SOURCE: Juniper Networks

Juniper Networks

January 25, 2011 16:05 ET

Juniper Networks Reports Record Preliminary Fourth Quarter and Fiscal Year 2010 Financial Results

SUNNYVALE, CA--(Marketwire - January 25, 2011) - Juniper Networks (NYSE: JNPR)

Q4 Financial Highlights

  • Revenue: $1.190 billion, up 26% from Q4'09 and up 18% from Q3'10
  • Operating Margin: 19.1% GAAP; 24.5% non-GAAP
  • GAAP Net Income Per Share: $0.35 diluted
  • Non-GAAP Net Income Per Share: $0.42 diluted, up 31% from Q4'09 and Q3'10 (including approximately $0.03 per share favorable impact due to the extension of R&D tax credit)

2010 Financial Highlights

  • Revenue: $4.093 billion, up 23% from 2009
  • Operating Margin: 18.8% GAAP; 24.0% non-GAAP
  • GAAP Net Income Per Share: $1.15 diluted
  • Non-GAAP Net Income Per Share: $1.32 diluted, up 43% from 2009

Juniper Networks (NYSE: JNPR) today reported preliminary financial results for the three and twelve months ended December 31, 2010, and provided its outlook for the three months ending March 31, 2011. Juniper's fourth quarter and full year 2010 results reflect record performance by the company as measured by non-GAAP net income and revenues.

Net revenues for the fourth quarter of 2010 increased 26% on a year-over-year basis and increased 18% sequentially, to $1.190 billion. For the year ended December 31, 2010, Juniper's revenue increased 23% on a year-over-year basis to $4.093 billion.

The Company posted GAAP net income of $190.2 million, or $0.35 per diluted share, and non-GAAP net income of $228.6 million, or $0.42 per diluted share, for the fourth quarter of 2010. Included in both the GAAP and non-GAAP net income per share is approximately $0.03 per share favorable impact due to the extension of R&D tax credit.

Non-GAAP net income per diluted share for the fourth quarter of 2010 increased 31% on a year-over-year and quarter-over-quarter basis. For the year ended December 31, 2010, GAAP net income was $618.4 million, or $1.15 per diluted share, and non-GAAP net income was $710.5 million, or $1.32 per diluted share.

Non-GAAP net income per diluted share, for the year ended December 31, 2010, increased 43% on a year-over-year basis. 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 produced outstanding results in 2010, the first year of a multi-year growth strategy centered on mobile Internet and cloud computing trends," said Kevin Johnson, Juniper's chief executive officer. "2011 is an important next step as we prepare to introduce innovative new products that continue to deliver on the promise of the new network."

Juniper's operating margin for the fourth quarter of 2010 increased to 19.1% on a GAAP basis, up from 0.6% in the same quarter a year ago. Non-GAAP operating margin for the fourth quarter of 2010 increased slightly to 24.5% from 24.4% in the same quarter a year ago. For the fiscal year 2010, Juniper's operating margin increased to 18.8% on a GAAP basis from 9.4% for the prior fiscal year. Non-GAAP operating margin for the fiscal year 2010 increased to 24.0% from 20.2% in the fiscal year 2009.

Juniper generated net cash from operations for the fourth quarter of 2010 of $371.0 million, compared to net cash provided by operations of $259.6 million for the same quarter of 2009. For the year ended December 31, 2010, Juniper generated net cash from operations of $812.3 million, compared to $796.1 million in 2009.

Capital expenditures as well as depreciation and amortization expense during the fourth quarter of 2010 were $47.8 million and $42.9 million, respectively. Capital expenditures as well as depreciation and amortization expense during the 2010 fiscal year were $185.3 million and $155.3 million, respectively.

"Juniper capped 2010 with a strong revenue and profit performance in the fourth quarter. The company executed well on the operating principles it set forth for the year, and we are showing strong returns on the investments we began making in 2009 in our innovation roadmap and the expansion of our routes to market," said Robyn Denholm, Juniper's chief financial officer. "We are focused on further enhancing our performance in 2011 by driving sustained, strong growth, improving margins, and leveraging our strong balance sheet."

