JNPR CC:
3 Q 2001 performance:
please with profitability and consistency
201.7 mil rev, 10 cent in Q
no mid-Q comments normally, so will make end of Q
1026 unit, 12776 ports
pleased with core and access
seeing seeing demand from new and existing carriers
34 percent Intl rev vers 28 percent last Q
customers: Q greater than 10 percent, also WCOM, ERICY 12 percent (greater than 10 percent 3 Q's in row)
new wins in China for cable and high speed internet, Spain,
New Zealand, Japan, Europe etc ...
In North Amer: Q, WCOM, Genuity, Alltel (DSL App), Direct TV Broadband
New Software partners added to industry group
pleased with win ratio and wins in access and core areas
Industry Overview:
-never been easily to tell winning companies
-look for new product, customers wins
-customers looking for value through innovation
-need to focus on innovation to protect leadership
-looking to continue momentum
JNPR Advantages:
-believe in new public network because it offers lower cost and newer services and is technically feasible
-right place to capitalize on opportunity, large enough to weather storm and agile enough to change
-company is focused
-not looking at other sectors, still expect sector to grow
-focusing on financial fundamentals
-GM up over last Q, 64, still above 60 (guidance)
-Oper Ex ....
-Cash flow positive, up 100 mil in Q.
-DSO 's down to 52 from 60 last Q
Misconceptions of industry:
-core is dead, access network is where opportunity lies
-Cap Ex is down and no need for new equipment
-JNPR is a on product company
-Core is not dead. Seeing growth in optical core slow down. Service will grow as metro and access growth will drive need for core. Some ports may not be running at capacity, but no routers are idle.
Cap Ex will effect plant capacity not capacity within the plants.
JNPR revs from core and access. Q was more than 10 percent. Sales were to the edge.
Drivers for future grow: new accounts , new geographs, new products and new applications.
Challenges not behind JNPR. Focus is on running the company. Can not control external factors. Many established company is disarray. New player suffer from timing. Customers have no time or money for unproven products. Unique time for JNPR.
Details of Q:
-rev 201.7 mil, flat
B2B > 1
major networks continue to iunvest, Q and WCOM > 10 percent customer
Intl Rev 34 percent up from 28 percent last Q
-Europe stronger than usual since new accounts, expect 35 percent for year
-rev from sales force 58 percent
-GM 60.4 percent up from 60.3 percent last Q
-GM should be up since settle with supplier, this impacted
last Q and this Q
-R&D lumpy
-Sales and Marketing 17.8 last Q,
-G&A 4.7 percent flat Q-Q
- 28 mil in good will write off
-settle with contract manufacturer for 39.9 mil
-Op Ex down 7 mil
-Op Margin ???
-Tax 32 percent
Cash- 1.7 bill up 60 mil Q-Q
9 months 350 mil
AR 111 mil
DSO 50 day, down from last Q ofr 60
-Defer Rev up 2 mil to 32 mil
-1085 people up 5 Q-Q
Guidance:
- rev flat , 35 percent Y-Y growth
- GM up to 61 percent
- Op Ex down
- decrease interest income due to lower rate
- 2 mil invested in ERICY joint venture
- 32 percent tax rate
- 10 cent for next Q
- 35 cent for the year
- 6 month and day option exchange program
- stock buy back, $200 mil in stock
- expect to remain cash flow positive
Q: Comment on share gains in segments in Q?
A: Hard to predict. Focus on win ratio, Solid rest in win column. Focus on growing the market. Share will take care of itself.
Q: Packet group strong but 2002 rev guidance shows little growth. Could it be better and metrics?
A: Guidance reflects expense levels we are driving the company towards. Seeing network focus on IP services. Benefits are in making the network smarter. Focus on end customers and the benefits the new IP network offers.
Q: Guidance in Q and rest of year, Q and WCOM have been meaningful customers. Q and WCOM have announced cut backs though. What is the outlook in Q4?
A: US and Intl mix. Down in Q2, usually strong. In Europe and Asia usually strong be was not.
