Juniper Networks Reports Preliminary Third Quarter 2012 Financial Results

SUNNYVALE, CA--(Marketwire - Oct 23, 2012) - Juniper Networks (NYSE: JNPR)

• Revenue: $1,118 million, up 4% from Q2'12 and up 1% from Q3'11
• Operating Margin: 3.8% GAAP; 16.9% non-GAAP
• GAAP Net Income Per Share: $0.03 diluted, includes $0.16 impact from restructuring and other charges
• Non-GAAP Net Income Per Share: $0.22 diluted, up 16% from Q2'12 and down 21% from Q3'11

Juniper Networks (NYSE: JNPR), the industry leader in network innovation, today reported preliminary financial results for the three and nine months ended September 30, 2012, and provided its outlook for the three months ending December 31, 2012.

Net revenues for the third quarter of 2012 increased 4% sequentially, and increased 1% on a year-over-year basis, to $1,118 million.

The Company posted GAAP net income of $17 million, or $0.03 per diluted share for the third quarter. The GAAP diluted income per share includes $0.16 impact from restructuring and other charges. Non-GAAP net income was $118 million, or $0.22 per diluted share, for the third quarter of 2012.

Non-GAAP net income per diluted share increased 16% compared to the second quarter of 2012 and decreased 21% compared to the third quarter of 2011. 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.

Juniper's operating margin for the third quarter of 2012 decreased to 3.8% on a GAAP basis from 8.1% in the second quarter of 2012, and from 12.4% in the third quarter 2011. Non-GAAP operating margin for the third quarter of 2012 increased to 16.9% from 15.0% in the second quarter of 2012 and decreased from 20.0% in the third quarter of 2011.

"Juniper delivered top line revenue growth in the third quarter as we focus on excellence in execution throughout our business," said Kevin Johnson, chief executive officer of Juniper Networks. "Our new products continue to gain traction in the marketplace, and we're aligning our organization to sharpen our focus, enable agility and drive efficiency as we position for 2013."

"Our third quarter results demonstrated a return to year-over-year revenue growth and improved operational performance," said Robyn Denholm, chief financial officer of Juniper Networks. "Long-term demand fundamentals for high-performance networking continue to be positive, yet customers remain cautious in the near-term environment. We remain focused on executing our strategy to drive revenue growth, and with our workforce restructuring largely complete, we're well prepared to capture the market opportunity ahead."

Other Financial Highlights
Total cash, cash equivalents and investments as of September 30, 2012 were $4,048 million, compared to $4,272 million as of the second quarter of 2012 and $4,130 million as of the third quarter of 2011.

Juniper generated net cash from operations for the third quarter of 2012 of $173 million, compared to net cash provided by operations of $212 million in the second quarter of 2012, and $185 million in the third quarter of 2011.

Days sales outstanding in accounts receivable ("DSO") was 32 days in the third quarter of 2012, compared to 34 days in the prior quarter and 36 days in the third quarter of 2011.

Juniper repurchased approximately 14 million shares in the third quarter of 2012, at an average price of $18.00 per share, or approximately $250 million.

Capital expenditures, as well as depreciation and amortization of intangible assets expense during the third quarter of 2012 were $87 million and $48 million, respectively.

Outlook
Long-term fundamentals driving demand for networking solutions are positive, and we are making good progress toward our revenue targets for our new products. Our outlook for the December quarter reflects our customers' continued caution in their investment decisions in what continues to be a challenging environment. 

• Juniper estimates revenue for the fourth quarter ending December 31, 2012 to be in the range of $1,100 million to $1,130 million. 
  
  
• Juniper estimates that its non-GAAP gross margin will be in the range of 63.5% to 64.5% for the fourth quarter.
  
  
• Juniper estimates that its non-GAAP operating expenses will be flat compared to the September quarter.
  
  
• Juniper expects its non-GAAP operating margin for the fourth quarter will be in the range of 14% to 16%.
  
  
• Juniper estimates that its non-GAAP net income per share will range between $0.19 and $0.22 on a diluted basis, assuming a flat share count and estimated non-GAAP tax rate of 32%.
  
  

All forward-looking non-GAAP measures exclude 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. A reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis.

Conference Call Webcast

Juniper Networks will host a conference call webcast today, October 23, 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 10 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) or connect with Juniper on Twitter and Facebook.

