Oppenheimer & Co. is reducing financial estimates for Juniper, which announces fourth quarter results next week. Customer spending is expected to be down 6% to 7% this year, yet Oppenheimer believes most of it won't occur until the second half of 2009.
“We believe spending will be more skewed toward [the second half] vs. previous years,” writes Oppenheimer analyst Ittai Kidron in a bulletin on the company's expectations for Juniper's fourth quarter. “Thus, we expect a very slow start to '09, and we've revised our 2009 growth assumptions” for Juniper.
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Oppenheimer expects service provider capital expenditures to be “skewed more than normal” towards the second half of the year. As a result, Oppenheimer expects Juniper to report flat year-over-year growth for its Infrastructure Products Group.
Oppenheimer also detects weakening demand for Juniper's new EX LAN switches in the enterprise.
“Our earlier checks suggested limited EX traction with a slightly worsening 1Q09 outlook,” Kidron states. “As such, we have lowered our growth forecast for Juniper's EX business.”
Oppenheimer now projects a 7.6% decline in Juniper's enterprise-heavy Service Layer Technology business vs. a previous expectation of 2.8% growth.
Faced with tougher competition and slowing growth, Oppenheimer expects Juniper management to place more emphasis on margins during its fourth quarter results and to reduce workforce next month.
“We believe cost cuts are already being implemented,” Kidron states.
All Juniper would say is that it is “focused on continuous improvement in all aspects of our business.”
Oppenheimer is lowering its estimates for Juniper's fourth quarter and full year 2008 results to revenue of US$930 million and earnings per share of $0.31 for the quarter; and $3.6 billion and $1.14 per share for the year.
This contrasts with Wall Street expectations of $938 million and $0.32 for the quarter, and $3.8 billion and $1.21 for the full year.
Juniper could raise 2009 EPS by another $0.09 if it executes on its share repurchases, Oppenheimer notes.