April 23 (Bloomberg) -- Juniper Networks Inc., having bowed to pressure from activist investors to cut expenses and increase cash payouts, is finally focused on boosting sales.
The maker of computer-networking equipment said yesterday that first-quarter revenue increased 10 percent from a year earlier to $1.17 billion, exceeding the average analyst estimate of $1.15 billion, according to data compiled by Bloomberg.
With telecommunications companies upgrading their networks to accommodate rising wireless Web traffic, demand for Juniper’s routers is increasing. Phone service providers supply more than 65 percent of revenue for Juniper, which is second in the networking-equipment market to Cisco Systems Inc.
“They seem to be holding their own,” said Jason Ader, an analyst at William Blair & Co. in Boston who has the equivalent of a buy rating on the stock. “People are getting comfortable with change, because there is a lot of change.”
For the first three months of the year, Chief Executive Officer Shaygan Kheradpir, who took the helm in January, was in cost-cutting mode. Juniper said on April 2 that it’s eliminating 6 percent of its workforce, or about 570 jobs, and ceasing development on new products, after hedge funds Elliot Management Corp. and Jana Partners LLC pushed the company to improve its cost structure.
Juniper spends about 22 percent of revenue on research and development, compared with 12 percent at Cisco. The company pays its engineers the most in Silicon Valley -- an average of almost $160,000, according to a study released in October by job-search site Glassdoor Inc.
Juniper shares gained 1.9 percent to $25.89 at yesterday’s close in New York. The Sunnyvale, California-based company’s stock has climbed 15 percent this year.
Restructuring tied to job cuts and other steps resulted in first-quarter charges of about $122 million. In addition to reducing expenses by $160 million, Juniper agreed in February to return at least $3 billion to shareholders through stock repurchases and dividends.
Net income in the quarter rose 22 percent to $110.6 million, or 22 cents a share, from $91 million, or 18 cents, a year earlier, Juniper said yesterday in a statement. Sales to service providers rose 10 percent to $782.7 million.
Kheradpir had been on the job less than two weeks when Elliott, run by billionaire Paul Singer, said it had amassed a 6.2 percent stake in Juniper and demanded changes. The company was also pressured to alter the composition of its board. Juniper has proposed adding Gary Daichendt and Kevin DeNuccio, both former Cisco executives.
“We’re coming out of it stronger and the best days are ahead of us,” Kheradpir said in an interview after the earnings announcement.
The CEO’s challenges aren’t just financial. Juniper and Cisco said this month that some of their routers, switches and security firewalls are susceptible to the Heartbleed Web-security bug recently discovered by researchers at Google Inc. Juniper said it issued a patch for its most vulnerable products that feature virtual private network, or VPN, technology.
Revenue in the second quarter will be $1.2 billion to $1.23 billion with adjusted earnings of 36 cents to 39 cents a share, Juniper said. Analysts on average predict sales of $1.21 billion and per-share earnings of 36 cents, according to data compiled by Bloomberg.
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