Juniper Networks (JNPR) 8-K Juniper Networks, Inc. Reports Q3’04 Financial Results Q3’04 Net Revenue $375.0M; GAAP EPS $0.09; Non-GAAP EPS $0.13

Investor Relations Contact:	Public Relations Contact:
Randi Paikoff Feigin Tel: 408-745-2371 randi@juniper.net	Kathy Durr Tel: 408-745-5058 kdurr@juniper.net

Juniper Networks, Inc. Reports Q3’04 Financial Results
Q3’04 Net Revenue $375.0M; GAAP EPS $0.09; Non-GAAP EPS $0.13

Sunnyvale, CA – October 14, 2004 — Juniper Networks, Inc. (NASDAQ: JNPR) today reported its results for the quarter ending September 30, 2004.

Net revenues for the third quarter were $375.0 million, compared with $172.1 million for the same period last year, an increase of 118 percent.

GAAP net income for the third quarter was $48.8 million or $0.09 per share, compared with a GAAP net income of $7.2 million or $0.02 per share in the third quarter of 2003. Non-GAAP net income was $73.5 million or $0.13 per share, compared with non-GAAP net income of $14.7 million or $0.04 per share in the third quarter of 2003. See the table at the bottom of the Non-GAAP Condensed Consolidated Statements of Operations for a reconciliation of the non-GAAP net income to the GAAP net income.

Cash provided by operations was $105.2 million for the third quarter, compared to cash provided by operations of $42.9 million for the same period last year. Capital expenditures and depreciation during the third quarter were $25.0 million and $10.6 million, respectively.

“We are once again pleased with our revenue and earnings growth for the quarter, and as a result we are investing that success in scaling the business for continued expansion,” said Scott Kriens, chairman and CEO of Juniper Networks. “We see consistent and strong reinforcement for our strategy and will remain focused on capitalizing on the opportunities we see and the position we enjoy in the marketplace today.”

Juniper Networks will host a conference call web cast today, October 14, 2004 at 1:45 p.m. PT/4:45 p.m. ET at: http://www.juniper.net/company/investor/conferencecall.html. The conference call will be archived on the Juniper Networks website until November 30, 2004. A replay will be accessible by telephone after 3:00 p.m. PT, through October 21, 2004 by dialing 800-633-8284 (or 402-977-9140), reservation number, 21209936. The replays will be available 24 hours/day, including weekends.

About Juniper Networks, Inc.
Juniper Networks transforms the business of networking by creating competitive advantage for our customers with superior networking and security solutions. Juniper Networks is dedicated to customers who derive strategic value from their networks, including global network operators, enterprises, government agencies and research and educational institutions. Juniper Networks’ portfolio of networking and security solutions supports the complex scale, security and performance requirements of the world’s most demanding mission critical networks. Additional information can be found atwww.juniper.net.

Juniper Networks, the Juniper Networks logo, NetScreen, NetScreen Technologies, the NetScreen logo, NetScreen-Global Pro, ScreenOS, and GigaScreen are registered trademarks of Juniper Networks, Inc. in the United States and other countries.

Statements in this release concerning Juniper Network’s business outlook, future financial and operating results, overall future prospects and stock repurchase program are forward looking statements that involve a number of uncertainties and risks. Actual results could differ materially from those anticipated in forward-looking statements in this release as a result of certain factors, including those set forth in the risk factors described in the Company’s most recent Form 10-Q filed with the Securities and Exchange Commission. All statements made in this press release are made only as of the date set forth at the beginning of this release. Juniper Networks undertakes no obligation to update the information in this release in the event facts or circumstances subsequently change after the date of this press release.

