $ 1,560,500
                            =========  =========  ===========  ===========




                             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,
                               --------------------   --------------------
                                  2009       2008       2009       2008
                               ---------   ---------  ---------  ---------
GAAP Operating income          $ 175,183   $ 189,874  $ 480,026  $ 694,974
Stock-based compensation
 expense                     C    38,214      29,254    139,659    108,133
Stock-based compensation
 related payroll tax         C      (651)        160        832      2,763
Amortization of purchased
 intangible assets           A     2,061       6,559     15,427     48,984
Restructuring charges        B     3,212          --     19,463         --
Other charges - legal
 settlement                  B    12,000          --     13,000      9,000
                               ---------   ---------  ---------  ---------
Non-GAAP Operating income        230,019     225,847    668,407    863,854
                               =========   =========  =========  =========

GAAP Operating margin               18.6%       20.6%      14.5%      19.5%
Stock-based compensation
 expense as a % of revenue   C       4.1%        3.2%       4.2%       3.0%
Stock-based compensation
 related payroll tax as a %
 of revenue                  C      (0.1)%        --        0.1%       0.1%
Amortization of purchased
 intangible assets as a %
 of revenue                  A       0.2%        0.7%       0.5%       1.3%
Restructuring charges as a
 % of revenue                B       0.3%         --        0.5%        --
Other charges - legal
 settlement as a % of
 revenue                     B       1.3%         --        0.4%       0.3%
                               ---------   ---------  ---------  ---------
Non-GAAP Operating margin           24.4%       24.5%      20.2%      24.2%
                               =========   =========  =========  =========

GAAP Other income and
 expense, net                     (1,904)     (5,101)     1,366     33,917
Loss on equity investments   B     2,251      13,333      5,562     14,832
                               ---------   ---------  ---------  ---------
Non-GAAP Other income and
 expense, net                        347       8,232      6,928     48,749
                               =========   =========  =========  =========

GAAP Provision for income
 tax                              44,093      52,297    258,111    217,142
Non-recurring income tax
 charge                      B        --          --    (56,683)        --
Valuation allowance on
 deferred tax assets         B        --          --    (61,755)        --
Income tax effect of
 non-GAAP exclusions         B    14,394      12,765     45,892     44,692
                               ---------   ---------  ---------  ---------
Non-GAAP Provision for
 income tax                       58,487      65,062    185,565    261,834
                               =========   =========  =========  =========
Non-GAAP Income tax rate            25.4%       27.8%      27.5%      28.7%
                               =========   =========  =========  =========
Non-GAAP Income before
 income taxes and
 noncontrolling interest*      $ 230,366   $ 234,079  $ 675,335  $ 912,603
                               =========   =========  =========  =========


* 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,
                            ---------------------   ---------------------
                               2009        2008        2009        2008
                            ---------   ---------   ---------   ---------
GAAP Net income
 attributable to Juniper
 Networks                   $ 130,957   $ 132,476   $ 225,052   $ 511,749
Stock-based compensation
 expense                  C    38,214      29,254     139,659     108,133
Stock-based compensation
 related payroll tax      C      (651)        160         832       2,763
Amortization of
 purchased intangible
 assets                   A     2,061       6,559      15,427      48,984
Restructuring charges     B     3,212          --      19,463          --
Other charges - legal
 settlement               B    12,000          --      13,000       9,000
Loss on equity
 investments              B     2,251      13,333       5,562      14,832
Non-recurring income tax
 charge                   B        --          --      56,683          --
Valuation allowance on
 deferred tax assets      B        --          --      61,755          --
Income tax effect of
 non-GAAP exclusions      B   (14,388)    (12,765)    (45,886)    (44,692)
                            ---------   ---------   ---------   ---------
Non-GAAP Net income         $ 173,656   $ 169,017   $ 491,547   $ 650,769
                            =========   =========   =========   =========