Usually in Q4 all markets stronger than Q3. 35 to 40 percent Intl business we expect. Opportunties in Europe still there.
For big customers, expect IP infrasturcture to still be their, expect pull back in other areas especially optical.
New customers: focus Q to Q is to enter new markets.
Q: Q broadening use of JNPR products. How? Other carriers
how are they using JNPR products. How expanding business. ERICY business?
A: Q no comment. Need to drive traffic and rev across a new infrastructure. Need commercial benefits whether ILEC or new company. In North Amer, brodening new customers, we will put in to new opportunities. See new opportunities. Current 500 customers in 45 countries. Expect new product with ERICY next year, early part.
Q: How many new customers. Percent rev?
A: Stop tracking new customers as it changes from Q to Q. Over 500 customers right now. Probably announced 11 new customers in Q. New customers usually see lumpy sales. Initial order and then some time later you get additional sales.
Q: Transport vers routing. Capacity on transport, but not routing. When pick up in routing market? When transport stabilize?
A: Not best to comment. Usually dig one ditch as it is costly to do later. A lot of electronics is installed initially. In the router market, the chasis is bought and then cards added. Seeing some circuit that have 10 gig capacity but not running at capacity. Seeing some absorption. In transport layer, equipment deployed was larger to start.
Q: M5 and M10 and M20 sales in Q. Directional growth next Q?
A: Don't break down by platform as products are changable in applications. Good progress on access side as routers shipped and port counts are up. All segments doing well.
Q: What about CLEC's going out of business? Is there true demand out there or is there carriers spending because they have funding?
A: CLEC not a significant rev number. Still companies who have financial models are challenged. First wave over as some companies are gone. Wave 2 some companies have models that are still not self sustaining. These will be absorbed.
No write off to date. Lower DSO show we have a high quality customer base. Don't believe anyone spending because they have money.
Q: VoIP? Some opportunites in wireless.
A: Expect voice to transport over IP. Too attractive to deny. NT win with Q. Don't see disassembly of existing networks. Cap and Grow is strategy. Expect to cap existing network and grow new IP network. No idea on timing.
Q: Business in China up? Payment structure? ERICY promoting own router, is this a concern?
A: Business in China good throughout year. A lot of sales done through ERICY. Strong Q1, less strong Q2, back in Q3. ERICY re-labels JNPR routers.
Q: Linearity? GM for 2002 above 60 percent? Does JNPR require new router sales and increase traffic or is software sales an element of growth.
A: No comment on linearity. GM 61 percent for news Q. Hope to see upside next year in GM. Need more intelligent systems to help growth business includes software and hardware.
Q: For largest customers when do they need to do significant up grades due to traffic growth?
A: No a binary decision. Will not be across the boards upgrades. Replacements will be in hot spots.
Q: Intl rev at low end of 35 to 40 percent? 50 percent in Q4 by my calculation. Op Ex in Q4 down dollar amount or percentage.
A: Not 50 percent, 35 to 40. Op Ex down 5 mil.
Q: Pricing down in Q. Percent of largest customers?
A: Pricing same. GM shows this. In general, pressure is from fact no timing demand for orders. No comment on customers.
Yankee Group did study based on cost of ownership, scalability, reliability, price.
Q: What happend in Sept?
A: Did not see any impact.
Q: Share count next Q?
A: Share count will be flat due to exchange program. Q2 next years see increase. End of year 350 mil shares.
Q: Cap Ex down 15 to 20 percent in 2002 vers 2001. Guidance in 2002 is flat with 2001. Indicates JNPR is taking share?
A: In our view, we see less impact in IP sector. Other sectors may decline more. Does not require a large shift for JNPR to make the number. Will not see that magnitude of cap ex reduction in our segment.
Q: Mix of chasis vers line card? Change in mix. Less chasis, more line cards?
A: Pretty stable.
Q: Percentage of sales core vers edge. Comment on relative growth at the edge.
A: Increase in interfaces, slight declince in chasis. Customers looking to deploy less hardware and get more intelligent services. Driving need is more intelligent services. |