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 September 30,								Nine Months Ended September 30,
				2012				2011				2012				2011
Net revenues:
	Product			$	838,179			$	861,935			$	2,414,714			$	2,630,803
	Service				280,132				243,861				809,854				697,149
		Total net revenues			1,118,311				1,105,796				3,224,568				3,327,952
Cost of revenues:
	Product				334,645				286,609				907,863				844,746
	Service				109,835				107,583				340,946				313,551
		Total cost of revenues			444,480				394,192				1,248,809				1,158,297
Gross margin					673,831				711,604				1,975,759				2,169,655
Operating expenses:
	Research and development				288,178				257,096				826,514				776,325
	Sales and marketing				261,026				254,933				778,200				747,859
	General and administrative				49,442				44,455				152,883				133,639
	Amortization of purchased intangible assets				1,148				1,263				3,562				4,139
	Restructuring and other charges				31,018				16,813				36,218				15,550
	Acquisition-related and other charges				250				18				1,186				6,804
		Total operating expenses			631,062				574,578				1,798,563				1,684,316
Operating income					42,769				137,026				177,196				485,339
Other expense, net					(3,956	)			(15,957	)			(25,617	)			(36,107	)
Income before income taxes and noncontrolling interest					38,813				121,069				151,579				449,232
Income tax provision					21,999				37,398				60,776				120,383
Consolidated net income					16,814				83,671				90,803				328,849
Adjust for net loss attributable to noncontrolling interest					--				(8	)			--				124
Net income attributable to Juniper Networks				$	16,814			$	83,663			$	90,803			$	328,973
Net income per share attributable to Juniper Networks common stockholders:
	Basic			$	0.03			$	0.16			$	0.17			$	0.62
	Diluted			$	0.03			$	0.16			$	0.17			$	0.60
Shares used in computing net income per share:
	Basic				521,178				529,286				525,419				530,994
	Diluted				524,537				536,583				530,343				544,086

Juniper Networks, Inc.
Preliminary Net Revenues by Reportable Segment
(in thousands)
(unaudited)
					Three Months Ended September 30,						Nine Months Ended September 30,
					2012			2011			2012			2011
Platform Systems Division:
	PSD Products:
		Routing			$	488,112		$	524,211		$	1,433,049		$	1,687,587
		Switching				145,616			122,172			409,033			339,937
		Security/Other				47,822			53,393			135,907			158,557
			Total PSD Products		$	681,550		$	699,776		$	1,977,989		$	2,186,081
	PSD Services					211,400			180,018			610,608			509,233
		Total Platform Systems Division Revenue			$	892,950		$	879,794		$	2,588,597		$	2,695,314
Software Solutions Division:
	SSD Products
		Security/Other			$	129,848		$	137,933		$	369,515		$	359,793
		Routing				26,781			24,226			67,210			84,929
			Total SSD Products		$	156,629		$	162,159		$	436,725		$	444,722
	SSD Services					68,732			63,843			199,246			187,916
		Total Software Solutions Division Revenue			$	225,361		$	226,002		$	635,971		$	632,638
Total					$	1,118,311		$	1,105,796		$	3,224,568		$	3,327,952

Juniper Networks, Inc.
Preliminary Net Revenues by Product
(in thousands)
(unaudited)
		Three Months Ended September 30,						Nine Months Ended September 30,
		2012			2011			2012			2011
Routing		$	514,893		$	548,437		$	1,500,259		$	1,772,516
Switching			145,616			122,172			409,033			339,937
Security/Other			177,670			191,326			505,422			518,350
Services			280,132			243,861			809,854			697,149
Total		$	1,118,311		$	1,105,796		$	3,224,568		$	3,327,952

Juniper Networks, Inc.
Preliminary Net Revenues by Geographic Region
(in thousands)
(unaudited)
		Three Months Ended September 30,						Nine Months Ended September 30,
		2012			2011			2012			2011
Americas		$	560,258		$	556,573		$	1,678,912		$	1,716,892
Europe, Middle East, and Africa			321,331			311,255			927,650			940,167
Asia Pacific			236,722			237,968			618,006			670,893
Total		$	1,118,311		$	1,105,796		$	3,224,568		$	3,327,952