Outlook

  • Juniper estimates revenue for the first quarter ending March 31, 2011 to be in the range of $1.060 billion to $1.110 billion, which equates to approximately 19% growth year-over-year at the mid-point of the range.
  • Juniper estimates that its non-GAAP gross margin will remain in its targeted range of between 66% and 68% in the first quarter.
  • Juniper estimates that its non-GAAP operating expenses will be higher as a percent of revenue but approximately flat with the prior quarter on a dollar basis. As a result, Juniper expects its non-GAAP operating margin for the first quarter will be 22.0%, plus or minus 0.5%.
  • Juniper estimates that its non-GAAP net income per share will range between $0.30 and $0.33 on a diluted basis, assuming a flat share count and estimated non-GAAP tax rate of 28.5%. The non-GAAP EPS estimate includes the impact of recent acquisitions of approximately $0.02 per share.

All forward-looking non-GAAP measures exclude estimates for amortization of intangible assets, stock-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 Web Cast
Juniper Networks will host a conference call web cast today, January 25, 2011 at 2:00 p.m. (Pacific Time), to be broadcast live over the Internet at: http://www.juniper.net/company/investor/conferencecall.html.

To participate via telephone, in the U.S. the toll free dial-in number is 877-407-8033; outside of the U.S. dial +1-201-689-8033. Please call ten minutes prior to the scheduled conference call time. The webcast replay of the conference call will be archived on the Juniper Networks website until April 14, 2011.

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. Additional information can be found at Juniper Networks (www.juniper.net).

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

Statements in this release concerning Juniper Networks' business outlook, economic and market outlook, future financial and operating results, and overall future prospects are forward-looking statements that involve a number of uncertainties and risks. Actual results or events could differ materially from those anticipated in those forward-looking statements as a result of certain factors, including: general economic conditions globally or regionally; business and economic conditions in the networking industry; changes in overall technology spending; 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,
                        ------------------------  ------------------------
                            2010         2009         2010         2009
                        -----------  -----------  -----------  -----------
Net revenues:
  Product               $   962,209  $   739,096  $ 3,258,651  $ 2,567,992
  Service                   227,732      202,358      834,615      747,920
                        -----------  -----------  -----------  -----------
    Total net revenues    1,189,941      941,454    4,093,266    3,315,912
Cost of revenues:
  Product                   299,699      234,756    1,000,865      841,722
  Service                    98,241       75,452      350,654      290,987
                        -----------  -----------  -----------  -----------
    Total cost of
     revenues               397,940      310,208    1,351,519    1,132,709
                        -----------  -----------  -----------  -----------
Gross margin                792,001      631,246    2,741,747    2,183,203
Operating expenses:
  Research and
   development              254,942      187,210      917,855      741,708
  Sales and marketing       257,690      211,288      857,072      759,131
  General and
   administrative            45,068       41,196      177,859      159,459
  Amortization of
   purchased intangible
   assets                       972        1,157        4,230       10,416
  Litigation settlement
   charges                       --      181,331           --      182,331
  Restructuring charges       2,255        3,212       10,805       19,463
  Acquisition-related
   charges                    4,276           --        6,342           --
                        -----------  -----------  -----------  -----------
    Total operating
     expenses               565,203      625,394    1,974,163    1,872,508
                        -----------  -----------  -----------  -----------
Operating income            226,798        5,852      767,584      310,695
Interest and other
 (expense) income, net         (580)         347        1,917        6,928
Gain (loss) on equity
 investments                  5,421       (2,251)       8,653       (5,562)
                        -----------  -----------  -----------  -----------
Income before income
 taxes and
 noncontrolling
 interest                   231,639        3,948      778,154      312,061
Income tax provision
 (benefit)                   41,556      (17,185)     158,781      196,833
                        -----------  -----------  -----------  -----------
Consolidated net income     190,083       21,133      619,373      115,228
Adjust for net loss
 (income) attributable
 to noncontrolling
 interest                       150        1,771         (971)       1,771
                        -----------  -----------  -----------  -----------
Net income attributable
 to Juniper Networks    $   190,233  $    22,904  $   618,402  $   116,999
                        ===========  ===========  ===========  ===========

Net income per share
 attributable to
 Juniper Networks
 common stockholders:
  Basic                 $      0.36  $      0.04  $      1.18  $      0.22
                        ===========  ===========  ===========  ===========
  Diluted               $      0.35  $      0.04  $      1.15  $      0.22
                        ===========  ===========  ===========  ===========
Shares used in
 computing net income
 per share:
  Basic                     523,556      523,200      522,444      523,603
                        ===========  ===========  ===========  ===========
  Diluted                   541,464      538,887      538,790      534,015
                        ===========  ===========  ===========  ===========




