瞻博網絡 (JNPR) 2002 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Juniper Network 3rd quarter conference call. All participants are in a listen-only mode. We will conduct a question and answer session. At that time if you have a question, press 1 and 4 on your telephone. This conference is being recorded Thursday, October 10, 2002. I would like to turn the conference over to [Randi Paikoff], Vice president.

Good afternoon and thank you for joining us. With me I have Scott Kriens our Chairman and CEO and Marcel Gani our CFO. If you have not yet seen the press release it can be retrieved at www.juniper.net. Today, Scott will discuss the 3rd Quarter highlights, the status of the acquisition integration and a few comments regarding the strategy in the markets we are serving. Following Scott's comments Marcel Gani will review in detail the final financial results for the 3rd quarter ending September 30. Before I go to Scott, I would like to remind you the matters we will be discussing today will include forward looking statements and as such are subject to risks and uncertainties we discuss in detail in are forms 10-k and 10-q filed with the SEC which identifies important risk factors that could cause actual results to differ from those in the forward looking statements. Scott?

Thanks, Randi. Good afternoon to everyone. Today I'd like to address three specific items and then following my comments, Marcel will review the financial results in more detail. First I will comment briefly on the 3rd quarter and the results that is we posted today. Then I will discuss the integration of the acquisition given that we close the transaction on the first day of the 3rd quarter. Finally, I would like to share some thoughts regarding our strategy in the market we are serving.

First to the quarter's results. Revenue was $152 million and pro forma earnings per share was a loss of two cents both of which are in line of the guidance we gave in July at the outset of the quarter. We are particularly satisfied with the execution of our quarterly plan, given the additional focus required over the last three months on the acquisition integration as well as on a broader front.

The overall challenges we are all well aware of in the current market place. We recognize revenue on a total of 907 units this quarter and shipped 17,325 ports. One similarity to last quarter was that we once again did not have any individual and customer represent 10% of the revenue during the quarter, but we are pleased to report that we had two channel partners represent at least 10% of revenue, both Ericsson who turned in their usual reliable performance as a partner and Siemens new to Juniper as a partner as a result of the acquisition. Ericsson continues to be a very strong person of Juniper's and the commitment of both companies to the relationship is solid.

As we see many opportunities to sell best in class IP solutions to carriers and service providers throughout the world. We are also very pleased with the Siemens relationship. This is the 1st quarter where we worked together and these results reflect the early benefits of the partnership. Not only have we executed on the integration of the acquisition which I'll talk about shortly, but we showed business continuity to our customers where the judges who matter most will ultimately measure the success of the integration effort.

While on the subject of partners, we continued to see success from both Qwest and WorldCom as channel partners as they continue to focus on selling managed services to their customers. We continue to win mind share in the most strategic accounts around the world as the major established providers select Juniper Networks for IP offerings. The examples of these in each of our three major theaters. First, in North America, I'm very pleased to be able to inform you today that Bellsouth has chosen Juniper Networks as a strategic technology supplier. By selecting the t640 for the core of their next generation IP NPLS network and we recognize revenue from Bellsouth this quarter. This is a part of their continued network transformation initiative.

Also the United States Department of Energy's Global Resource Network team with Juniper Networks to deploy a simultaneous IP version 4 and IP version 6 operation and we announce that Canary, the Canadian network for the Advancement of Research and Education is deploying M40E and M20 routers in the national next generation network which connects more than 2,000 Canadian institutions with voice or vidio data capacity. In Asia Pacific where we saw very strong activity for the quarter, we had deployments in Australia as part of the expansion of the private IP broadband and metro networks Tellstra Clear, New Zealand's second largest full service communications company is deploying a combination of e series and m series routers to provide secure, reliable IP infrastructure in service to their customers and in China, we announce multiple deployments of e series routers, Citron telecom, Nuam Telecom and Shang Hi Telecom.

