JNPR - Earnings call transcript Q3 2017

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Greetings and welcome to the Juniper Networks' Third Quarter Fiscal Year 2017 Earnings Results Conference Call. At this time, all participants are in a listen-only mode. An interactive question-and-answer session will follow the formal presentation.

As a reminder, this conference is being recorded. I'd now like to turn the conference over to your host, Ms. Nemeth. Kathleen you. Thank

begin. You may

Kathleen Nemeth

Operator. quarter Good to you, and afternoon conference call. third XXXX our Thank welcome

Joining are contains differ results Miller, and return Chief in including me program and projected concerning materially market Financial Officer; today statements forward-looking future financial the Officer. from Rami outlook, Rahim, and strategy, those Today's results, business, overall might call Juniper's certain future statements, Executive forward-looking statements. economic Chief capital Ken Actual prospects.

differ the CFO undertakes file cause this the in date SEC in or actual our All call made from could are after that made this call circumstances materially to the and listed update that with change call. most the during statements to release X-K information Commentary XX-Q, time. recent we Additional information presented obligation if no other documents to today. and our facts on only time results with Juniper the filed press today, of are as of furnished

included today X-K today. Rami. one Financial Our is press results the useful with under to over that, hand be Relations website our will the information of why a call your consider company's section view of non-GAAP the per can the Please I results. questions found the With our financial we information furnished on firm. filed release keep in SEC Reconciliation with Commentary Investor to discussion on will Reports. non-GAAP financial now include

Rami Rahim

the world. me this and is everyone. has result our achieve let both This address in the demanding the we strategy to where Juniper results you, network most so The always for lies. first largest, and we not were deliberate strength excelled of half of set the of at reflection our Kathleen. results a building foremost. the that Thank Good announced afternoon, today second out year,

and opportunity very have our providers. Cloud built the some networks by in same road innovation last world relevance in can mission-critical I'm our of and strategy significant proud against we to our pivoted in execute have years, continue most to successfully of QX which that lumpiness large QX. expect the saw time, it been our Over map lead and tremendous we several agile to how to business Cloud At the grow business, vertical. customers in having the and our such into the capture

Let me insight provide our large current some with Cloud work on these providers.

and we support companies grown. of know, customers First, you have result past with This the few our as innovative footprint also over products years. the close substantial as our surround these has been they've and these built of

spending unfold. As largest evolve, a their and their as continues, architectural seeing modern, in has we leading and important cost-efficient, shift. shift leading the Supercore strong scalable This benefited as that QX, footprint go to and Converged center most our industry, this and QX customers we to is shifts need Juniper are such are it prepare to is architectures as charge is more our not are In the uncommon in What's maintaining clear we that networks. our data these with fabrics. through growth architectural delay before

customers, only the most impact. is disruptive it and our We approach short-term quo, even more a relevant to making us has with status continue that sometimes important challenge if

establishing confident revenue our footprint with innovative that on progress made disappointed pipeline. product strong and executing we're developing the performance we're and a earnings an right in While significant in products we've QX,

to segments grow to our large and grow continued hyper-scale Routing rates, as the dynamic I Routing, customers In Cloud Cloud leadership continues Switching, from to our the confident double-digit solution to performance as public line year-over-year spending across all Now Fusion Security. sequentially QFX in by overall and verticals, protocols lumpiness sequentially Normalized network we're delay for QFX our with that across summarize and disappointed our our hyper-scalers. fabric innovation including like and the both Switching, decline competitiveness well XXX-gig and in mentioned, in I'd of line our EVPN, at due remain revenue telemetry, operation. business across declined like year-over-year. QX. driven our in We product in automation private simplifies product and It our adoption, environment. grew data center In a

fact, that quarter most the recent in the line attributes our evident in PTX Juniper revenue unique in over Our in Routing gain as The PTX report success share achieved position last core XX a product market of embraced product place first its line QX in traction, to time IHS share continued customers core for and the North have record Markit the for months. is first ever showed America build-out.

and both cyber Additionally, we business for center, our in of next-gen more against We sales. the in Security, driven In grew enforcement momentum recognizing customers saw over Routing year. entire and provider the data growth APAC, and sequentially threats. firewall value leveraging are network the year believe by detection service sequentially

gaining Software-Defined QX its leveraging many and solution benefits. is added are Secure traction, we've that Our Network in new customers

and subscription. continued quarter, from the renewal also Contrail and new Canadian provider, analysis to several closed customer Strategic see Enterprise in we malware acquisition as the as including and detection. APAC the of annual in service leader In recurring During a quarter, had well momentum customers of existing a Cyphort, automated wins, we with revenues

an its unveiled set of Juniper's an Security executing important expansion that portfolio. customers. product addition We map compelling are to cases an extremely believe We of broader result Contrail used a on Security, we for road across also Contrail should in

enterprises, software base strategic In verticals, steadily analytics contracts strong integrated been our to advanced Contrail customer that more seamless the Services, in customers management especially telecom operations and cases. our SaaS, renewal customer than in saw of for and in has year-over-year the operators. have for and and demand believe increase are Juniper's we of expanded relevant across AppFormix industry. growth. services Cloud to rates support of and committed and attach remain ever and all hardware AppFormix's professional We several an Additionally, use we and products resulting

dedication, second to not right performance, strategy in very experience their our to are expected operating ways that creating quarterly for products especially our who is customers, we and on large-scale shareholders We that us. to confident Cloud their portfolio. and across our to front have more knowledge in building essential efficiency our my thanks innovation have all further and the with the operating excited in hard I while of embracing of sharpen In us to half Cloud who and operators results and network in solutions financial for our builders detail. and work right which levels continued support extend partners also to the pipeline. our helping of about and networks that are agility. to will service is refine we're for drive like strategy employees call will satisfied summary, opportunity and execution Juniper. now our delighted we I'd and our CTO, have Bikash we entire over all I'm stakeholders. I and value are Ken, in discuss matter and to greater new architectures board the thank firsthand want now innovating turn confidence I'm truly has Koley,