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

                                    Three Months Ended  Twelve Months Ended
                                       December 31,        December 31,
                                    ------------------- -------------------
                                      2010      2009      2010      2009
                                    --------- --------- --------- ---------
Cost of revenues - Product          $   1,260 $   1,074 $   4,353 $   3,906
Cost of revenues - Service              3,632     2,922    13,523    10,487
Research and development               23,481    15,294    78,461    59,282
Sales and marketing                    15,929    11,340    54,949    43,148
General and administrative              8,100     7,584    30,671    22,836
                                    --------- --------- --------- ---------
Total                               $  52,402 $  38,214 $ 181,957 $ 139,659
                                    ========= ========= ========= =========




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

                                    Three Months Ended  Twelve Months Ended
                                       December 31,        December 31,
                                    ------------------- -------------------
                                      2010      2009      2010      2009
                                    --------- --------  --------- ---------
Cost of revenues - Product          $      66 $    (23) $     197 $      25
Cost of revenues - Service                319      (70)       689        75
Research and development                  793     (407)     2,206       133
Sales and marketing                     1,177     (155)     2,912       514
General and administrative                182        4        429        85
                                    --------- --------  --------- ---------
Total                               $   2,537 $   (651) $   6,433 $     832
                                    ========= ========  ========= =========



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

                              Three Months Ended      Twelve Months Ended
                                 December 31,            December 31,
                            ----------------------- -----------------------
                               2010        2009        2010        2009
                            ----------- ----------- ----------- -----------
Infrastructure - Product    $   757,652 $   562,978 $ 2,511,584 $ 1,959,198
Infrastructure - Service        149,502     132,363     538,690     482,437
                            ----------- ----------- ----------- -----------
  Total Infrastructure      $   907,154 $   695,341 $ 3,050,274 $ 2,441,635
                            ----------- ----------- ----------- -----------

Service Layer Technologies
 - Product                  $   204,557 $   176,118 $   747,067 $   608,794
Service Layer Technologies
 - Service                       78,230      69,995     295,925     265,483
                            ----------- ----------- ----------- -----------
  Total Service Layer
   Technologies             $   282,787 $   246,113 $ 1,042,992 $   874,277
                            ----------- ----------- ----------- -----------

                            ----------- ----------- ----------- -----------
Total                       $ 1,189,941 $   941,454 $ 4,093,266 $ 3,315,912
                            =========== =========== =========== ===========




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

                              Three Months Ended      Twelve Months Ended
                                 December 31,            December 31,
                            ----------------------- -----------------------
                               2010        2009        2010        2009
                            ----------- ----------- ----------- -----------
Americas                    $   580,120 $   514,482 $ 2,095,556 $ 1,687,857
Europe, Middle East, and
 Africa                         359,761     254,899   1,189,266     953,218
Asia Pacific                    250,060     172,073     808,444     674,837
                            ----------- ----------- ----------- -----------
Total                       $ 1,189,941 $   941,454 $ 4,093,266 $ 3,315,912
                            =========== =========== =========== ===========



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

                              Three Months Ended      Twelve Months Ended
                                 December 31,            December 31,
                            ----------------------- -----------------------
                               2010        2009        2010        2009
                            ----------- ----------- ----------- -----------
Service Provider            $   783,841 $   639,269 $ 2,631,486 $ 2,197,069
Enterprise                      406,100     302,185   1,461,780   1,118,843
                            ----------- ----------- ----------- -----------
Total                       $ 1,189,941 $   941,454 $ 4,093,266 $ 3,315,912
                            =========== =========== =========== ===========




                            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,
                        ------------------------  ------------------------
                            2010         2009         2010         2009
                        -----------  -----------  -----------  -----------
GAAP Cost of
 revenues - Product     $   299,699  $   234,756  $ 1,000,865  $   841,722
Share-based
 compensation
 expense              C      (1,260)      (1,074)      (4,353)      (3,906)
Share-based
 compensation
 related payroll
 tax                  C         (66)          23         (197)         (25)
Amortization of
 purchased
 intangible assets    A      (2,554)        (904)      (4,301)      (5,011)
                        -----------  -----------  -----------  -----------
Non-GAAP Cost of
 revenues - Product         295,819      232,801      992,014      832,780
                        ===========  ===========  ===========  ===========

