Shares of Juniper Networks (JNPR - Analyst Report) dropped 5.6% in Friday’s trade after the company disclosed in its latest 10Q (released last Thursday) that it is being investigated by the U.S. Department of Justice and the U.S. Securities and Exchange Commission for possible violations under the U.S. Foreign Corrupt Practices Act.
The Act deems any payments made to foreign government officials to secure or retain business as illegal. This current investigation is not in the best interests of Juniper as the networking solutions and communications provider generates majority of its revenues from international operations.
In the last reported quarter, Juniper’s international revenues (EMEA and Asia-Pacific) were down 2.2% on a year-over-year basis. However, better-than-expected revenues from Americas offset this decrease and resulted in a 7.0% increase in total revenue. Moreover, Juniper expects to gain traction in the international markets.
Juniper, however, is not the sole one to face this investigation since bellwether companies such as International Business Machines (IBM - Analyst Report), Oracle (ORCL - Analyst Report) and Hewlett-Packard Co. (HPQ - Analyst Report) have come under the scanner of investigating agencies.
Juniper is witnessing strong revenue growth in some of its key business markets and is gaining traction in its routing and switching portfolio. The company’s new products, cost reduction initiatives and improving execution are expected to remain the positives, going forward.
However, the pending outcome from the investigation, competition from F5 Networks Inc., Cisco Systems Inc. and AT&T Network coupled with constricted federal spending and sluggish macro economic conditions could act as near-term headwinds.
Nonetheless, we remain encouraged by the rapid deployment of Juniper’s networking products and services by organizations and government verticals to meet growing business demand. We also appreciate Juniper’s continuous efforts to make strategic acquisitions to enrich its product portfolio.
Currently, Juniper has a Zacks Rank #2 (Buy).