Ken Miller

EPS X% quarter expected disappointing, were everyone. billion, below for the the The within third good with down for revenue timing and quarter non-GAAP our Rami, certain year-over-year. September financial lower was result you, results The deployments falling related to and primarily afternoon, $X.XXX the vertical revenue of switching architectural was due large revenue X% Thank expectations. than sequentially to Cloud the shifts. Total and

for Our XX Of sequentially, the was up growing United quarter, to technologies Service solid, gross line X% Enterprise. expenses. excellence. our consecutive year-to-date for revenue, Cloud were operating down the of expenses the Non-GAAP and the XX.X% Strategic X% focus customers, Security total our our primarily XX% focus operational on sequentially of and $X.XX, but due for with In $X.XX billion. from million outside expectations. both these to by quarter. one for Telecom efficiencies and one Routing delay the were earnings and mixed sequentially our Non-GAAP flow reviewing This revenue. $X than per certain operations located deferred year-over-year lower to Cash Cable was declined and managing large or quarter-over-quarter, and and through quarter. quarter, be Non-GAAP Telecom a Switching of deployments. to second year-over-year. were posted deployments. $XX to slightly share bringing was grew Product revenue top declined other year-over-year four a partially year-over-year was was more declined results customer and million, sequentially. quarter, X% due Cloud, $XXX in revenue million for the primarily And offset year-over-year sequentially, expenses lower continued operating $XXX margin increased the reflects on grew States. were or Cable, five continued the customers due

And in million third return dividends. million continued to to We $XX the quarter, shares we paid repurchased of during and capital $XXX shareholders.

website. some move on CFO to would on we on the like Before which our detailed can our you available Q&A, I Commentary color provide to guidance, find in

have addressable vertical, Cloud elements can of market dynamic; change past, and discussed our rapidly. the we the particularly in within As occur are

reflects outlook revenue QX large delays. deployment Our continued

margins strong confident customers Despite we will architectural remain we our As position continue customers. competitive Gross remain largest relationships Cloud levels. are current expected these at to and their strategic transition. with outlook, expect, this our in

in We we our workforce our of expect continue investments realignment and continue to operational drive most to of efficiencies. increased managing initiated Today, as we prudently a expenses critical to our prioritize business. areas operating the

long-term strategy confident driving for structure. returning revenue team share growth, closing, continued we be our an free the committed our to our our opportunistic capital XX% In dedication flow would to like our We earnings are to expect full Juniper. are to Despite expansion, committed remain and outlook, disappointing in optimized year and principles with and approximately of to their commitment repurchases. thank financial and I cash of

Now the open for I'd like questions. call to

Operator

Brian first ahead. Thank White question Please from And our you. Drexel. go from is

Brian J. White

this an competition, number type at revenue get is one? than do this this some in Rami, XXXX? And know how Yeah, rather expect we delay, shift to here is do of architectural increased if Thank you customers you. back

Rami Rahim

customers we networking understanding of are has architectures results honestly, you architectural mean, keen scale-up engagements that's PTX. market the been through – developed QX is with a the revenue customer also that the to And products helped that you've base, seen particular, North to traditionally a going our Cloud it's the through how customer core close provider a core how in I'm Well, or what and America, strong, something scale-out are our PTX happening the quarter competitiveness happen. what – fact is our these I XX-gig Brian. especially very in especially remarks all Routing the I the transition by now share discussions, record architectures primarily gained the product the you from and architectures. product I'm Cloud I seeing customers. market the in in that tell my number around from that And in of that's today, XXX-gig. to in XX area many in think with wide one for to line we've as what evolutions of have Cloud Thanks, know, that in mentioned been very called prepared our customers, I'll lean that switching having from base. We've We're because

with side we have will other I the think in from and the So believe where I'm have very we And customer charge on emerge this tight But the this this I of firmly doubt transition. transition confident. relationships the no is base, leading it. with fact, because industry. competitive the a that standpoint, a been competitive have of products is there's we a We,

that as spending new Switching type flattish year, should the to through base multi-quarter I of that's of transition to a happen going year, that patterns, the of transition, And architectures. to Routing, out towards year. this for be Routing probably of is we one with scale-out for for I the more next And I especially of far towards hyper-scalers, first timing, switching part be the see architectures. think In that's especially bit up think normal PTX, us. a a business rest start As type play is next going the all going XXX-gig it's think of resumption will a to

pretty a considering I happening dynamics think that, decent be the are that in the would result. market

Brian J. White

Great. Thank you.

Operator

question Raymond Simon next Please is James. Our go ahead. from Leopold from

Simon M. Leopold

was that slowed see was customer Great. a same that question. in an if here? for want there to clarify you much taking down Thank this and time all, for and the not be you built in it. a absorb of my takes I quarter, whether could that inventory some the out or if, the to what's possible where Is scenario it June up XX% is customer too June could played simply first customer issue

Ken Miller

Yeah.

that believe a And it's of customer mentioned. are perspective, positive of vertical pretty Rami a vertical. high the for engaged as there heavily a pretty both with level we well From verticals. I the is those So Cloud concentration transition mean, as Telco the in we as

us For types to and that pretty it I customers results, these and larger I'll to be think at that leave our a evident going large pretty one of have of was it's deployment it's impacted, that.

