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On Jun 13, 2014, we issued an updated research report on Juniper Networks, Inc. (JNPR - Analyst Report) following the company’s mixed first-quarter fiscal 2014 results, wherein the top line exceeded the Zacks Consensus Estimate while the bottom line lagged the same.

Revenues improved on a year-over-year basis driven by higher product revenues (up 12.1% year over year) and services revenues (up 6% year over year).  Juniper also saw year-over-year growth across its geographies.

Juniper is capitalizing on the growing demand for data center virtualization, cloud computing and mobile traffic packet/optical convergence. The company is offering its new suites of products such as the T4000 core router, QFX data center platform, ACX and PTX packet/optical solution among others. We believe Juniper’s new products will be able to meet the escalating needs of customers and thereby find easy acceptance.

Furthermore, Juniper is expected to benefit from the higher spending pattern of carriers to upgrade their networks in order to support the incremental growth in data traffic. Increased spending by AT&T (T - Analyst Report) and Verizon (VZ - Analyst Report) — Juniper’s two large customers — are expected to aid its top line, going forward.

Juniper had entered the Software Defined Networking (SDN) space with the acquisition of SDN start-up Contrail Systems (Dec 2012). According to IDC, the SDN space is expected to generate $3.7 billion in revenues by 2016. We believe that Juniper’s expansion into the software defined networking segment will strengthen its market position.

To complement its growth prospects, Juniper has been successfully developing global channel partner and strategic reseller relationships with Ericsson, International Business Machines (IBM - Analyst Report) and Nokia Siemens Networks. These partnerships will help Juniper to enhance its reach and expand its customer base.

Apart from this, Juniper has devised a strategic Aggressive Capital Return Plan under which it is set to return $3 billion to its shareholders. Per the strategy, shares worth $2 billion will be repurchased by the end of the first quarter of 2015. Thus, to honor the commitment, Juniper initiated a $1.2 billion accelerated stock repurchase program of which $900 million was completed in the first quarter of 2014. These initiatives are expected to support the company’s bottom line going forward.

However, increasing competition from Cisco and AT&T, uncertain economic conditions and constricted federal spending remain the possible headwinds.

Currently, Juniper Networks carries a Zacks Rank #2 (Buy).
 

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