Juniper Networks (Nasdaq: JNPR) is ready to do some holiday shopping in spite of its net income dropping 38% in the third quarter over the same period a year ago. CEO Kevin Johnson attended a technology conference in Hong Kong on Monday where he told a reporter, “If there are interesting opportunities that have strategic alignment with what we are doing and make economic sense, we're very open to M&A [mergers and acquisitions] and companies in Asia.”
Echoing what he said in Juniper's conference call last week, Johnson added that he is very interested in companies that can enhance Juniper's broader market opportunity in “... the two key trends of mobile Internet and cloud computing.”
Johnson pointed out that with Asia contributing one-fifth of Juniper's revenues, that market is becoming more critical to the company's potential. “We continue to see Asia growing faster than other regions,” he said.
Acquiring minds
The company has been on somewhat of an acquisition binge, buying five software firms in 2010. Those included a mobile device security software developer, two companies that produce streaming content delivery software, a maker of security software for virtual servers, and a provider of wireless LAN management software.
Juniper knows it can’t stand still in the highly competitive network infrastructure marketplace. Its biggest rival is Cisco (Nasdaq: CSCO), which is pounding away at it in the hotly contested data-center fabric market. (This is the new and complex data center parallel switching technology that is becoming an important component for cloud computing.) Other competitors for this market are Brocade (Nasdaq: BRCD) and Hewlett-Packard (NYSE: HPQ).
Juniper is also competing against Alcatel-Lucent (NYSE: ALU) and ADTRAN (Nasdaq: ADTN) -- as well as Cisco and HP -- for sales of traditional network switching and routing hardware, and the systems which manage them, to telecoms and other service providers.
So, in spite of Juniper's earnings disappointment, the company can't afford to skimp on its research and development budget. One billion dollars is the figure Johnson said the company would spend this year on R&D. That will come out of the $3.1 billion it has on hand in the form of cash and investments. That should leave enough for some judicious company shopping.
It's probably a good thing Juniper doesn’t have too much cash on hand. It might be tempted into buying something as far off the radar as, say, what Cisco bought with the $500 million burning a hole in its pocket. I’m talking about the Flip camcorder. I'm just saying.
Meanwhile, back to earnings ...
During last week’s earnings conference call, Johnson attributed Juniper's failings to the challenging macroeconomic environment, which made customers more careful with their capital expenditures. And in Hong Kong, he warned that macroeconomic conditions are probably not going to get any better by the end of the year, likely becoming worse than they were in the fourth quarter of 2010.
But macroeconomic threats -- balance of trade issues, currency fluctuations, sovereign debt crises, etc. -- may endure less than the more-permanent threats of stiff competition from Juniper’s rivals and the speed at which technologies change. Therefore, the hunt for that techno-edge just can't stop.
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