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Strategies & Market Trends : Sharck Soup -- Ignore unavailable to you. Want to Upgrade?

To: Dave Gore who wrote (26735)	6/8/2001 11:26:10 AM
From: StormRider	Respond to of 37746

Juniper Networks (JNPR) 46.63: There are warnings and then there are warnings. Broadcom warned, but most analysts anticipated they would warn and even anticipated the magnitude of the warning, and the stock traded up. Juniper is another matter. Most analysts felt that the company could come close to its numbers this quarter, and certainly very few foresaw a warning of this magnitude. Revenues are expected to be $200-210 mln in the Jun qtr, a huge 35% lower than prior guidance of $300-330 mln, and down 38% sequentially. There is no talk of a bottom in sight and the company would not offer guidance beyond Q2. Though there has been much talk of Cisco (CSCO) regaining the competitive edge vs Juniper in the core router market, Juniper went to great lengths on its conference call to emphasize that its shortfall was not due to competitive pressures but instead to a broad industry slowdown. And indeed there is a broad industry slowdown. As we have been noting for months, capital spending by telecom carriers has fallen off dramatically, and the decline is affecting virtually all telecom equipment cos. To Juniper's credit, it survived a bit longer than most -- its Q1 was quite strong and the drop-off did not hit until Q2. This delayed hit quite likely reflects the fact the Juniper's core routers are still very much needed by carriers struggling to accommodate the growth in data traffic. Carriers put core routers near the top of the wish list, and these products were the last to get axed due to capex constraints. That's the good news. The bad news is that there is no end in sight to the capex recession. There is little doubt that capex by emerging carriers will continue to fall, simply because more of these companies will fail. And now we are seeing that even incumbent carriers are planning to reduce capex again in 2002 -- both Qwest (Q) and Verizon (VZ) have recently suggested as much. Broadly speaking, telecom equipment is a shrinking market and will remain so for at least another year. That does not mean that spending on all equipment will shrink. There will be some exceptions - metro DWDM and optical switching have been the best examples. Core routers were thought to be another example, but today's Juniper warning indicates that this market segment is not immune, a fact which underscores just how severe the capex recession has become. One final scary thought: Juniper claims that the Q2 shortfall on revenues and gross margins is not due to price discounting, but it did say that customers were trying to demand more price concessions. Could pricing pressure be the catalyst for the next leg down in telecom equipment? - Greg Jones, Briefing.com