Juniper Networks Inc. (JNPR:US) fell the most in almost three years after forecasting third-quarter revenue and profit that trailed analysts’ estimates amid a slowdown in sales of networking equipment to phone companies.
The shares tumbled 9.6 percent to $22.43 at the close in New York, the most since July 27, 2011.
Sales in the current period will be $1.15 billion to $1.2 billion, the company said yesterday in a statement. On average, analysts projected (JNPR:US) sales of $1.26 billion, according to data compiled by Bloomberg. Profit excluding some costs will be 35 cents to 40 cents a share, compared with an average analyst estimate for 44 cents.
Revenue is being hurt as some telecommunications carriers delay equipment purchases for the rest of 2014, Juniper said. The company has also struggled to sell smaller gear to corporations, a market dominated by Cisco Systems Inc. The forecast is a blow to Chief Executive Officer Shaygan Kheradpir, who took over in January and a month later unveiled a restructuring plan under pressure from activist investors.
“Missing your numbers when you’ve made big promises is not a good thing,” said Alex Henderson, an analyst at Needham & Co., who recommends holding the stock.
The company also initiated a quarterly dividend of 10 cents a share, its first such payout. The dividend will be payable on Sept. 23 to shareholders of record as of Sept. 2.
Juniper said merger activity among U.S. carriers led to delays of large projects that will hamper sales for the second half of the year. While Kheradpir didn’t specify which companies, T-Mobile US Inc. and Sprint Corp. have been in merger talks, and AT&T Inc. in May agreed to acquire satellite-TV company DirecTV. Revenue from carriers was also stronger than predicted in the second quarter, up 15 percent to $831.8 million, possibly taking some sales from later in the year.
“They had a spike in sales to service providers last quarter, which could make things softer this quarter,” Needham’s Henderson said.
In the second quarter, total revenue rose 6.8 percent to $1.23 billion, while profit before certain costs was 40 cents a share, Juniper said. On average, analysts projected sales of $1.22 billion and profit of 38 cents. While revenue from phone-service providers gained, enterprise sales dropped 6.4 percent to $397.7 million.
Weaker demand for mobile phone system equipment from China Mobile Ltd., the world’s largest service provider, hurt revenue at Xilinx Inc. (XLNX:US) The maker of programmable chips fell 14 percent to close at $41.26, its worst decline since October 2005.
China Mobile has stopped ordering new machinery while it installs equipment it’s already bought, the company said yesterday. Sales in the current period will range between $588.1 million and $612.6 million, compared with an average analyst estimate of $644.5 million.
Juniper said second-quarter net income, including charges for restructuring steps and other items and a gain from a legal settlement, rose to $221.1 million, or 46 cents a share, from $97.9 million, or 19 cents, a year earlier.
Kheradpir came under pressure from activist hedge funds Elliott Management Corp. and Jana Partners LLC days after he took the helm of the Sunnyvale, California-based company. In February, the company said it would cut $160 million in expenses and return at least $3 billion to investors through stock buybacks and dividends. On April 2, Juniper said in a filing that it would eliminate 6 percent of its workforce, or about 570 jobs.
As part of Kheradpir’s strategy to pare Juniper’s product line, the company yesterday also said it reached an agreement to sell its Junos Pulse unit, whose products helped Juniper gear work directly with smartphones, for about $250 million to private-equity firm Siris Capital.
On a conference call to discuss earnings, executives outlined progress on the company’s cost-cutting efforts, which included a charge of $10 million to complete all the job cuts announced last quarter, as well as $4 million in costs related to the cancellation of some research and development projects. Kheradpir said the company will continue to evaluate the product lineup, but he is comfortable with where it is now.
“We have a very clear strategy that we have tested over and over again, both internally and externally,” with partners and customers, he said yesterday on the call.
(An earlier version of this story was corrected to fix the dateline to July 22 from April 22.)
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