GAAP Cost of
 revenues - Service          98,241       75,452      350,654      290,987
Share-based
 compensation
 expense              C      (3,632)      (2,922)     (13,523)     (10,487)
Share-based
 compensation
 related payroll
 tax                  C        (319)          70         (689)         (75)
                        -----------  -----------  -----------  -----------
Non-GAAP Cost of
 revenues - Service          94,290       72,600      336,442      280,425
                        ===========  ===========  ===========  ===========

GAAP Gross margin -
 Product                    662,510      504,340    2,257,786    1,726,270
Share-based
 compensation
 expense              C       1,260        1,074        4,353        3,906
Share-based
 compensation
 related payroll
 tax                  C          66          (23)         197           25
Amortization of
 purchased
 intangible assets    A       2,554          904        4,301        5,011
                        -----------  -----------  -----------  -----------
Non-GAAP Gross
 margin - Product           666,390      506,295    2,266,637    1,735,212
                        ===========  ===========  ===========  ===========

GAAP Product gross
 margin as a % of
 product revenue               68.9%        68.2%        69.3%        67.2%
Share-based
 compensation
 expense as a % of
 product revenue      C         0.1%         0.2%         0.2%         0.2%
Share-based
 compensation
 related payroll
 tax as a % of
 product revenue      C          --%          --%          --%          --%
Amortization of
 purchased
 intangible assets
 as a % of product
 revenue              A         0.3%         0.1%         0.1%         0.2%
                        -----------  -----------  -----------  -----------
Non-GAAP Product
 gross margin as a
 % of product
 revenue                       69.3%        68.5%        69.6%        67.6%
                        ===========  ===========  ===========  ===========

GAAP Gross margin -
 Service                    129,491      126,906      483,961      456,933
Share-based
 compensation
 expense              C       3,632        2,922       13,523       10,487
Share-based
 compensation
 related payroll
 tax                  C         319          (70)         689           75
                        -----------  -----------  -----------  -----------
Non-GAAP Gross
 margin - Service       $   133,442  $   129,758  $   498,173  $   467,495
                        ===========  ===========  ===========  ===========

GAAP Service gross
 margin as a % of
 service revenue               56.9%        62.7%        58.0%        61.1%
Share-based
 compensation
 expense as a % of
 service revenue      C         1.6%         1.4%         1.6%         1.4%
Share-based
 compensation
 related payroll
 tax as a % of
 service revenue      C         0.1%          --%         0.1%          --%
                        -----------  -----------  -----------  -----------
Non-GAAP Service
 gross margin as a
 % of service
 revenue                       58.6%        64.1%        59.7%        62.5%
                        ===========  ===========  ===========  ===========




                            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,
                        ------------------------  ------------------------
                            2010         2009         2010         2009
                        -----------  -----------  -----------  -----------
GAAP Gross margin       $   792,001  $   631,246  $ 2,741,747  $ 2,183,203
Share-based
 compensation
 expense              C       4,892        3,996       17,876       14,393
Share-based
 compensation
 related payroll
 tax                  C         385          (93)         886          100
Amortization of
 purchased
 intangible assets    A       2,554          904        4,301        5,011
                        -----------  -----------  -----------  -----------
Non-GAAP Gross
 margin                     799,832      636,053    2,764,810    2,202,707
                        ===========  ===========  ===========  ===========

GAAP Gross margin
 as a % of revenue             66.6%        67.1%        67.0%        65.8%
Share-based
 compensation
 expense as a % of
 revenue              C         0.4%         0.4%         0.4%         0.4%
Share-based
 compensation
 related payroll
 tax as a % of
 revenue              C          --%          --%          --%          --%
Amortization of
 purchased
 intangible assets
 as a % of revenue    A         0.2%         0.1%         0.1%         0.2%
                        -----------  -----------  -----------  -----------
Non-GAAP Gross
 margin as a % of
 revenue                       67.2%        67.6%        67.5%        66.4%
                        ===========  ===========  ===========  ===========

GAAP Research and
 development
 expense                    254,942      187,210      917,855      741,708
Share-based
 compensation
 expense              C     (23,481)     (15,294)     (78,461)     (59,282)
Share-based
 compensation
 related payroll
 tax                  C        (793)         407       (2,206)        (133)
                        -----------  -----------  -----------  -----------
Non-GAAP Research
 and development
 expense                    230,668      172,323      837,188      682,293
                        ===========  ===========  ===========  ===========