Non-GAAP Net income per
 share:
Basic                     D $    0.33   $    0.32   $    0.94   $    1.23
                            =========   =========   =========   =========
Diluted                   D $    0.32   $    0.32   $    0.92   $    1.18
                            =========   =========   =========   =========
Shares used in computing
 non-GAAP net income per
 share:
Basic                     D   523,200     527,634     523,603     530,337
                            =========   =========   =========   =========
Diluted                   D   538,887     534,817     534,015     551,433
                            =========   =========   =========   =========

GAAP Net income
 attributable to Juniper
 Networks as a % of
 revenue                         13.9%       14.3%        6.8%       14.3%
Stock-based compensation
 expense as a % of
 revenue                  C       4.1%        3.2%        4.2%        3.0%
Stock-based compensation
 related payroll tax as
 a % of revenue           C      (0.1)%        --          --         0.1%
Amortization of
 purchased intangible
 assets as a % of
 revenue                  A       0.2%        0.7%        0.5%        1.4%
Restructuring charges as
 a % of revenue           B       0.3%         --         0.5%         --
Other charges - legal
 settlement as a % of
 revenue                  B       1.3%         --         0.4%        0.3%
Loss on equity
 investments              B       0.2%        1.4%        0.2%        0.4%
Non-recurring income tax
 charge as a % of
 revenue                  B        --          --         1.7%         --
Valuation allowance on
 deferred tax assets as
 a % of revenue           B        --          --         1.9%         --
Income tax effect of
 non-GAAP exclusions as
 a % of revenue           B      (1.5)%      (1.3)%      (1.4)%      (1.3)%
                            ---------   ---------   ---------   ---------
Non-GAAP Net income as a
 % of revenue                    18.4%       18.3%       14.8%       18.2%
                            =========   =========   =========   =========

Discussion of Non-GAAP Financial Measures

The table above includes the following non-GAAP financial measures 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; net other income and expense; 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 tables 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 Expenses, Other Items, and Stock-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.

Note A: Acquisition-Related Expenses. 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: Stock-Based Compensation Related Items. We provide non-GAAP information relative to our expense for stock-based compensation and related payroll tax. We began to include stock-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 stock-based compensation, we believe that the exclusion of stock-based compensation allows for more accurate comparisons of our operating results to our peer companies. Further, we believe that excluding stock-based compensation expense allows for a more accurate comparison of our financial results to previous periods during which our equity-based awards were not required to be reflected in our income statement. Stock-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 stock is unrelated to the amount of compensation ultimately received by the employee; and the cost to the company is based on a stock-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 stock-based compensation, payroll tax on stock option exercises is dependent on our stock price and the timing and exercise by employees of our stock-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 stock-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.

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

                                              December 31,   December 31,
                                                  2009           2008
                                              -------------  -------------

                      ASSETS
Current assets:
  Cash and cash equivalents                   $   1,604,723  $   2,019,084
  Short-term investments                            570,522        172,896
  Accounts receivable, net of allowances            458,652        429,970
  Deferred tax assets, net                          142,641        145,230
  Prepaid expenses and other current assets          48,744         49,026
                                              -------------  -------------
    Total current assets                          2,825,282      2,816,206
Property and equipment, net                         455,651        436,433
Long-term investments                               483,505        101,415
Restricted cash                                      53,732         43,442
Purchased intangible assets, net                     13,834         28,861
Goodwill                                          3,658,602      3,658,602
Long-term deferred tax assets, net                    3,800         71,079
Other long-term assets                               35,425         31,303
                                              -------------  -------------
    Total assets                              $   7,529,831  $   7,187,341
                                              =============  =============
      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                            $     242,591  $     249,854
  Accrued compensation                              176,551        160,471
  Accrued warranty                                   38,199         40,090
  Deferred revenue                                  571,652        459,749
  Income taxes payable                               35,781         33,047
  Other accrued liabilities                         142,526        113,399
                                              -------------  -------------
    Total current liabilities                     1,207,300      1,056,610
Long-term deferred revenue                          181,937        130,514
Long-term income tax payable                        170,245         78,164
Other long-term liabilities                          37,531         20,648
Commitments and contingencies
Juniper Networks stockholders' equity:
  Common stock, $0.00001 par value                        5              5
  Additional paid-in capital                      9,060,089      8,811,497
  Accumulated other comprehensive loss               (1,433)        (4,245)
  Accumulated deficit                            (3,128,472)    (2,905,852)
                                              -------------  -------------
    Total Juniper Networks stockholders'
     equity                                       5,930,189      5,901,405
Noncontrolling interest                               2,629             --
                                              -------------  -------------
  Total equity                                    5,932,818      5,901,405
                                              -------------  -------------
  Total liabilities and stockholders' equity  $   7,529,831  $   7,187,341
                                              =============  =============