They are three provincial branches of China Telecom which is the country's largest telecommunications operator. In addition China Netcom will deploy the e series routers as part of a network expansion across the inner-Mongolia province of China, which is North China's largest communication network. In Korea, Korea telecom, the world's largest provider of advanced broadband services with more than four million subscribers deployed additional m 20 routers to alleviate capacity demand throughout the national highspeed backbone network called pub net. FK telecom selected M Series routers to ensure the delivery of voice over ip services to more than 7 million mobile customers throughout the country.

In Japan, [Chuguku] Information Systems Service Company which is the telecommunication arm of [Chuguku] Electric Power is deploying the E Series router to deliver high speed fiber to the home services to residential customers in the region. Just this morning in Singapore, Singtel announced a significant expansion of its broadband network capacity usin E Series routers. The new extension supports the introduction of DSL wholesale services and uses E Series virtual routing functionality targeted at supporting Singtel's wholesale ISP customers. In Taiwan, the [Yow Gin] Technology Corporation which is the leading Taiwanese service provider announced they will deploy the G Series CMTS and E Series routers to build a multiple internet service provider cable network capable of delivering advanced IP subscriber services to its broadband cable subscribers.

Here is a great example of the Juniper leverage strategy. This is a new customer in a new market and buying new products and integrating across the product portfolio for comprehensive solutions. Elsewhere in the world, in Sweden, Ericsson and Juniper Networks announced an agreement to expand the capacity in the European network global operator Telea, Telea International Carrier. Ericsson will deliver IP core backbone routers based on t 640 internet routing node as part of the verified and pretested packet backbone network solution. Comham, the swedish cable operator in conjunction with our partner Scientific Atlanta announced a deployment of g 10 to deliver services to more than 1.4 million subscribers across Sweden. The Luthuania Teletom deployed E Series version SDX 300 service deployment system to offer business and residential subscribers a wide range of broadband services and solutions like teared internet and rich media services on demand.

This morning we announced that Telenor, Norway's leading provider of broadband services for the private and business markets has deployed Juniper's Network's SDX 300 service deployment system as well in their nation wide ip network. The combination with the previously installed e series routers and the SDX 300 system enables them to customize broadband service to the needs of each individual subscriber. Across Europe, one and one internet, the European web hosting company deployed a network based on Juniper's m 20 and m 40 routers to provide reliable web hosting services. As you can see, a lot of activity throughout the world supported by not only our direct efforts, but Ericsson and in many of those Siemens as well.

There a couple other highlights I would like to mention from the 3rd quarter. In July we announced an addition to the T Series routing family. In the 1st quarter we announced the t 640 and then the t 320 router. The T 320 allows service providers and carriers to realize the same benefits of the t series family, but on a platform that's right sized for immediate needs and provides a cost-effective path to bench the interface capabilities. The benefits include rich services and ability to scale the bandwidths without service disruption. Industry-leading interface densities and most importantly in today's environment and I will talk about this later, unparalleled asset longevity and asset life.

Separately, we announced the latest addition of the G series line of the high performance cmts or cable modem termination systems for the cable industry. This latest announcement being the G 1 CMTS. It offers the highest bandwidth and delivers the highest RF performance for cable modem services. It's 1.0 and 1.1 compliant and certified. Separately, teams from Artphez, Dante, Red Iris and Juniper recently succeeded in breaking the IT version 6 performance record. We achieved speeds at more than 30 times faster than the previous record. The team transferred a single stream of data at a rate of 483 million bits per second over a distance of 2500 kilometers on a network from Slovenia to Spain using the ip version 6 protocol and the Juniper M Series routers.

Then finally on the management front, we announced the appointments of our data sales team under the leadership of Jeff Lindholm, our VP of Worlwide Sales. and his global sales management team of Don Pile in North America, Adam Judd in Asia pacific. And Tim Lane in Latin America. Those are the gentlemen who brought you the results we are announcing today. That brings me to the subject of the over all status of integration of the acquisition.

The first comment to make is that the customer reaction to the speed and the focus integration has been overwhelmingly positive. All customer faces systems and documents and web systems are fully integrated are transparent to customers and reflect Juniper Networks with customer service, invoices, quotes, etc.. We discussed the product strategy last quarter and we are moving ahead as planned. I will not go into that detail again here. We are seeing benfit to the expanded portfolio in the form of customer wins based upon confidence. Both on the products we're shipping today and the road maps we defined for the future.