GAAP Sales and
 marketing expense          257,690      211,288      857,072      759,131
Share-based
 compensation
 expense              C     (15,929)     (11,340)     (54,949)     (43,148)
Share-based
 compensation
 related payroll
 tax                  C      (1,177)         155       (2,912)        (514)
                        -----------  -----------  -----------  -----------
Non-GAAP Sales and
 marketing expense          240,584      200,103      799,211      715,469
                        ===========  ===========  ===========  ===========

GAAP General and
 administrative
 expense                     45,068       41,196      177,859      159,459
Share-based
 compensation
 expense              C      (8,100)      (7,584)     (30,671)     (22,836)
Share-based
 compensation
 related payroll
 tax                  C        (182)          (4)        (429)         (85)
                        -----------  -----------  -----------  -----------
Non-GAAP General
 and administrative
 expense                     36,786       33,608      146,759      136,538
                        ===========  ===========  ===========  ===========

GAAP Operating
 expense                    565,203      625,394    1,974,163    1,872,508
Share-based
 compensation
 expense              C     (47,510)     (34,218)    (164,081)    (125,266)
Share-based
 compensation
 related payroll
 tax                  C      (2,152)         558       (5,547)        (732)
Amortization of
 purchased
 intangible assets    A        (972)      (1,157)      (4,230)     (10,416)
Litigation
 settlement charges   B          --     (181,331)          --     (182,331)
Restructuring
 charges              B      (2,255)      (3,212)     (10,805)     (19,463)
Acquisition-related
 charges              A      (4,276)          --       (6,342)          --
                        -----------  -----------  -----------  -----------
Non-GAAP Operating
 expense                $   508,038  $   406,034  $ 1,783,158  $ 1,534,300
                        ===========  ===========  ===========  ===========




                            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,
                            ---------------------   ----------------------
                               2010        2009        2010        2009
                            ----------  ---------   ----------  ----------
GAAP Operating income       $  226,798  $   5,852   $  767,584  $  310,695
Share-based compensation
 expense                  C     52,402     38,214      181,957     139,659
Share-based compensation
 related payroll tax      C      2,537       (651)       6,433         832
Amortization of
 purchased intangible
 assets                   A      3,526      2,061        8,531      15,427
Litigation settlement
 charges                  B         --    181,331           --     182,331
Restructuring charges     B      2,255      3,212       10,805      19,463
Acquisition-related
 charges                  A      4,276         --        6,342          --
                            ----------  ---------   ----------  ----------
Non-GAAP Operating
 income                        291,794    230,019      981,652     668,407
                            ==========  =========   ==========  ==========

GAAP Operating margin             19.1%       0.6 %       18.8%        9.4%
Share-based compensation
 expense as a % of
 revenue                  C        4.3%       4.1 %        4.3%        4.2%
Share-based compensation
 related payroll tax as
 a % of revenue           C        0.2%      (0.1)%        0.2%        0.1%
Amortization of
 purchased intangible
 assets as a % of
 revenue                  A        0.3%       0.2 %        0.2%        0.5%
Litigation settlement
 charges as a % of
 revenue                  B         --%      19.3 %         --%        5.5%
Restructuring charges as
 a % of revenue           B        0.2%       0.3 %        0.3%        0.5%
Acquisition-related
 charges as a % of
 revenue                  A        0.4%        -- %        0.2%         --%
                            ----------  ---------   ----------  ----------
Non-GAAP Operating
 margin                           24.5%      24.4 %       24.0%       20.2%
                            ==========  =========   ==========  ==========

GAAP Other income
 (expense), net                  4,841     (1,904)      10,570       1,366
(Gain) loss on equity
 investments              B     (5,421)     2,251       (8,653)      5,562
                            ----------  ---------   ----------  ----------
Non-GAAP Other (expense)
 income, net                      (580)       347        1,917       6,928
                            ==========  =========   ==========  ==========

