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Downturn starts to impact network numbers

Alex Scroxton

Stock in Juniper Networks has slipped after the company reported preliminary financial results for its Q4'08, warning its sales growth has come in below previous estimates, amid mounting evidence that customer spend on networks is slowing in some areas. 

The network industry has so far portrayed itself as a bastion of resistance against the recession, but some players are clearly starting to see the effects. Speaking to Reuters, CEO Kevin Johnson said nobody had seen this kind of economic cycle for at least "two generations" and he expected more delayed orders to hurt sales further in 2009. 

Analysts had expected the networking manufacturer to make fourth quarter sales of around $936m, but actual revenues will actually come in at $923m, up 14% year-on-year, according to Juniper. Non-GAAP net income is up 19% to $169m. 

The figures were impacted slightly by $3m of deferred revenues from Juniper's Japanese business, where a routine audit last year uncovered evidence that its channel had been cooking the books. 

Industry eyes now turn to Cisco, which is set to release its second quarter numbers next Wednesday. Shares in the networking goliath have already come under pressure ahead of its announcement after analysts at Barclays Capital and Robert W Baird cut their forecasts this week. 

RW Baird's Kenneth Muth wrote: "Near-term we see downside risk due to continued deterioration in fundamentals and the extent of global contraction," suggesting that Cisco could see its revenues down sequentially by up to 8%.


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