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Juniper Networks, Inc.
Condensed Consolidated Balance Sheets
(in thousands)

	September 30, 2004			December 31, 2003
ASSETS
Current assets:
Cash and cash equivalents	$	667,714		$	365,606
Short-term investments		290,798			215,906
Accounts receivable, net		162,040			77,964
Prepaid expenses and other current assets		66,491			31,333
Total current assets		1,187,043			690,809
Property and equipment, net		269,729			244,491
Long-term investments		588,152			394,297
Restricted cash		31,109			30,837
Goodwill		4,420,988			983,397
Purchased intangible assets, net and other long-term assets		274,191			67,266
Total assets	$	6,771,212		$	2,411,097
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	105,391		$	61,237
Accrued warranty		40,219			35,324
Other accrued liabilities		195,002			118,940
Deferred revenue		172,656			75,312
Total current liabilities		513,268			290,813
Other long-term liabilities and convertible subordinated notes		48,578			157,841
Convertible senior notes		400,000			400,000
Commitments and contingencies
Stockholders’ equity:
Common stock and additional paid-in capital		5,781,856			1,557,376
Deferred stock compensation		(44,845	)		(1,228	)
Accumulated other comprehensive income		729			4,414
Retained earnings		71,626			1,881
Total stockholders’ equity		5,809,366			1,562,443
Total liabilities and stockholders’ equity	$	6,771,212		$	2,411,097

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Juniper Networks, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)

	Three Months Ended September 30,						Nine Months Ended September 30,
		2004			2003			2004			2003
Net revenues:
Product (1)	$	325,240		$	147,110		$	783,094		$	423,351
Service		49,774			25,018			122,872			71,087
Total net revenues		375,014			172,128			905,966			494,438
Cost of revenues:
Product		87,730			48,694			218,182			145,868
Service		25,304			14,245			65,641			40,852
Total cost of revenues		113,034			62,939			283,823			186,720
Gross margin		261,980			109,189			622,143			307,718
Operating expenses:
Research and development		64,881			44,932			169,604			131,409
Sales and marketing		81,953			34,710			201,150			101,404
General and administrative		12,426			6,524			38,662			21,292
Restructuring costs		(1,223	)		13,985			(5,058	)		13,985
Amortization of purchased intangibles and deferred stock compensation (2)		33,025			1,998			72,214			17,323
In-process research and development		–			–			27,500			–
Integration costs		–			–			5,087			–
Total operating expenses		191,062			102,149			509,159			285,413
Operating income		70,918			7,040			112,984			22,305
Interest and other income		6,412			8,031			16,707			27,300
Interest and other expense		(987	)		(9,386	)		(4,967	)		(33,689	)
Write-down of investments		(2,939	)		–			(2,939	)		–
Gain (loss) on redemption of convertible subordinated notes		–			9,220			(4,107	)		14,108
Gain on sale of investments		–			–			–			8,739
Income before income taxes		73,404			14,905			117,678			38,763
Provision for income taxes		24,645			7,700			47,933			14,297
Net income	$	48,759		$	7,205		$	69,745		$	24,466
Net income per share:
Basic	$	0.09		$	0.02		$	0.15		$	0.06
Diluted	$	0.09		$	0.02		$	0.14		$	0.06
Shares used in computing net income per share:
Basic		533,447			384,795			478,044			379,792
Diluted		562,718			408,083			514,065			399,525
(1) Product net revenues are generated from groups of similar products as follows:
Infrastructure	$	261,848		$	147,110		$	675,866		$	423,351
Security		63,392			–			107,228			–
Total	$	325,240		$	147,110		$	783,094		$	423,351
(2) Amortization of deferred stock compensation relates to the following cost and expense categories by period:
Cost of revenues	$	879		$	(287	)	$	2,174		$	(48	)
Research and development		7,155			(2,098	)		16,276			1,414
Sales and marketing		6,107			(573	)		13,885			127
General and administrative		437			(346	)		1,544			(77	)
Total	$	14,578		$	(3,304	)	$	33,879		$	1,416

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Juniper Networks, Inc.
Non-GAAP Condensed Consolidated Statements of Operations ⁽¹⁾
(in thousands, except per share amounts)