GAAP Income tax
 provision (benefit)            41,556    (17,185)     158,781     196,833
Non-recurring income tax
 adjustment               B         --         --       54,069     (56,683)
Valuation allowance on
 deferred tax assets      B         --         --           --     (61,755)
Income tax effect of
 non-GAAP exclusions      B     21,219     75,672       59,258     107,170
                            ----------  ---------   ----------  ----------
Non-GAAP Provision for
 income tax                     62,775     58,487      272,108     185,565
                            ==========  =========   ==========  ==========
Non-GAAP Income tax rate          21.6%      25.4 %       27.7%       27.5%
                            ==========  =========   ==========  ==========
Non-GAAP Income before
 income taxes and
 noncontrolling
 interest*                  $  291,214  $ 230,366   $  983,569  $  675,335
                            ==========  =========   ==========  ==========

*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,
                            ---------------------   ---------------------
                               2010        2009        2010        2009
                            ---------   ---------   ---------   ---------
GAAP Net income
 attributable to
 Juniper Networks           $ 190,233   $  22,904   $ 618,402   $ 116,999
Share-based
 compensation expense     C    52,402      38,214     181,957     139,659
Share-based
 compensation related
 payroll tax              C     2,537        (651)      6,433         832
Amortization of
 purchased intangible
 assets                   A     3,526       2,061       8,531      15,427
Litigation settlement
 charges                  B        --     181,331          --     182,331
Restructuring charges     B     2,255       3,212      10,805      19,463
Acquisition-related
 charges                  A     4,276          --       6,342          --
(Gain) loss on equity
 investments              B    (5,421)      2,251      (8,653)      5,562
Non-recurring income
 tax adjustments          B        --          --     (54,069)     56,683
Valuation allowance on
 deferred tax assets      B        --          --          --      61,755
Income tax effect of
 non-GAAP exclusions      B   (21,219)    (75,666)    (59,258)   (107,164)
                            ---------   ---------   ---------   ---------
Non-GAAP Net income         $ 228,589   $ 173,656   $ 710,490   $ 491,547
                            =========   =========   =========   =========

Non-GAAP Net income per
 share:
Basic                     D $    0.44   $    0.33   $    1.36   $    0.94
                            =========   =========   =========   =========
Diluted                   D $    0.42   $    0.32   $    1.32   $    0.92
                            =========   =========   =========   =========
Shares used in computing
 non-GAAP net income per
 share:
Basic                     D   523,556     523,200     522,444     523,603
                            =========   =========   =========   =========
Diluted                   D   541,464     538,887     538,790     534,015
                            =========   =========   =========   =========

GAAP Net income
 attributable to
 Juniper Networks as a
 % of revenue                    16.0 %       2.4 %      15.1 %       3.5 %
Share-based
 compensation expense
 as a % of revenue        C       4.4 %       4.1 %       4.4 %       4.2 %
Share-based
 compensation related
 payroll tax as a % of
 revenue                  C       0.2 %      (0.1)%       0.2 %        -- %
Amortization of
 purchased intangible
 assets as a % of
 revenue                  A       0.3 %       0.2 %       0.2 %       0.5 %
Litigation settlement
 charges as a % of
 revenue                  B        -- %      19.3 %        -- %       5.5 %
Restructuring charges
 as a % of revenue        B       0.2 %       0.3 %       0.3 %       0.5 %
Acquisition-related
 charges as a % of
 revenue                  A       0.4 %        -- %       0.2 %        -- %
(Gain) loss on equity
 investments              B      (0.5)%       0.2 %      (0.2)%       0.2 %
Non-recurring income
 tax adjustments as a %
 of revenue               B        -- %        -- %      (1.3)%       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      (1.8)%      (8.0)%      (1.5)%      (3.2)%
                            ---------   ---------   ---------   ---------
Non-GAAP Net income as
 a % of revenue                  19.2 %      18.4 %      17.4 %      14.8 %
                            =========   =========   =========   =========


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 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 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. Additionally, with respect to future financial guidance provided on a non-GAAP basis, we have excluded estimates for amortization of intangible assets, stock-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: 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,
                                                    2010          2009
                                                ------------- -------------
                      ASSETS
Current assets:
  Cash and cash equivalents                     $   1,811,887 $   1,604,723
  Short-term investments                              474,514       570,522
  Accounts receivable, net of allowances              596,622       458,652
  Deferred tax assets, net                            161,535       196,318
  Prepaid expenses and other current assets           169,812        48,744
                                                ------------- -------------
    Total current assets                            3,214,370     2,878,959
Property and equipment, net                           493,881       455,651
Long-term investments                                 535,178       483,505
Restricted cash                                       119,346        53,732
Purchased intangible assets, net                      121,803        13,834
Goodwill                                            3,927,807     3,658,602
Long-term deferred tax assets, net                         --        10,555
Other long-term assets                                 55,466        35,425
                                                ------------- -------------
    Total assets                                $   8,467,851 $   7,590,263
                                                ============= =============