In Taiwan, they're a great example of this. They are a new customer and a new market buying new products and the g series platform as well as integrating the e series. Over all, we have been pleased with how quickly the integration has progressed and believe it's a reflection of many things. First of all, the correctness of the decision to put the two companies together to begin with, the common design philosophy and product development organizations and across the company, the shared values and culture of execution that exists in both companies prior to bringing them together. And so to the third of my topics, a few comments on the market and Juniper's strategy.

First the market. We are witnessing a clear change in behavior in the market. The change is from the legacy systems and spending of the past to the new networks, the next generation of infrastructure and services that will define success in the years to come. This is a subtle change to see perhaps because it's masked by the fact that absolute spending is down. The percentage allocations of these amounts is shifting from the old to the new. We have seen unprecedented scrutiny on capital spending by customers. That prioritizes the criteria of investing with long useful lives. The scrutiny makes them form harsh decisions when evaluating legacy investments versus the next generation infrastructure and to gain maximum benefit for the investment of scarce capital.

Customers will look into the future and network decisions like the one made at Bellsouth are a confirmation of this. When the case studies and histories are written, market conditions in the networking industry today will have proven to be an accelerator in moving us into these new networking models faster. Actually, it's not really disputed as to where we are going. There will be a single converged infrastructure that will be packet-based and accessed by fiber, copper, cable and radio. There will be billions of users and devices on this infrastructure and it will be smart enough to identify each one of them uniquely if necessary and handle individual requests and needs in accordance with their ability and willingness to pay for the services. This is not the debate.

The debate and the money to be made by all participants is engaging the time frames involved and the path and the pace of the migration. These times of scrutiny when every dollar has to be spent so carefully, surface questions about the future and the life of decisions made today, the ultimate destination that is will be important to customers and the questioning in these times results in more being spent on the new than the old, given that there is not enough money to invest in both. So to our strategy in the face of market observations, basically we are turning three knobs today at Juniper. We label them financial discipline, market coverage, and innovation. Each of these must be set with respect to the other. Too much innovation at the expense of financial discipline will do harm. Protecting short-term financial possibilities while sacrificing market coverage will not position us for the future and so on.

What we are managing to achieve the proper setting of these 3 variables, each in relation to the other. We currently enjoy an innovation advantage and extended it this quarter with the product introduction I spoke of earlier. We are financially strong and seeing many companies formed in recent years suffer the brunt of failing to maintain this priority and in most cases that failur will not be recoverable. Finally and most importantly, we are winning in the marketplace with our customers around the world.

We saw success in China, Korea, Japan, Sweden, Canada, as well as here in the U.S. We are seeing success with both incumbent and new carriers. We include among our customers 22 of the top 25 operators around the world, measured by Cap-X spending levels. These customers successes are far more important than the numbers represent, measured as initial contract values, because they represent the capture of rack space, the equivalent of shelf space in the retail world.

Owning the shelf or rack space is the key to being positioned to participate to the maximum extent possible when the market turns. It is true the shelf space is not delivering returns because of many factors. There is existing capacity in the network today and usage and growth is less than some people hoped, but through all of this demand has been steady and we currently see networks growing at an annual rate of approximately 70-100%.

We can't find anyone who is using the network less, e-mailing with fewer attachments and disassembling supply chains. In all cases exactly the opposite. No matter what one believes about the other factors, 100% annual demand growth will produce the consumption of the products on the shelves and demonstrate the value of that space when future orders are placed to restock those shelves.

To sum it up, this is going to be a long race. We will continue to grind it out as we did in the 3rd quarter. I would describe my attitude about the results as one of satisfaction and not celebration. We will celebrate when we have solid financial growth and will be satisfied in the meantime with customer growth. We will achieve relative success by continuing to improve product position relative to competitors and by continuing to improve with customer , both new and existing, and maintaining the deployment and commitment to a financial position that improves relative to other in the marketplace every quarter and will position the company to participate as the recovery materializes.

