Jittery Juniper (NASDAQ:JNPR) shares couldn't decide where to turn after the company reported better-than-expected second-quarter results, but then gave disappointing guidance for the third quarter.

As the first major network equipment provider to report results this quarter, investors had hoped for positive comments from Juniper regarding the future of the beleaguered industry, but they'll have to keep hoping.

In the second quarter, the networking company earned $0.03 per share, or $14 million, up more than 50% from last year's same quarter on a 41% rise in sales to $165 million. For the first six months of 2003, it made $17.3 million, or $0.04 per share, on $322 million in sales -- a vast improvement over last year's $40 million loss over the same period.

But that's where the good news stopped.

In the conference call, management suggested third-quarter sales would be flat, largely due to lackluster prospects in Europe, home to Juniper's largest customers, Ericsson (NASDAQ:ERICY) and Siemens (NYSE:SI). This news comes after Juniper had seen respectable consecutive revenue growth during the last three quarters.

New partnerships with Microsoft (NASDAQ:MSFT) and Lucent (NYSE:LU) helped in the second quarter, and the company saw further improvement in U.S. sales by signing a multiyear contract with Verizon (NYSE:VZ) and gaining more business from BellSouth (NYSE:BLS). (Chief competitor Cisco Systems (NASDAQ:CSCO) also serves these two.) But a lack of other new deals on the horizon keeps a lid on near-term prospects.

Juniper's cash from operations rose to $73 million in the first six months of 2003, up from $40 million last year. This made its past six months' free cash flow leap to $63 million from just $19 million in the first half of 2002. The company has $800 million in cash and investments, bringing its enterprise value to $4.3 billion. That gives it a very steep valuation multiple unless (and until) free cash flow can more than double again. That'll at least take patience.