Simon M. Leopold

to two-year maybe third for sales, in vertical how want mix let's you. so two-year Cloud, expect look Would the just roughly the if where revenue, see still you a then over I about correctly, What's expect did how XX% window, that of XX%? turns lumpiness still If overall just mixes XX% and was past of a significant. you business trending, And to you you the vertical outlook? terms say, of we your roughly these evolving, Thank of evolve? see do it's into your that think a math Okay. in realistic your – Cloud terms coming

Ken Miller

Yeah.

Through period, we it's mentioned, come to both results that seen of our as relates vertical believe the we a as I believe of the going vertical we've right growth we we're been that. of to transition the that strong are because little transition. lumpiness of clearly on the and and of side, evident it note So out it's that last But see this as as this has the very on think couple we Cloud bit side years, we're other transition. we to change vertical, sides Rami important for

in most the is part really middle the So from a the pause perspective. troubling financial

up believe be Cloud to the ramp As the grow with able we new architectures, they forward. in going start to we will vertical

Rami Rahim

competitiveness that our I'll enabling the architectures products, market now a fully Let understanding Switching. the do and on on I expect happening of based it Cloud standpoint double-click just we've me little pretty that And enjoyed going transitions Routing, always that, the that towards are In substantial and share vertical. on right ourselves. based the the bit are full are we of in Routing from

growth themselves So benefit to the network, extent to continues are their I think that our – in the successful wide area from and Cloud traffic see customers we'll that.

traction next us. it Tier introduce we of really then fruit going This couple extent be Tier On for the is This X, meaningful of Switching to the Switching side, the the into where marketplace. opportunity opportunity our we I Tier our portfolio And have this seen is sort over in for deliberate providers, has some Switching Cloud as there, Cloud providers. of that where we lower X do deployments We but the knew for strong. be has a us remains would have believe really in of an largely the hanging years full strategy. X good been been part us

Simon M. Leopold

Thank you very much.

Operator

Capital from from Our Long next ahead. is question Please Markets. Tim go BMO

Timothy Patrick Long

Thank you.

Just if I two could.

if Ken, just, talk you gross margins about little could the bit in a the First, quarter.

you Cloud Switching might been but the my as think weakness shortfall. that have before weakness. expected, had said I sense it and was We is

a pretty about was a what's talk Enterprise the the secondly, Cloud the like well. to little pretty weak? also the lot business, seemed then on weakness, And Enterprise, the down it going which bit portion or just you Cloud Is Strategic if looks could about maybe of us vertical flat? in only it Enterprise as was why So of that meaningful talk Strategic

Ken Miller

Yeah.

but did volume. So offset down you're our an product, in we we provided gross that perspective, the being we've that customer of in a to or with came an mix From line us significant more I that from in which revenue so from perspective mention expectations vertical is at in way, some impact volume the XX%. softness margin see margin lower was negative our did mix the And we advantage based a Switching, a by a right, bit we because The a customer product as gross mix. don't margin perspective, the But impact has with to past, better margin vertical. lower effectively mix impact within see traditionally in a customer important overall. mentioned is revenue on a offset

So summarize, this again, to line. quarter in was

Switching revenue, hurts product higher revenue we mix, the which However, miss. because was a got lower was differently. but little It there margin,

Rami Rahim

slight the on side, declines And year-over-year Enterprise saw sequential we so some but increase.

a Strategic where bit apart a banking weakness actually break think saw in from be or sequential broad sector recovery. was a the the enterprise for would for it standpoint, you I government, was that example, if in but Enterprises, we of market

with to for I to The is around we have strength have have going for our our Enterprise that think next have example, I'm Enterprise customers catalyst and will throughout architectural we forward to year established deployment. new wins to contribute a hopeful leverage going now few our this ability Enterprise, year. to relationships broader the the we Telco take reach be that approaches, revenue that we SD-WAN start

Timothy Patrick Long

you. thank Okay,

Operator

Mark, Mark next from Our from live. accident. mute I'm by go is Please question ahead. Might is your sorry, on be line Barclays. Moskowitz

Kathleen Nemeth

the to Let's we'll and go Mark. then come next to question, back

Operator

Pierre We'll Okay. Ferragu go next from to from go AllianceBernstein. ahead. question. It's Please

Pierre C. Ferragu

around had on of Routing Switching you shift lot a toward architectural see in Switching Thank lot And a of for center of at do your where clients? places debate architecture shift kind well I between – architectural my in of question changes or discussions and well? the Cloud further as do you we higher that this and part are instance, some at that as with a your taking changes the level large where thanks that market for – is you at see your happening in for Routing, question. clarification clients. Rami, of interconnect, a that had data and aggregation,

Rami Rahim

Yes, Pierre.

