Juniper profit up but shy of higher expectations

SAN FRANCISCO (Reuters) - Juniper Networks Inc JNPR.O, the world's second-largest maker of routers for the Internet, reported on Tuesday a 46 percent jump in quarterly profit, but its shares fell after the results missed some investors' raised expectations.

Juniper reported earnings before certain items of 22 cents per share, one cent above analysts' average forecast of 21 cents per share but shy of what was expected by some investors. The stock is up about 90 percent this year.

"They beat by just a penny, but they should have beat by two pennies or three pennies," said Ehud Gelblum, an analyst at JPMorgan who has an "overweight" rating on the shares. "But what will carry the day is the higher revenue and the higher gross margin."

Juniper shares fell 7.1 percent following the earnings report after adding 3.5 percent to close at $37.14 on Nasdaq.

Juniper, which sells telecommunications equipment and digital networks for businesses, has benefited from growth in online video and other Internet uses that require high-speed Web service. It competes with Cisco Systems Inc (CSCO.O), the largest maker of such equipment.

Some analysts have said Juniper's core router, the T1600, a new space- and energy-efficient model, will help it grab some market share lost to Cisco over the past year. Juniper Chief Executive Scott Kriens said the company has the potential.

"We clearly have the opportunity to improve our position in the market, given the strength of our technology, and timing of delivery and the capabilities," he told Reuters in an interview.

Third-quarter revenue rose to $735 million from $573.6 million, beating the average analyst estimate of $707.8 million, as compiled by Reuters Estimates. Net income rose to $85.1 million, or 15 cents per share, from $58.3 million, or 10 cents per share, a year earlier.

Juniper, based in Sunnyvale, California, increased its full-year revenue and earnings forecasts as the company benefits from rising demand for network equipment to handle growing Internet traffic. But it expects gross profit margins to decline from the third quarter as operating expenses grow.

Chief Financial Officer Robyn Denholm told analysts on a conference call that Juniper now expects 2007 revenue of $2.79 billion to $2.81 billion, or fourth-quarter revenue of $770 million to $790 million.

She said Juniper expects full-year earnings before items of 84 cents to 85 cents per share, or 23 cents to 24 cents per share for the fourth quarter based on the 61 cents per share it reported for the nine months through September.

The forecasts were up from the company's July forecast of 2007 revenue of $2.73 billion to $2.76 billion and earnings before items of 82 cents to 83 cents per share.

Analysts, on average, were expecting fourth-quarter earnings before items of 23 cents per share and revenue of $751.3 million. They are forecasting full-year earnings per share before items of 83 cents and revenue of $2.75 billion.

Juniper said in July it expected third-quarter revenue of $695 million to $715 million and earnings per share of 21 cents before items.

Shares of Juniper trade at 43 times estimated 2007 earnings per share, compared with Cisco's multiple of about 24.

(Additional reporting by Ritsuko Ando in New York, editing by Phil Berlowitz and Braden Reddall)