Juniper Networks, Inc.
Preliminary Net Revenues by Market
(in thousands)
(unaudited)
		Three Months Ended September 30,						Nine Months Ended September 30,
		2012			2011			2012			2011
Service Provider		$	705,257		$	685,013		$	2,071,837		$	2,156,530
Enterprise			413,054			420,783			1,152,731			1,171,422
Total		$	1,118,311		$	1,105,796		$	3,224,568		$	3,327,952

Juniper Networks, Inc.
Segment Operating Results
(in thousands)
(unaudited)
					Three Months Ended September 30,								Nine Months Ended September 30,
					2012				2011				2012				2011
Platform Systems Division:
	Product revenue				$	681,550			$	699,776			$	1,977,989			$	2,186,081
	Service revenue					211,400				180,018				610,608				509,233
		Total PSD revenue				892,950				879,794				2,588,597				2,695,314
		Non-GAAP PSD contribution margin $				356,144				381,802				1,011,877				1,214,346
		Non-GAAP PSD contribution margin %				39.9	%			43.4	%			39.1	%			45.1	%
Software Solutions Division:
	Product revenue					156,629				162,159				436,725				444,722
	Services revenue					68,732				63,843				199,246				187,916
		Total SSD revenue				225,361				226,002				635,971				632,638
		Non-GAAP SSD contribution margin $				99,776				94,549				256,165				250,339
		Non-GAAP SSD contribution margin %				44.3	%			41.8	%			40.3	%			39.6	%
Total revenue						1,118,311				1,105,796				3,224,568				3,327,952
Non-GAAP Segment contribution margin $						455,920				476,351				1,268,042				1,464,685
Non-GAAP Segment contribution margin %						40.8	%			43.1	%			39.3	%			44.0	%
Corporate unallocated expenses						266,505				255,190				794,188				755,496
Non-GAAP Total segment operating margin $						189,415				221,161				473,854				709,189
Non-GAAP Total segment operating margin %						16.9	%			20.0	%			14.7	%			21.3	%
		Amortization of purchased intangible assets		A		(9,041	)			(6,701	)			(25,081	)			(20,213	)
		Share-based compensation expense		A		(59,115	)			(60,468	)			(186,002	)			(169,633	)
		Share-based payroll tax expense		A		(103	)			(135	)			(1,052	)			(9,163	)
		Restructuring and other charges		B		(83,418	)			(16,813	)			(88,618	)			(15,550	)
		Acquisition-related and other charges		A,B		(250	)			(18	)			(1,186	)			(9,291	)
		Other		B		5,281				--				5,281				--
GAAP Operating income					$	42,769			$	137,026			$	177,196			$	485,339

Juniper Networks, Inc.
Share-Based Compensation by Category
(in thousands)
(unaudited)
		Three Months Ended September 30,						Nine Months Ended September 30,
		2012			2011			2012			2011
Cost of revenues - Product		$	1,162		$	1,241		$	3,499		$	3,400
Cost of revenues - Service			3,872			3,705			13,217			12,110
Research and development			26,039			26,540			80,316			75,453
Sales and marketing			21,382			20,572			64,315			52,969
General and administrative			6,660			8,410			24,655			25,701
Total		$	59,115		$	60,468		$	186,002		$	169,633

Juniper Networks, Inc.
Share-Based Compensation Related Payroll Tax by Category
(in thousands)
(unaudited)
		Three Months Ended September 30,						Nine Months Ended September 30,
		2012			2011			2012			2011
Cost of revenues - Product		$	3		$	4		$	27		$	299
Cost of revenues - Service			15			9			102			938
Research and development			29			35			277			3,385
Sales and marketing			51			79			556			4,048
General and administrative			5			8			90			493
Total		$	103		$	135		$	1,052		$	9,163