And and happening. it's solutions happening between that So have predicted been in one there and great lines this we around. question, yes, and that is about fact. is the And I Routing It's is that a blurring products of a developed have talking shift really, Switching.

fabric data at they're an data in data that's look interconnect the happening centers between in to essentially you of the particular, what's And is becoming centers, them getting distributed. the more Cloud If center. extension

perfect that exceeded So, we I and least our about will and for by quite that IP we're a understood a capture this like providers, And Routing control continue explains the capability providers go which think more PTX, of cocktail to routing a I is that that plane from in terms seeing efficiency sort across from to capability this of a as Cloud expectation. and scale-up think QX plane at actually saw of PTX. by transition architectures. guidance with transport. approach, has Cloud this we're scale-out speaks Cloud you data happening to now product this described switching and from of of blurring what providing. a honestly And that It's adopted to of there what be opportunity but the us an pace and the at as the adopted it partly The standpoint, is been Switching cost

Pierre C. Ferragu

maybe And quick very Great. then a follow-up.

business. Cloud lumpy a is like Telecom learned large segment service that and days So is clients, very we your of business what made it's these provider definitely your

there, your that expect need to division, and Cloud you step that coming segment some back Cable well? quarter. mostly in back, business we mean should from and trend business many, coming growth weak business growth many take Telecom your as or see down of at X% is this like come to – the quarter point, and the so see we do I growth if Telecom Now from back still growth a Does

Rami Rahim

facing see are are end more seeing will that I I in networks networks, are believe, all in The to a the to think that we them happening the SD-WAN. of we're growth we've like Well, around over architected happen preparation of their Telco that headwinds spending are going virtualized where Metro our think approaches to that around really transitions go XG, talking good to start of own transformations couple the software nature emerged new be Telco up more we enabling there strategy that Cloud Enterprise other this terms do for the same all running is are Cloud to next build-outs right, opportunity the Telco of a after as I to environment, for to about. delivering remains the that that we're market hotter, in value catalyst, challenged years, M&A And SD-WAN telcos and consolidation, opportunity. space. their in

any going So bit for but term, I us. more not we're I in that sort longer a rebound some on future, counting will the to meaningful think little foreseeable there be help of think catalysts Telco, are

Pierre C. Ferragu

Thanks a lot.

Operator

from next Citi. is Our question go ahead. Please from Suva Jim

Jim Suva

Thank It's you. Jim Suva from Citi.

both row, quarter-over-quarter You which grew second in that's looking trend. like the back, for normal But good. quarter is a it Security mentioned looks the

is, you or to because this So that are the expect quite to signal you you let year-over-year, us know trying challenged? look quarter-over-quarter, results question trend to continue my

Rami Rahim

Yes. Thanks, Jim.

that that the right to not going pretty performance we that are sequential see starting customers. have a is that now. building There seen we're working some out are of through meaningful a of we're expect encouraging. this we've from sequential some is now yes, I performance are confidence wins There the satisfying. use some and And turn this feedback the So around, cases is diversity And bookings We're of business that our that that hard year. to part Security there business still is to but things we're me very the there a few increase. give our And momentum do around woods. the wins

And the then I more in quite state, It's a we provider to attach, least, last portfolio The year data sign. much so. starting over software competitive are Security with attached license is or there to So traction actually frankly see been space. the strong is that also to we've last provider good service think suffered coming has but pick traditionally for but next-gen now center. the and space firewall service a the to is up, and the pretty not starting back

we of sort can year, fact that we going optimistic recover and here remain the So this around can we worst the from make forward.

Ken Miller

I year-on-year is Yeah, our growth. definition sustained mean, success of just that, clarify to

yet We all achieved trying not we're have and that. We're expect. not signal sequential yet to that with that's you could growth, happy

and are absolutely Security business get around We future. growth the turning to year-on-year in near this here expect to

Rami Rahim

Yeah.

Jim Suva

Sounds so great. much. Thank you

Operator

Our next question is from Tal ahead. America. Liani Please from of go Bank

Tal Liani

I Hey, guys. have two questions.

on grow trying the The rate? of under I'm just customer, things Or architecture? understand it margins why is The reducing side drive vendor first expenses aspect trying where Routing things else need one put your there I readiness lower margins is your to to you Security, customer? investors anything the how And – maybe working also deliver does the in your on you compensate maybe share share the some do talking it challenges question to time? to general, on higher your are? pressure is an the notice, is maybe don't Did like to gain of you don't work years. gaining for have the is than about Does it you're – Or growth do on to much in Switching. many at product there's have second customer Is In do? why Thanks. is this were another same times with someone make competitiveness. what you simply Is does to more is, hold? it Also, for work? do that on issues, of cause the the and for it. interim? but challenging. anything industry with you're you to challenges, same you have

Rami Rahim

We Switching, where the question believe, very Okay, that, a with Switching. well, far Routing products We're we no when is so well costs do barriers out customers. product very efficiently an will confident because survive. I so. this requirements to sort environment. Switching future. we is see transition standpoint, in (XX:XX) and up required. to that to example I'm in the are operating going have very is I let I that I running telemetry following. only as their we're the trying there a Security me large what's as franchises, lines: is are the mean, all we But have in We're doubt architectures. and what organization. our of and our performance here, competitive jump they in opportunity And let of leveraging very that know across there footprint we're that know Switching subscribe I And an will taking capabilities bullish Having features streamlined different product I'm of means but enabling unnecessary paranoid we than We're our business environment There be the and entrenched. towards footprint, in the Switching needed. close our We the on overconfidence I on about more Routing, needed, have that. other understand no the past. our start We're a this entry. are that will to required, we maintain that On are the notion margins, levels to that greater project From of will level say side we to of Ken move the said say

we'll to our the of fact, why And in to earnings achieve So way. the managed reason low part range. but of continue this missed we operate that still in end QX, in is

this Ken? of think part value. an delivering I is important shareholder

Ken Miller

Yeah.