	Three Months Ended September 30,						Nine Months Ended September 30,
		2004			2003			2004			2003
Net revenues:
Product	$	325,240		$	147,110		$	783,094		$	423,351
Service		49,774			25,018			122,872			71,087
Total net revenues		375,014			172,128			905,966			494,438
Cost of revenues:
Product		87,730			48,694			218,182			145,868
Service		25,304			14,245			65,641			40,852
Total cost of revenues		113,034			62,939			283,823			186,720
Gross margin		261,980			109,189			622,143			307,718
Operating expenses:
Research and development		64,881			44,932			169,604			131,409
Sales and marketing		81,953			34,710			201,150			101,404
General and administrative		12,426			6,524			38,662			21,292
Total operating expenses		159,260			86,166			409,416			254,105
Operating income		102,720			23,023			212,727			53,613
Interest and other income		6,412			8,031			16,707			26,110
Interest and other expense		(987	)		(9,386	)		(4,967	)		(33,689	)
Income before income taxes		108,145			21,668			224,467			46,034
Provision for income taxes		34,606			6,934			71,829			14,731
Net income	$	73,539		$	14,734		$	152,638		$	31,303
Net income per share:
Basic	$	0.14		$	0.04		$	0.32		$	0.08
Diluted	$	0.13		$	0.04		$	0.30		$	0.08
Shares used in computing net income per share:
Basic		533,447			384,795			478,044			379,792
Diluted		562,718			408,083			514,065			399,525

⁽¹⁾ The non-GAAP statements exclude restructuring costs, amortization of purchased intangibles and deferred stock compensation, in-process research and development, integration costs, write-down of investments, gain (loss) on redemption of convertible subordinated notes, gain on sale of investments and a prior period acquisition related adjustment. See reconciliation to GAAP information below:

	Three Months Ended September 30,					Nine Months Ended September 30,
		2004		2003		2004					2003
Non-GAAP net income	$	73,539		$14,734		$152,638				$	31,303
Restructuring costs		1,223		(13,985)		5,058					(13,985	)
Amortization of purchased intangibles and deferred stock compensation		(33,025	)	(1,998)		(72,214)					(17,323	)
In-process research and development		–		–		(27,500)					–
Integration costs		–		–		(5,087)					–
Write-down of investments	(2,939)				–		(2,939	)	–
Gain (loss) on redemption of convertible subordinated notes		–		9,220		(4,107)					14,108
Gain on sale of investments		–		–		–					8,739
Acquisition related adjustment		–		–		–					1,190
Income tax effect		9,961		(766)		23,896					434
Net income	$	48,759		$7,205		$69,745				$	24,466

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Juniper Networks, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)

	Nine months ended September 30,
		2004			2003
OPERATING ACTIVITIES:
Net income	$	69,745		$	24,466
Adjustments to reconcile net income to net cash from operating activities:
Depreciation		29,313			35,754
Amortization of purchased intangibles, deferred stock compensation and debt costs		75,945			23,597
In-process research and development		27,500			–
Write-down of investments		2,939			–
Loss (gain) on redemption of convertible subordinated notes		4,107			(14,108	)
Gain on sale of investments		–			(8,739	)
Changes in operating assets and liabilities:
Accounts receivable, net		(56,132	)		29,975
Prepaid expenses, other current assets and other long-term assets		(17,851	)		1,268
Accounts payable		20,891			5,783
Accrued warranty		4,895			240
Other accrued liabilities		51,791			9,740
Deferred revenue		83,854			7,633
Net cash provided by operating activities		296,997			115,609
INVESTING ACTIVITIES:
Purchases of property and equipment, net		(44,689	)		(14,136	)
Purchases of available-for-sale investments		(583,639	)		(671,826	)
Maturities and sales of available-for-sale investments		672,941			770,334
Increase in restricted cash		(132	)		(25,000	)
Minority equity investments		(1,180	)		(900	)
Cash and cash equivalents acquired in connection with the NetScreen acquisition, net of cash paid		40,889			–
Net cash provided by investing activities		84,190			58,472
FINANCING ACTIVITIES:
Proceeds from issuance of common stock		121,090			77,403
Redemption of convertible subordinated notes		(144,967	)		(381,159	)
Retirement of common stock		(55,202	)		–
Proceeds from issuance of convertible senior notes		–			392,750
Net cash (used in) provided by financing activities		(79,079	)		88,994
Net increase in cash and cash equivalents		302,108			263,075
Cash and cash equivalents at beginning of period		365,606			194,435
Cash and cash equivalents at end of period	$	667,714		$	457,510

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