The gap between the winners and losers is increasing in challenging times such as these and it never has been easier than it is to pick the winners of tomorrow. We are committed to realizing the clear opportunity to be one of the winners. The right companies with critical mass in the right markets and the right products to continue to focus and continue to execute will have repeatable results, even in markets as challenging as these we see today. They are not acceptable to depend on market conditions to run a business successfully and it's a requirement of successful companies today to execute now and deliver results in the midst of the current uncertainty.

That's our commitment at Juniper and one on which we will deliver. I would like to thank and recognize our employees for continued commitment and focus on achieving these results and execution of our plan. I would like to thank our long term shareholders, partners and suppliers for continued confidence in Juniper Networks. I will turn it over to Marcel.

Thank you, Scott. First I will review the pertinent income statement items and balance sheet and then I'll discuss the business plan for the 4th quarter. I will refer to the pro forma numbers for the 3rd quarter which excludes the amortization of tangible and stock compensation and process R&D and restructuring and other operating cost. One-time integration cost, a gain on debt extinguishment and loss of equity investment.

The total revenue for Q3 is $152 million. This obviously not includes the E Series from the acquisition that closed on July 1. We did not report the Q2 results for the e series as it was not part of Juniper, however total revenue of the combined company would have been flat from the Second quarter to the 3rd quarter. As a way to measure the success of the acquisition, I would like to share with you today the e series contribution revenue which was 47.7 million or 37% of the product revenue.

On a going forward basis, we are not managing the business to optimize any one particular strategy, either the e, m or t series and will report combined numbers. With WorldCom, we deferred $5 million in the 2nd quarter and we also shipped additional product to WorldCom this quarter. We have been paid partially for the product shipped in Q2 and using the remained deferred balance to $3.6 million and have been paid fully on the product shipped in Q3. The majority of the product were resold for managed service business. It is important to know that Worldcom continued to earn both existing and new business in the market place and remains a strong partner to the customer and Juniper.

The service revenue was $21.8 million. We expect service revenue to continue to be a profitable revenue stream going forward. The book to bill ratio was one in the quarter and the e series and m and t series were up approximately at one. As Scott mentioned, we had two channel partners represent greater than 10% of revenue. Ericsson and Siemens. Our international revenues were very strong and continue to reflect the lumpiness of our business due to the success of Ericsson and Siemens in Europe and Asia.

In an effort to provide you with more information, we would like to share detail with the international mix and continue to do so going forward. Asia showed the most significant growth, 30% of total revenue. Europe represented 22% and while the Americans were the weakest with 48% of total revenue. Revenues for the direct sales force consisted of 32% for country's specific distributors. Gross margin with a charge of approximately 5.1 million due to the purchase accounting rules regarding the amortization of backlog and inventory was 54.7%. The gross margin excluding this charge would have been 58%.

Turning to the expense side, the R&D expenses were 48.8 million and 32% of total revenue. Sales and marketing expenses were 37.7 million and accounting for 25% of total revenue. G&A expenses were 9.1 million, 6% of revenue. Excluded from the pro forma income were the amortization of performed intangible and preferred stock compensation with preferred stock restructuring and other operating costs. Integration cost, again on debt extinguishment. Total operating expenses were at 95.6 million or 63% of total revenue.

We will continue to focus on the financial fundamentals on expense management and I will discuss it further as it pertains to our guidance for the next quarter. The operating loss was 12.5 million and other income totalled $176,000. This was in line with expectations due to the gross margin charge and lower cash balance. The interest income was due to the realized gain on the sale of long-term investments in order to provide the cash payment for the acquisition.

We had a tax credit of 3.9 million for Q3 due to the loss position. Pro forma net loss was 8.4 million and pro forma loss per share was 2 cents, consistent with original guidance. Pro forma net loss would be 1 cents excluding the gross margin charge. Including the amortization of purchase intangible and preferred stock compensation of 8.7 million and process R&D of 83.5 million, & restructuring and other operating expense of 22.8 million and a gain on the debt extinguishment of 62.9 million and losses of 19.9 million with a net change 74.5 million and the net loss was 88.3 million or 23 cents per share. If the acquisition was included, total revenue it would have been flat from Q2 to Q3.