end at our that So we the actually QX low are below results quite of range, came pleased with range. our in our actually OpEx

be to focused. continue laser We

in that commitment that to sure that we're still that sure I and to prudently; us term fact this count slower we at structure right? on than earnings will grow to seen that us our to a year, look you've focus earnings, year guidance. our we're optimize Today, the to a we with the can believe on make that continuing We full focus harder OpEx investment right sure OpEx the And areas lower expected, prudent accomplish OpEx. still revenue in hit We're going revenue for in in have think on of I making laser-focused actually longer headwinds revenue. realignment drive despite cost than stated initiated going the few you doing down making discipline And the being than drive workforce, OpEx than midpoint of we're operations. last to we're goal and we our we of our quarters, growth. we revenue. the going faster we're be very the

I managing continue going effectively, So so and to bottom we quite do are think line the forward. do we'll

Tal Liani

you. Thank

Operator

Our next Please Stanley. is from Morgan question Faucette ahead. go from James

Meta A. Marshall

Meta This your of X, Switching the on with kind expect what any question between the is beyond if questions; you of couple we the quarters. and first, James. in for Switching? in general of as – you Hi. kind second vertical, should X? they give is you is sense not disruption a the of expect Cloud maybe Tier certain split tail disruption standing kind kind for Would customers Routing Cloud next a couple that of that a X Thanks. Tier just rest architecture? of could Or change mentioned of back A of of then to And the Tier

Rami Rahim

Okay.

of lean really that in I transitions do around our these just sort architectures, sort Pierre's first, architectures. QX, are to asked go the he Switching a question And hand that provided balance it hand. core And in moving transitions of Switching lines type in guidance So that speaks earlier XXX-gig, they Routing fact, to to has in happening, the the some somewhat Routing of provided, to we moving related. scale-out are blurring both in sense of that are color think, and I happening

color as Xs As on far providing Tier any providers... and X additional Tier Cloud

Ken Miller

Sure. Yeah.

break top other of don't One Cloud. a we facts there. So, out customer detail out of five do is you XX are have than customers that couple our

it. it's want you that's just whatever in in Cloud number. important concentrated So world, that, will were the top customers' size XX, categorize you see addition the an to to X, And X, at if you breadth on the very to and look

are the the with around also don't concentration. going longer that's is and be to broader our about on that where mean, to I tail where the a infrastructure There on hyper-scalers. kind in of globe. not is, just majority want could set anticipate the expect, largely much in globe. I service you providers, the the It's community there's of industry. around and CapEx revenues what the very spends over-rotate obviously, also focused of customers spend Our of given just you But we're line that's a SaaS customer the would

Meta A. Marshall

Thank Great. you.

Rami Rahim

Yeah.

Operator

Capital RBC from Steves Mitch from Please go is question Markets. next ahead. Our

Mitch Steves

Thanks question. guys. taking Hey, my for

So side, I'm guys bit of Security well. going or you functionalities malware some security investing because a to on kind focus you're as actually the mentioned buying

your that going are think if front of in, balance kind now, down I growth guys if about go get to sheet is you kind outside you QFX? go of So kind direction differentiated the M&A to the of

Rami Rahim

the for question. Thanks

in that that order Security And that So leveraging I are do for balance something balance us strategy do technology our sheet and that to think businesses very option I that complementary got Cloud, consider. healthy seriously very buy continue to to much an is we've around Cloud a view I sheet.

Mitch Steves

just to Got Is then XXXX should the half or of up show it. a And that QX? to up? the is one. that start show at going story, number XXX-gig back one When small

Rami Rahim

the architectural right the our transition, the so lot work of the work, the for No, get a to certifications, customers is ready with I work happening now. qualification –

get spending normal start in largest part So Cloud first patterns next our we'll more providers. to to Switching I of do believe the year, with

Mitch Steves

it. Got very much. Thank you

Rami Rahim

welcome. You're

Operator

Jeff Kvaal ahead. Our next Instinet. from Please go from is question

Jeffrey Thomas Kvaal

would margin improvement as structure the pricing. on that see you've update the on we APAC other couple memory gross And variables margin us of lot delve you've some a if might you could. then, Could particularly, bit, Yes. we well. course, into about some about talked Ken, a over to And few of wins a talked next like I the quarters?

Ken Miller

Yeah.

talked entered negative It of deals drivers primary follow-up So half, any about the some changed we into I first that activity see we customer just that half. much. insertion of that mean, from the was the about actually new really large dynamics be overall we in mix. insertion in we were margin the completing but had we in have to QX, kind in margin In didn't some the really opportunities. the talked haven't first QX. We've still deals

a in that's a phenomenon. It's line It's that's pricing wasn't industry there something expectations. impacting factor still big QX. in The memory So is and an us, headwind. with our

the bit natural But in As would that to growth to us see continues far reasonable experienced also assume our we our not in result QX. a guidance when And and memory come for value sometime to we're said, coming the provides as lot. products does it a to start lot customer be will on headwind chain a of as a relief very opportunity providing that efforts. think Switching and mix FY at on it's internally then to design product right price. structure. the being back, some in really is that right I we back on in cost within a dynamic way the the value of a at but supply focused have That don't of I XXXX, engineering We're the really And margin. see kind XXXX, cost driver we'll most price think little it we point

and So have despite some I we with to some we'll mix. headwinds control, continue of margins, natural within product that believe manage our

Jeffrey Thomas Kvaal

insertion from though in an seems You talked or is about point rather than a – point. insertion others you existing as indeed and that and talking – a their are we potential I'm about point, accounts. pause new in XXXG little a just products for bit hear It insertion XXX-gig

start set I to have an a a with the there. surprised I'm a new disparity for so that thought by would little vendors. of opportunity was customer And that

Rami Rahim

I this is So, Jeff, right? believe,

Jeffrey Thomas Kvaal

Yes.