Juniper Networks, Inc.
Reconciliation between GAAP and non-GAAP Financial Measures
(in thousands, except percentages)
(unaudited)
				Three Months Ended											Nine Months Ended
				September 30,			June 30,				September 30,				September 30,			September 30,
				2012			2012				2011				2012			2011
GAAP Cost of revenues - Product				$	334,645		$	292,589			$	286,609			$	907,863		$	844,746
Share-based compensation expense		C			(1,162	)		(1,220	)			(1,241	)			(3,499	)		(3,400	)
Share-based compensation related payroll tax		C			(3	)		(12	)			(4	)			(27	)		(299	)
Amortization of purchased intangible assets		A			(7,893	)		(7,531	)			(5,438	)			(21,519	)		(16,074	)
Restructuring and other charges		B			(52,400	)		--				--				(52,400	)		--
Other		B			5,281			--				--				5,281			--
Acquisition-related and other charges		A,B			--			--				--				--			(2,487	)
Non-GAAP Cost of revenues - Product					278,468			283,826				279,926				835,699			822,486
GAAP Cost of revenues - Service					109,835			113,297				107,583				340,946			313,551
Share-based compensation expense		C			(3,872	)		(4,125	)			(3,705	)			(13,217	)		(12,110	)
Share-based compensation related payroll tax		C			(15	)		(53	)			(9	)			(102	)		(938	)
Non-GAAP Cost of revenues - Service					105,948			109,119				103,869				327,627			300,503
GAAP Gross margin - Product					503,534			512,073				575,326				1,506,851			1,786,057
Share-based compensation expense		C			1,162			1,220				1,241				3,499			3,400
Share-based compensation related payroll tax		C			3			12				4				27			299
Amortization of purchased intangible assets		A			7,893			7,531				5,438				21,519			16,074
Restructuring and other charges		B			52,400			--				--				52,400			--
Other		B			(5,281	)		--				--				(5,281	)		--
Acquisition-related and other charges		A,B			--			--				--				--			2,487
Non-GAAP Gross margin - Product					559,711			520,836				582,009				1,579,015			1,808,317
GAAP Product gross margin as a % of product revenue					60.1	%		63.6	%			66.7	%			62.4	%		67.9	%
Share-based compensation expense as a % of product revenue		C			0.1	%		0.2	%			0.1	%			0.1	%		0.1	%
Share-based compensation related payroll tax as a % of product revenue		C			--	%		--	%			--	%			--	%		--	%
Amortization of purchased intangible assets as a % of product revenue		A			0.9	%		0.9	%			0.7	%			0.9	%		0.6	%
Restructuring and other charges as a % of product revenue		B			6.3	%		--	%			--	%			2.2	%		--	%
Other as a % of product revenue		B			(0.6	)%		--	%			--	%			(0.2	)%		--	%
Acquisition-related and other charges as a % of product revenue		A,B			--	%		--	%			--	%			--	%		0.1	%
Non-GAAP Product gross margin as a % of product revenue					66.8	%		64.7	%			67.5	%			65.4	%		68.7	%
GAAP Gross margin - Service					170,297			155,800				136,278				468,908			383,598
Share-based compensation expense		C			3,872			4,125				3,705				13,217			12,110
Share-based compensation related payroll tax		C			15			53				9				102			938
Non-GAAP Gross margin - Service				$	174,184		$	159,978			$	139,992			$	482,227		$	396,646
GAAP Service gross margin as a % of service revenue					60.8	%		57.9	%			55.9	%			57.9	%		55.0	%
Share-based compensation expense as a % of service revenue		C			1.4	%		1.5	%			1.5	%			1.6	%		1.8	%
Share-based compensation related payroll tax as a % of service revenue		C			--	%		--	%			--	%			--	%		0.1	%
Non-GAAP Service gross margin as a % of service revenue					62.2	%		59.4	%			57.4	%			59.5	%		56.9	%

