(Corrects name of Frost & Sullivan in 12th paragraph)
* Sees Q4 rev $860-895 mln, higher than market's $835 mln
* Q3 rev $823.9 mln, higher than Street view of $799.5 mln
* Q3 EPS excluding items 23 cents vs Street's 21 cents
* CEO emphasizes organic growth over M&A
* Shares up 1.4 pct (Updates with analyst and CEO comments)
By Ritsuko Ando
NEW YORK, Oct 22 (Reuters) - Network equipment maker Juniper Networks Inc's JNPR.O quarterly results and outlook exceeded Wall Street estimates, adding to hopes that a recovery in telecommunications spending was underway.
And while analysts were concerned that Juniper may be looking at acquisitions after a flurry of deals among rivals like industry leader Cisco Systems Inc (CSCO.O), Chief Executive Kevin Johnson said he was focusing on in-house development instead.
"We continue to invest in R&D and that investment is paying off," he told investors on a conference call after the earnings release on Thursday. "Our execution is improving and I'm confident that we're coming out of the economic downturn stronger."
Revenue for the quarter ended Sept. 30 fell 13 percent from a year earlier to $823.9 million, but was up 5 percent from the previous quarter and higher than the average analyst forecast of $799.5 million according to Thomson Reuters I/B/E/S.
Net income fell to $83.8 million, or 16 cents per share, from $148.5 million, or 27 cents a share, in the year-ago quarter.
Earnings, excluding items, were 23 cents a share, down from 32 cents a year ago but higher than expectations of 21 cents. Johnson said the results showed it was "indeed in the early phases of an economic recovery."
For the fourth quarter, Juniper forecast earnings of 23 cents to 26 cents a share, excluding items, and revenue of $860 million to $895 million. The market was expecting earnings of 23 cents a share on revenue of $835 million.
The numbers appeared to confirm a recovery in technology spending by U.S. companies including phone and cable service providers, and Juniper's shares rose 1.4 percent in extended trade to $28.61 from their close at $28.22.
Some analysts said they were concerned about Juniper's longer-term strategy after Cisco said last week that it would acquire wireless gear maker Starent for $2.9 billion -- a deal seen hurting Juniper's position among wireless providers.
That was followed by Tellabs Inc's TLAB.O announcement earlier on Thursday to buy wireless infrastructure gear manufacturer WiChorus for $165 million.
Analysts have predicted more deals in wireless networking as phone companies upgrade their networks to accommodate more wireless Internet access.
"With Cisco buying Starent and today, losing WiChorus to Tellabs, the question is what are they going to do about it, who are they going to partner with," said Frost & Sullivan analyst Ronald Gruia.
Juniper's Johnson did not rule out M&A but said acquiring companies and tacking on their products to its own portfolio would not help customers.
"This is not to say that we will not or do not look at acquisition opportunities. We do look at them, but we expect organic R&D to be a primary value creator," he said.
Analysts' reactions to those comments were mixed.
Some said his passive comments on M&A raised the question of how else it plans to compete with Cisco and other vendors like Alcatel-Lucent SA ALUA.PA and Ericsson (ERICb.ST). Others were more relieved by the conservative stance.
There had been rumors in the past month that Juniper may be eyeing smaller equipment makers like Brocade Communications Systems Inc (BRCD.O) or Riverbed Technology Inc RVBD.O.
"That was the first time under new management that they've come out with such a strong statement, that they're going to focus organically," said Auriga USA analyst Anthony Carbone. "I think that puts to bed some speculation that's been going on."
Carbone said the market's restrained reaction to the upbeat outlook may also be because the shares, after rising over 50 percent in 6 months, had already priced in a recovery.
"Even the more optimistic investors were pleasantly surprised by the topline guidance," he said. "But the valuation's stretched." (Reporting by Ritsuko Ando; Editing by Richard Chang and Carol Bishopric)