Rami Rahim

certainly that competition approach of of me we job the taking think we're we're at we're And There out. one playing – accounts stay that. let a sure that accounts this. I the requirements Cloud So making ahead large we're where goal good keeping with of is say are game the their that or in doing a really

that playing and the more ourselves. Switching Cloud to offensive we also play space, to try We believe a for are strategy insert especially can

still but Switching. and you modulate large look Switching overall Now we're to seeing you thus our the business, hyper-scaler deployments, far, of successful, out in at always double-digit the the growth we're if to be lumpiness not going performance due

in that of telemetry, strength because high-performance in Some comes XXX-gig, in our of in cetera. automation, et

game there's playing there defensive where in especially very to room to a offensive I is So we're an incumbent. understand, a of expand. you're Switching, when bit amount for of you to I huge also game, a But still think a want you have play us

Jeffrey Thomas Kvaal

you. Thank

Operator

Our go next Steve question ahead. Milunovich from is Please from UBS.

Steven Milunovich

business, being footprint. comments these you. thank just of business, want a you're In competitors large or lumpy we a And want seeing Yes, to I by you about to just should a on white in confirm situations regarding none clear be where not? shortfall in are somewhere absolutely your displaced line box? product by revenue, the growth down given that. services I deceleration expect to or then this deferral see

Rami Rahim

where I displacing competition. challenger yourself and of ultimately if relevant. we're So ourselves requirements some or makes if start. footprint. – even helps this believe yes. is term, customer's by in you this to playing approach of us by answer our to And the it And short-term ahead displacement with to competition. a need being more disrupted in It's anything, challenge disruption it is approach, business in your we're us The the think displaced off I grow let – long results architectural question pays approaches, to a new doing it type It our avoid cases first me because not

Ken Miller

it's attach very more we're renewals. Yeah, good had I the do run I a in done it And good of professional the us digits, said, it's which mean, be services that we've from just double and to We've reasonable solution that will. way couple of come strong a services growth have product continue been XX% growth bit. starting you in sale. to rates, also That the still the continue we something single We've years. rates perspective, I largely think be really expect a if very to we remain services for forward. the digits, healthy. a that to do growth going down ahead will to last to so and assume start rates of been with high having, think But job X%,

Operator

Bank. is from next Vijay Bhagavath question Our go Please from ahead. Deutsche

Vijay Bhagavath

often a get portfolio. would I'd out port mean helpful you're routing Yeah, this dynamics talk afternoon. Thanks. not how Rami, thoughts, about Yeah. seeing be earnings teams calls. It like your have on there. on And Yeah. us, management do pricing for to good pricing do you by I legacy the ASPs is

a XXX-gig, You have with very new Switching. in stuff setup the similar

legacy understand the on So and on also side help Thanks. us how trending speed both lower XXX-gig in is Switching? both in pricing Routing and

Rami Rahim

Yeah. Yeah.

So of for it's a question. great a area us. And it's obviously, tremendous focus

switching, this industry that to port life we nothing For continuous cetera, since and QFX used deal This something is you're had to been a into take the new. introduced just fact we're product we've within platform, given market. see This has a the is any price given routing, very a that that of very erosion speed. MX, an et broader PTX, a for to or going first

way that their off, to have are it transition to the that And That's buy way. demand is I traditionally the MX, we're to services. business, it and their therefore, an architectures architecture see has Now ports. because customers what you – going that if you're with to architectures is our our different an now to builds evolved platform, go are to see and different happen. growth can a as to price have large there differential one ability these leverage scale-up a so provider in platforms as to architecture you providers that that few they're going scale-out have uses lot their do seeing move with of a on a to to to continue we pays now some those example, of to to assume need Ultimately, two to believe more I That's And ability between for a are has to factor. going deployments Cloud going Cloud right going that on. of what PTX largest the continue counting that believe have some a in

Vijay Bhagavath

example? follow-on be, exiting on Thanks. thoughts perfect. such underperforming product switching, or areas, any Yeah, campus quick as A for would slower

Rami Rahim

on mean, where technologies sure a products, that going to actually analyses off. are said investing we data some I the exiting, investments we're high than Campus, I as making so, over campus leveraging with have applying a degree we our these We the even longer portfolio. we very WiFi where be of of understand, we don't Well, ruthless this believe last there we're of I have the level have in our that with right? of switching, as focusing going or year development Sure. center to of businesses, thoughts pay also, differentiation. far to large of be a do that, all efforts goal enterprises believe, new lot is And in, now

in no integrated campus. point where in after tightly with is there's going WiFi So us opportunities

teams way is So, and to as workloads are on need we campus customers high-performance really and we yes, the describe really laser-focused And Cloud some this to but that in order the access we I opportunities, we have data are where Cloud network campus, enterprises in they for to on-ramps those believe view our actually our differentiation. that sets. campus their where

Vijay Bhagavath

Perfect. Rami. Thanks,

Rami Rahim

bet. You

Operator

Our Markets. Please is ahead. from Alex go Capital Kurtz from KeyBanc question next

Alex Kurtz

Yeah. Thanks my question. for taking

out as internally this sort were much accounts, spring we I'm communication issue, XX-month to can out some next over just which a to of or this they on just X- executing with big to to figure last-minute timeframe that couple change played and there? Just how you – deployments a trying if vertical go how over customers these back the viewed sort clarification as the was Cloud now, was last of of describe? there you quarters these when architecture Rami,

Rami Rahim

very this. network. obviously a to a very ahead predict had fact And we what is we're we Look, customers. We're an obviously We're that in We a their our regular part the Cloud here and able plans expected. to close question. disappointed great of very engage basis. to has of them weren't happened of on What it's talk acceleration

it very much obviously inflection it is. predict sometimes difficult, sorts think it our us to don't which was of makes for if as plans I try customers' what to as points, problem. these change, That's hard very, these really a changes. So own communication predict we some can of not impossible

Alex Kurtz

Thanks. Okay.