               LIABILITIES AND EQUITY
Current liabilities:
  Accounts payable                              $     292,270 $     242,591
  Accrued compensation                                256,746       176,551
  Accrued warranty                                     35,931        38,199
  Deferred revenue                                    660,264       571,652
  Income taxes payable                                 25,000        34,936
  Accrued litigation settlements                           --       169,330
  Other accrued liabilities                           201,765       142,526
                                                ------------- -------------
    Total current liabilities                       1,471,976     1,375,785
Long-term deferred revenue                            224,165       181,937
Long-term income tax payable                          103,823       170,245
Other long-term liabilities                            59,087        37,531
                                                ------------- -------------
Total liabilities                                   1,859,051     1,765,498
Total equity                                        6,608,800     5,824,765
                                                ------------- -------------
Total liabilities and equity                    $   8,467,851 $   7,590,263
                                                ============= =============




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

                                                    Twelve Months Ended
                                                        December 31,
                                                  ------------------------
                                                      2010         2009
                                                  -----------  -----------
Cash flows from operating activities:
Consolidated net income                           $   619,373  $   115,228
Adjustments to reconcile consolidated net income
 to net cash from operating activities:
  Depreciation and amortization                       155,288      148,373
  Share-based compensation                            181,957      139,659
  (Gain) loss on equity investments                    (8,653)       5,562
  Excess tax benefits from share-based
   compensation                                       (48,500)      (3,510)
  Deferred income taxes                                64,035        9,436
Changes in operating assets and liabilities:
  Accounts receivable, net                           (129,199)     (28,682)
  Prepaid expenses and other assets                  (129,292)      (8,520)
  Accounts payable                                     48,217       (2,422)
  Accrued compensation                                 78,071       16,079
  Accrued warranty                                     (2,268)      (1,891)
  Accrued litigation settlements                     (169,330)          --
  Income tax payable                                   25,193       43,672
  Other accrued liabilities                              (451)     199,787
  Deferred revenue                                    127,894      163,326
                                                  -----------  -----------
    Net cash provided by operating activities         812,335      796,097

Cash flows from investing activities:
Purchases of property and equipment, net             (185,291)    (153,101)
Purchases of trading investments                       (2,754)          --
Purchases of available-for-sale investments        (1,577,758)  (1,461,532)
Proceeds from sales of available-for-sale
 investments                                          537,916      285,379
Proceeds from maturities of available-for-sale
 investments                                        1,086,514      398,435
Payment for business acquisitions, net of cash
 and cash equivalents acquired                       (374,765)          --
Changes in restricted cash                            (12,424)     (11,276)
Purchases of privately-held equity investments,
 net                                                   (4,188)      (6,205)
                                                  -----------  -----------
  Net cash used in investing activities               (532,750)   (948,300)

Cash flows from financing activities:
Proceeds from issuance of common stock                451,039      164,207
Purchases and retirement of common stock             (565,473)    (453,888)
Change in customer financing arrangements              (3,487)      19,613
Excess tax benefits from share-based compensation      48,500        3,510
(Return of capital to) proceeds from
 noncontrolling interest                               (3,000)       4,400
                                                  -----------  -----------
  Net cash used in financing activities               (72,421)    (262,158)
                                                  -----------  -----------
  Net increase (decrease) in cash and cash
   equivalents                                        207,164     (414,361)
Cash and cash equivalents at beginning of period    1,604,723    2,019,084
                                                  -----------  -----------
Cash and cash equivalents at end of period        $ 1,811,887  $ 1,604,723
                                                  ===========  ===========




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

                                              December 31,    December 31,
                                                 2010            2009
                                             --------------  --------------
Cash and cash equivalents                    $    1,811,887  $    1,604,723
Short-term investments                              474,514         570,522
Long-term investments                               535,178         483,505
                                             --------------  --------------
  Total                                      $    2,821,579  $    2,658,750
                                             ==============  ==============

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