Juniper Networks, Inc.
Reconciliation between GAAP and non-GAAP Financial Measures
(in thousands, except percentages)
(unaudited)
			Three Months Ended												Nine Months Ended
			September 30,				June 30,				September 30,				September 30,			September 30,
			2012				2012				2011				2012			2011
GAAP Gross margin			$	673,831			$	667,873			$	711,604			$	1,975,759		$	2,169,655
Share-based compensation expense		C		5,034				5,345				4,946				16,716			15,510
Share-based compensation related payroll tax		C		18				65				13				129			1,237
Amortization of purchased intangible assets		A		7,893				7,531				5,438				21,519			16,074
Restructuring and other charges		B		52,400				--				--				52,400			--
Other		B		(5,281	)			--				--				(5,281	)		--
Acquisition-related and other charges		A,B		--				--				--				--			2,487
Non-GAAP Gross margin				733,895				680,814				722,001				2,061,242			2,204,963
GAAP Gross margin as a % of revenue				60.3	%			62.2	%			64.4	%			61.3	%		65.2	%
Share-based compensation expense as a % of revenue		C		0.5	%			0.5	%			0.4	%			0.5	%		0.5	%
Share-based compensation related payroll tax as a % of revenue		C		--	%			--	%			--	%			0.1	%		--	%
Amortization of purchased intangible assets as a % of revenue		A		0.7	%			0.7	%			0.5	%			0.6	%		0.5	%
Restructuring and other charges as a % of revenue		B		4.6	%			--	%			--	%			1.6	%		--	%
Other as a % of revenue		B		(0.5	)			--	%			--	%			(0.2	)%		--	%
Acquisition-related and other charges as a % of revenue		A,B		--	%			--	%			--	%			--	%		0.1	%
Non-GAAP Gross margin as a % of revenue				65.6	%			63.4	%			65.3	%			63.9	%		66.3	%
GAAP Research and development expense				288,178				268,734				257,096				826,514			776,325
Share-based compensation expense		C		(26,039	)			(28,486	)			(26,540	)			(80,316	)		(75,453	)
Share-based compensation related payroll tax		C		(29	)			(122	)			(35	)			(277	)		(3,385	)
Non-GAAP Research and development expense				262,110				240,126				230,521				745,921			697,487
GAAP Sales and marketing expense				261,026				259,455				254,933				778,200			747,859
Share-based compensation expense		C		(21,382	)			(21,022	)			(20,572	)			(64,315	)		(52,969	)
Share-based compensation related payroll tax		C		(51	)			(329	)			(79	)			(556	)		(4,048	)
Non-GAAP Sales and marketing expense				239,593				238,104				234,282				713,329			690,842
GAAP General and administrative expense				49,442				48,775				44,455				152,883			133,639
Share-based compensation expense		C		(6,660	)			(7,027	)			(8,410	)			(24,655	)		(25,701	)
Share-based compensation related payroll tax		C		(5	)			(54	)			(8	)			(90	)		(493	)
Non-GAAP General and administrative expense				42,777				41,694				36,037				128,138			107,445
GAAP Operating expense				631,062				581,155				574,578				1,798,563			1,684,316
Share-based compensation expense		C		(54,081	)			(56,535	)			(55,522	)			(169,286	)		(154,123	)
Share-based compensation related payroll tax		C		(85	)			(505	)			(122	)			(923	)		(7,926	)
Amortization of purchased intangible assets		A		(1,148	)			(1,236	)			(1,263	)			(3,562	)		(4,139	)
Restructuring and other charges		B		(31,018	)			(3,161	)			(16,813	)			(36,218	)		(15,550	)
Acquisition-related and other charges		A,B		(250	)			206				(18	)			(1,186	)		(6,804	)
Non-GAAP Operating expense			$	544,480			$	519,924			$	500,840			$	1,587,388		$	1,495,774

Juniper Networks, Inc.
Reconciliation between GAAP and non-GAAP Financial Measures
(in thousands, except percentages)
(unaudited)
			Three Months Ended											Nine Months Ended
			September 30,			June 30,				September 30,				September 30,			September 30,
			2012			2012				2011				2012			2011
GAAP Operating income			$	42,769		$	86,718			$	137,026			$	177,196		$	485,339
Share-based compensation expense		C		59,115			61,880				60,468				186,002			169,633
Share-based compensation related payroll tax		C		103			570				135				1,052			9,163
Amortization of purchased intangible assets		A		9,041			8,767				6,701				25,081			20,213
Restructuring and other charges		B		83,418			3,161				16,813				88,618			15,550
Other		B		(5,281	)		--				--				(5,281	)		--
Acquisition-related and other charges		A,B		250			(206	)			18				1,186			9,291
Non-GAAP Operating income				189,415			160,890				221,161				473,854			709,189
GAAP Operating margin				3.8	%		8.1	%			12.4	%			5.5	%		14.6	%
Share-based compensation expense as a % of revenue		C		5.3	%		5.8	%			5.5	%			5.9	%		5.1	%
Share-based compensation related payroll tax as a % of revenue		C		--	%		0.1	%			--	%			--	%		0.3	%
Amortization of purchased intangible assets as a % of revenue		A		0.8	%		0.7	%			0.6	%			0.8	%		0.6	%
Restructuring and other charges as a % of revenue		B		7.5	%		0.3	%			1.5	%			2.7	%		0.5	%
Other as a % of revenue		B		(0.5	)%		--	%			--	%			(0.2	)%		--	%
Acquisition-related and other charges as a % of revenue		A,B		--	%		--	%			--	%			--	%		0.3	%
Non-GAAP Operating margin				16.9	%		15.0	%			20.0	%			14.7	%		21.4	%
GAAP Other income (expense), net		E		(3,956	)		2,770				(15,957	)			(25,617	)		(36,107	)
(Gain) loss on equity investments		B		(5,842	)		(14,787	)			1,116				(6,629	)		982
Non-GAAP Other income (expense), net		E		(9,798	)		(12,017	)			(14,841	)			(32,246	)		(35,125	)
GAAP Income tax provision				21,999			31,769				37,398				60,776			120,383
Income tax effect of non-GAAP exclusions		B		39,735			13,980				19,152				75,835			59,297
Non-GAAP Provision for income tax				61,734			45,749				56,550				136,611			179,680
Non-GAAP Income tax rate				34.4	%		30.7	%			27.4	%			30.9	%		26.7	%
Non-GAAP Income before income taxes and noncontrolling interest*			$	179,617		$	148,873			$	206,320			$	441,608		$	674,064