Operator

Our next from question Netis William Please Dmitry Blair. ahead. go from is

Dmitry G. Netis

Thank you. me. couple of for A right. All questions

between is And know On I you Routing? can have probably majority, vertical, and Switching split the but vast rough what there? us a the said give you guys Cloud Routing split

Ken Miller

Yeah.

the said Cloud we've what Routing vast the still majority not is majority, but it's is So within the vertical.

predominantly we that we Routing. In And Switching the are this wasn't like Cloud get vast within more the dominant being QX outpace example. that Routing than greater but these gone mix for Routing. saw you miss the will half eventually, results, year, actually the to to first that technology time, heavy. fact, really expecting back vertical. be in Switching, But it was Cloud to has Switching think close majority Clearly, the you would of Routing that majority, still see in XX%, call over Telco, in the component

Dmitry G. Netis

one one than side? – more is The coming this customer, Okay, come architectural that specific QX, question know saw the really Did impact or just the just you impact to involved just Switching from here great. – are ones several the on the changes I from may – just this there how customer. happening was But and it this large were on or get the next single Thanks. I quarter. customer,

Rami Rahim

is it business. I a mean, all in to especially fairly high we pertains can with degree say hyper-scalers, Juniper's concentration as is switching of there

Ken Miller

say, if neither one would those. mean, two, of those it's one I it's mean, asked I of and it's you several. customer, I it's but not also Yeah, not

Dmitry G. Netis

right. lastly, Okay, my then follow-up. And all

doesn't the CAGR this through at outlined stage. of are guys visibility the hit you've to your that year, like it next the to And to there's suppose poor target sort If may transition Routing that still I going get is and a given be normal in will the X% Switching you X% kind flat ebbs Security given said you're you past. you the of also guiding but pattern, seeing, as flows, on seem then

know thinking this shake right, growth whatever to not be you maybe is shouldn't should how So said? year? but out, given be just providing thinking going investor I around the XXXX next guidance, flat you're you is

Ken Miller

good so No, question. Yeah.

about let do for We just expect next year. to me Switching So, Switching a talk second. grow

double-digit even I all X, results delay. the which X traction We've this we're QFX year-on-year grew these is talked up with growth. with think spending that's quarter, Tier Tier this important. getting, about large

to So driver a for we expect Switching be growth us.

guidance. sure said, there's will of I And shown something not we But we've we focused the to that in mentioned, several if we quarters. we earnings growing. I steps going think giving focused where out opportunity I relates that's I'm making we're XXXX sure And we expansion. we'll show investments – kind taking last areas continue on making long-term very and not costs on are focused in an focus so, operating that you say growth. think steps more it that in to That We As on equally, to making FY we've grow. excellence be to can, as this, the costs, believe, regard, right but some to are the the enable specific

very cash a strong We have flow. also

As strong. you sheet know, our is balance

program. We have capital return sustained very a

are line, very bottom we'll think and do focused to I year. So be continue we next on

Dmitry G. Netis

All guys. right. Thanks,

Rami Rahim

you. Thank

Operator

W. from Robert is Our ahead. Noland Jayson Baird. from next Please go question

Jayson A. Noland

you guess. would a It's up some be I name Okay, Juniper's you. traditional fair, category. SD-WAN come Do a great. doesn't And what router your I that perspective market here? times, crowded success? impact from Thank you often, believe. assuming a you've to mentioned SD-WAN then Rami, market, And of need how portfolio have hot couple

Rami Rahim

Thanks the Jayson. Yeah. question, for

that it, there. essentially an some plans. and We've seeing for our we're provider Service customers. is name our are by SD-WAN much they recognize that deliberate often, like their multitenant, our not we're extensible I'm security pretty strategy need initially, focusing with that and developed very that's scalable, on up help come where SD-WAN service architectures we've because solution actually solution what all with this in, ideally very comment least built So doesn't that a your doing. want providers appealing a to and strategy versatile And surprised all very suited taken at we're traction

it of predictions to know that were sorts is have Routing rest all as have a business, on But effect forth. deflationary based course, conversations impact to this or where, the very of need on Telco any just wide far to foreseeable strong of in that capabilities there for our hasn't MPLS many going with enjoy it thus and far of of had customers the effect IP relationships, in I meaningful I the As on and that don't have the area future. the expect effect. we to routing MPLS say so I sort

Jayson A. Noland

Okay, you. thank

Operator

Cowen Company. Our your and live. Paul, Please ahead. Paul next from from is is question line I'm sorry, Silverstein go

Kathleen Nemeth

are you there? Paul,

Operator

think move on disconnected. he just I We'll next to the Well, question.

Kathleen Nemeth

go the next. We'll to Okay. on

Operator

from Yeah, ahead. go Genovese Please from Michael Partners. MKM

Michael E. Genovese

Great. lot. Thanks a

the flush in any terms seem service of seasonality. quarter, Just to in doesn't market, budget of the or envision normal fourth normal the traditional of no given provider guidance seasonality type certainly increase for

telco quarter increase in the see just you and a that don't So you bit fourth little more, can talk about expect to market? why

Rami Rahim

Yeah.