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

                                                  Twelve Months Ended
                                                     December 31,
                                              ----------------------------
                                                  2009           2008
                                              -------------  -------------
Cash flows from operating activities:
Consolidated net income                       $     223,281  $     511,749
Adjustments to reconcile net income to net
 cash from operating activities:
  Depreciation and amortization                     148,373        172,453
  Stock-based compensation                          139,659        108,133
  Loss on equity investments                          5,529         14,832
  Change in excess tax benefits from
   share-based compensation                          (3,510)       (40,182)
  Deferred income taxes                              69,868         14,314
  Other non-cash charges                                 --            613
  Changes in operating assets and
   liabilities:
    Accounts receivable, net                        (28,682)       (50,211)
    Prepaid expenses and other assets                (8,487)          (539)
    Accounts payable                                 (2,422)        19,770
    Accrued compensation                             16,079          1,761
    Income tax payable                               44,517         49,554
    Other accrued liabilities                        28,566         (4,062)
    Deferred revenue                                163,326         76,994
                                              -------------  -------------
      Net cash provided by operating
       activities                                   796,097        875,179
Cash flows from investing activities:
Purchases of property and equipment, net           (153,101)      (164,604)
Purchases of available-for-sale investments      (1,461,532)      (474,007)
Proceeds from sales of available-for-sale
 investments                                        285,379        130,237
Proceeds from maturities of
 available-for-sale investments                     398,435        369,114
Changes in restricted cash                          (11,276)        (8,094)
Purchases of minority equity investments, net        (6,205)        (2,458)
                                              -------------  -------------
      Net cash used in investing activities        (948,300)      (149,812)
Cash flows from financing activities:
Proceeds from issuance of common stock              164,207        119,450
Purchases and retirement of common stock           (453,888)      (604,700)
Net proceeds from customer financing
 arrangements                                        19,613         22,963
Redemption of convertible debt                           --           (288)
Change in excess tax benefit from employee
 stock option plans                                   3,510         40,182
Proceeds from noncontrolling interest                 4,400             --
                                              -------------  -------------
      Net cash used in financing activities        (262,158)      (422,393)
                                              -------------  -------------
Net (decrease) increase in cash and cash
 equivalents                                       (414,361)       302,974
Cash and cash equivalents at beginning of
 period                                           2,019,084      1,716,110
                                              -------------  -------------
Cash and cash equivalents at end of period    $   1,604,723  $   2,019,084
                                              =============  =============
Supplemental disclosure of cash flow
 information
  Cash paid for interest                      $       5,417  $       5,224
  Cash paid for taxes                         $     139,969  $     147,999
Supplemental disclosure of non-cash investing
 and financing activities:
  Common stock issued in connection with
   conversion of the Senior Notes             $          --  $     399,208




                        Juniper Networks, Inc.
      Cash, Cash Equivalents, Trading, and Available-For-Sale Investments
                          (in thousands)
                           (unaudited)

                                           December 31,   December 31,
                                              2009           2008
                                         -------------- --------------
Cash and cash equivalents                $    1,604,723 $    2,019,084
Short-term investments                          570,522        172,896
Long-term investments                           483,505        101,415
                                         -------------- --------------
Total                                    $    2,658,750 $    2,293,395
                                         ============== ==============

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