*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									Nine Months Ended
			September 30,			June 30,			September 30,			September 30,			September 30,
			2012			2012			2011			2012			2011
GAAP Net income attributable to Juniper Networks			$	16,814		$	57,719		$	83,663		$	90,803		$	328,973
Share-based compensation expense		C		59,115			61,880			60,468			186,002			169,633
Share-based compensation related payroll tax		C		103			570			135			1,052			9,163
Amortization of purchased intangible assets		A		9,041			8,767			6,701			25,081			20,213
Restructuring and other charges		B		83,418			3,161			16,813			88,618			15,550
Other		B		(5,281	)		--			--			(5,281	)		--
Acquisition-related and other charges		A,B		250			(206	)		18			1,186			9,291
(Gain) loss on equity investments		B		(5,842	)		(14,787	)		1,116			(6,629	)		982
Income tax effect of non-GAAP exclusions		B		(39,735	)		(13,980	)		(19,152	)		(75,835	)		(59,297	)
Non-GAAP Net income			$	117,883		$	103,124		$	149,762		$	304,997		$	494,508
Non-GAAP Net income per share:
Basic		D	$	0.23		$	0.20		$	0.28		$	0.58		$	0.93
Diluted		D	$	0.22		$	0.19		$	0.28		$	0.58		$	0.91
Shares used in computing non-GAAP net income per share:
Basic		D		521,178			527,756			529,286			525,419			530,994
Diluted		D		524,537			531,755			536,583			530,343			544,086
GAAP Net income attributable to Juniper Networks as a % of revenue				1.5	%		5.4	%		7.6	%		2.8	%		9.9	%
Share-based compensation expense as a % of revenue		C		5.3	%		5.8	%		5.5	%		5.9	%		5.1	%
Share-based compensation related payroll tax as a % of revenue		C		--	%		0.1	%		--	%		--	%		0.3	%
Amortization of purchased intangible assets as a % of revenue		A		0.8	%		0.8	%		0.6	%		0.8	%		0.6	%
Restructuring and other charges as a % of revenue		B		7.5	%		0.3	%		1.5	%		2.7	%		0.5	%
Other as a % of revenue		B		(0.5	)%		--	%		--	%		(0.2	)%		--	%
Acquisition-related and other charges as a % of revenue		A,B		--	%		--	%		--	%		--	%		0.3	%
(Gain) loss on equity investments as a % of revenue		B		(0.5	)%		(1.4	)%		0.1	%		(0.2	)%		--	%
Income tax effect of non-GAAP exclusions as a % of revenue		B		(3.6	)%		(1.4	)%		(1.8	)%		(2.3	)%		(1.8	)%
Non-GAAP Net income as a % of revenue				10.5	%		9.6	%		13.5	%		9.5	%		14.9	%

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; 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 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. Further, we believe that excluding share-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. 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 share 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 income (expense), 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 income (expense), net.