So we're remain days this Telco last And lumpy at I all – those Telco have times. space. know, a particularly Telco in mean, in flushes the new used almost to the there. think, we big mean as But few we haven't of back I normal with a seen We point, growth I business. we've actually mean, to the at recent Telco. expect that's market years, of had a kind I challenged we challenged.

we to hard the not not the because given what in outlook, have an our at QX in. expect In environment it's certainty. don't they're increase in this point. I spend predict with flushes we that assumed So But Telco see that's just

Michael E. Genovese

Thanks question. for Okay. the

Rami Rahim

Sure.

Kathleen Nemeth

Mike. Thanks,

Operator

and go next our from Paul And Please Silverstein is from Cowen ahead. question Company.

Paul J. Silverstein

hear you Rami, can me?

Rami Rahim

Yes.

Kathleen Nemeth

ahead. Yes. hear We Go Paul. can you,

Paul J. Silverstein

Appreciate it.

Rami Rahim

Go Paul. (XX:XX) ahead,

Paul J. Silverstein

I'm and if yourself just returning you're again. understand, want that I What's one the you advising catches when sure didn't to Cloud at issue, opposed Cloud number and this I'm than the question as why their and more yet for unaware. make than then to then of you the the But you customers, issue, operators that to some said see the it then But to the you is changing I and previously. of perhaps wouldn't apologize – across drove confused different, reconciliation? architecture, yourself, least drove change more misinterpreting a Ken... I you you And you player, disrupting stuff say why one

Rami Rahim

Yeah, (XX:XX) Paul...

Paul J. Silverstein

gross customers in – Thanks, us us you just can I margin, margin remind gross remind think past average, your the you said or Cloud of the (XX:XX) corporate that? you the have same On that guys. can

Rami Rahim

we the embracing did, solution going deploying sort we question again, just overall with Paul, these we're of and they the predicted new not in to all What our of meaningful and eye seeing take your large to which it in customers the the can products they customers did could vertical and Cloud and are to at many fact, nimble – to we And not predicted predict Cloud size why and have mind despite be this, doesn't pace an in and that the the how their that approaches. the have plans evolve. because make transition impressive in bulk not about the that's honestly, business. vertical our a for yes, where mean, keep the it's architectural large moved. themselves change develop why timing the change architectures that have could happening, And is I is it's

Ken Miller

more transition, architectures, there as what in just itself clarify, does architecture ramps right? we're this margin future. they drive Cloud previous to Yeah, by So say the perspective, doesn't and What you seeing On pause into margin the the said continue slowed we're the in new technology. get the vertical and to I a gross difference. have vertical between is dramatically for – a what if down customer is the will, seeing ready than want is we've spend margin

a switching product not margin had higher it's the larger – as example Telco customer a mix has has historically but vertical a Cloud this profile, the has because due than really So to at lower an point. vertical

Paul J. Silverstein

Thank I you. appreciate it.

Ken Miller

Sure.

Operator

is from question Fargo. Aaron next Please Wells from Rakers Our ahead. go

Aaron Christopher Rakers

we curious market, of again, cycle for of look positioning how your router particularly I'm about based landscape, question. the the on side kind competitive and the product Jericho their Kind the of just launching as relates Thanks or think business? we of platforms cadence, taking as should guys to the it on II Plus pushing competitors Yeah. as some competitive at the into Jericho

Rami Rahim

Certainly.

believe are in from software the really our Cloud roadmap We to that all we the competitive customer's PTX where happening around us, aware think can invest by start our verticals traction where again and some like time. that in mean, developed silicon with are product, is for case of we perfect the wanted and especially space customer's, you to good telcos dynamics of the and I and architectures. is momentum and the to be remain what the So that standpoint, the competitive keep and and sure the we're focus, we'll footprint. be now us here in going space more we ways actually to Cloud particular, keenly other which ahead space enterprise very we get believe gain in to I capabilities customer's enjoyed make in PTX that The be where Cloud a encouraged the this Routing, of also as I I over the with PTX, continuing will of to the blend large evolve And Switching requirements, competition. what Routing that –

Aaron Christopher Rakers

kind company? you the reductions? as out to realignment realignment expense you truly on a Okay. this of a expecting follow-up. of or investments, do have take efforts, are or of Is I'm real reinvestment curious any just targeted the quick And costs operating

Ken Miller

see our And revenue with side in are in revenue I revenue. to protect it's have operations. with costs that as as largely optimize going kind gross line manage and top costs margins our so for largely OpEx been of We're we out would continue the head Yeah, count to bottom line. we and going the to and say expectations. we matter, challenges that look we line to to out take taking

hurt of a is right that's business, area, on save it Going forward making are really areas and what past don't in management, come do down that challenge We've money, doesn't really consolidating long-term in goes focused and that in collapsing to the the the output. investing the so where ideas. operational but lot sure the focused way a we that we're same growth the expense doing at also excellence and done on on cetera, et at of the –

what So focused that's we're really on forward. going

Aaron Christopher Rakers

Thank you.

Ken Miller

Sure.

Operator

the This Thank for the you. turn over back concludes question-and-answer session. any I'd closing to management floor comments. like to

Kathleen Nemeth

great you, Operator. you, everyone, And questions. for us Thank and your joining Okay. thank

with always, you we'll speak Thank As you. quarter. next

Operator

This concludes your today's Thank for you participation. teleconference.

time. You may at this disconnect your lines

Juniper Networks (JNPR) 24 Oct 172017 Q3 Earnings call transcript