Juniper Networks, Inc.
Preliminary Condensed Consolidated Balance Sheets
(in thousands)
				September 30, 2012 (unaudited)			December 31, 2011
ASSETS
Current assets:
	Cash and cash equivalents			$	2,707,940		$	2,910,420
	Short-term investments				439,278			641,323
	Accounts receivable, net				397,082			577,386
	Deferred tax assets, net				229,374			154,310
	Prepaid expenses and other current assets				168,625			156,222
		Total current assets			3,942,299			4,439,661
Property and equipment, net					768,530			598,581
Long-term investments					900,769			740,659
Restricted cash and investments					102,661			78,307
Purchased intangible assets, net					118,655			123,114
Goodwill					3,987,073			3,928,144
Other long-term assets					140,607			75,354
		Total assets		$	9,960,594		$	9,983,820
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable			$	224,242		$	324,843
	Accrued compensation				230,102			223,018
	Accrued warranty				29,776			28,276
	Deferred revenue				771,709			712,663
	Income taxes payable				66,996			12,545
	Other accrued liabilities				178,976			165,358
		Total current liabilities			1,501,801			1,466,703
Long-term debt					999,145			999,034
Long-term deferred revenue					221,217			254,364
Long-term income tax payable					116,929			108,471
Other long-term liabilities					41,622			65,590
Total liabilities					2,880,714			2,894,162
Total stockholders' equity					7,079,880			7,089,658
		Total liabilities and stockholders' equity		$	9,960,594		$	9,983,820

Juniper Networks, Inc.
Preliminary Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
					Nine Months Ended September 30,
					2012				2011
Cash flows from operating activities:
	Consolidated net income				$	90,803			$	328,849
	Adjustments to reconcile consolidated net income to net cash provided by operating activities:
		Non-cash portion of share-based compensation				186,002				165,236
		Depreciation and amortization				137,855				125,986
		Deferred income taxes				(75,064	)			(6,014	)
		Restructuring and other charges				88,618				15,550
		Gain (loss) on investments, net				(7,810	)			982
		Excess tax benefits from share-based compensation				(7,184	)			(44,524	)
		Amortization of debt issuance costs				708				509
	Changes in operating assets and liabilities, net of effects from acquisitions:
		Accounts receivable, net				180,368				152,019
		Prepaid expenses and other assets				(54,089	)			14,103
		Accounts payable				(114,020	)			(25,962	)
		Accrued compensation				5,608				(62,625	)
		Income tax payable				64,715				70,241
		Other accrued liabilities				(24,838	)			7,759
		Deferred revenue				15,899				1,012
			Net cash provided by operating activities			487,571				743,121
Cash flows from investing activities:
	Purchases of property and equipment					(256,753	)			(187,886	)
	Purchases of trading investments					(3,776	)			(4,575	)
	Purchases of available-for-sale investments					(1,009,076	)			(1,893,474	)
	Proceeds from sales of available-for-sale investments					625,119				1,050,936
	Proceeds from maturities of available-for-sale investments					431,705				446,150
	Payment for business acquisition, net of cash and cash equivalents acquired					(90,487	)			(31,101	)
	Proceeds from sales of privately-held investments					32,715				2,143
	Purchases of privately-held investments					(11,123	)			(34,545	)
	Purchase of licensed software					(65,297	)			--
	Changes in restricted cash					(20,820	)			(1,144	)
		Net cash used in investing activities				(367,793	)			(653,496	)
Cash flows from financing activities:
	Proceeds from issuance of common stock					88,225				341,063
	Purchases and retirement of common stock					(400,070	)			(548,590	)
	Payment for capital lease obligation					(1,430	)			--
	Issuance of long-term debt, net					--				991,556
	Change in customer financing arrangements					(16,167	)			(7,616	)
	Excess tax benefits from share-based compensation					7,184				44,524
		Net cash (used in) provided by financing activities				(322,258	)			820,937
		Net (decrease) increase in cash and cash equivalents				(202,480	)			910,562
Cash and cash equivalents at beginning of period						2,910,420				1,811,887
Cash and cash equivalents at end of period					$	2,707,940			$	2,722,449

Juniper Networks, Inc.
Cash, Cash Equivalents, and Investments
(in thousands)
(unaudited)
			September 30, 2012			December 31, 2011
Cash and cash equivalents			$	2,707,940		$	2,910,420
Short-term investments				439,278			641,323
Long-term investments				900,769			740,659
	Total		$	4,047,987		$	4,292,402