Operating expense would've shown a decline of 6.4 million to 95.6 million which reflects the 1st quarter of cost savings associated with synergies of the acquisition. A net loss in Q2 would have been 12.8 million compared to the 8.4 million loss reported in Q3. Now a few comments on the balance sheet.

Cash, cash equivalent and short and long-term investment totalled approximately 1.2 billion. The primary decrease associated was with the 375 million payment for the acquisition. At the time of the acquisition, the reason for the use of cash was to use a technique to repurchase stock as opposed to causing a higher level of dilution. In addition we made a decision to buy back the notes during the quarter. We used $146 million of cash to buy back 208 million of bonds, a 66 million increase in net cash while reducing the debt liability as well as future interest payment. Total cash charges related to the acquisition were approximately $25 million. Excluding the interest payments on the convertible of 27 million and the cash charges associated with the acquisition, total cash flow was approximately a positive 10 million.

Accounts receivable was 74 million and ndg was 44 days, better than our goal of 55 to 65 days, reflecting focus on collection and cash flow. As we said, we do not believe this number is sustainable in light of the increase in the international portion of the business. Deferred revenue was 45 million, up from 32.5. This was because of the e series and m series service revenue. We ended the the quarter with 1,658 in total head counts up from 1215 at the end of last quarter. This includes a 600 employees acquisition and a July lay off. I was pleased with the integration acquisition given the process went as smooth as it ever has. Despite the complexity, we were able to close in one day.

I would like to thank the organization for an outstanding job and all of the system and a flawless close process. Now for the goals and guidance. We will continue to focus on the financial fundamentals going forward and visibility remains limited and it is difficult to give extended guidance. We can't predict the level of business, but we are managing to financial plan and we would like to share with you. Assuming we will be able to get revenue equal to the 3rd quarter.

We expect our gross margin in the 58% range while lowering operating expenses by about 2 to 3 million across all areas of the company. Due to the increase in cash balance and lower interest rate, we expect the net to interest expense of approximately $2.5 million at a tax rate of 32 percent. We expect shares for Q4 to be around 375 million and 390 million respectively. Taking all of this into account, we expect a pro forma net loss per share of one cent in the 4th quarter. This remains in line with the guidance we given at the time of the acquisition regarding in 2002. Positive cash flow continues to be a primary focus as it relates to fundamentals. We expect cash flow from operation to be positive in Q4. We would like to take your questions. Please limit yourself to one question per person. Thank you.

Can you instruct the audience with the queueing process.

If you would like to register a question, press 1 and 4. You will hear a prompt to acknowledge. If your question has been answered and you would like to withdraw, press 1 and 3. If you are using a speaker phone, pick up your hand set before your entering your request. One moment please. The first question is from the line of Lisa Vogerty with CS First Boston.

Can you hear me okay?

Yes.

I'll stick to one. On the announcement, can you give us a sense of where you are on the timing of that project whether it has been shipped in this quarter or the middle of being shipped or going to be shipped? Thanks.

It's Scott. With regard to the project, Bellsouth has chosen Juniper as a strategic supplier and primary purchase of t 640s for the core of the next generation ipmpls network and the product was shipped previously and revenue was recognized and included in the results we announced here in the 3rd quarter.

Thank you.

Next question.

The next question is from Samuel Wilson from Merrill Lynch and Company.

Good afternoon. One from Marcel and one from Scott. Can you give us a sense of where there is the most activity going on today. Not necessarily the most revenue produced, but where is the most excitement going on today? You mentioned the cash flow positive in the 4th quarter. I wanted to clarify, is that with the interest payment that is you have to accrue every quarter or without? What's your Cap-X expected to be?

We will only answer one per person so I will let Scott answer the question.

Sam, activity across the three regions is actually harder to discern or differentiate. There is significant activity in North America. That is not reflected in the results or at least in the percentage contribution to the revenue in the last quarter. As your question suspects, the activity level is different than willingness to spend. We did see the strongest growth in terms of revenue as a percentage out of Asia Pacific. The activity level in North America remains quite high as it does in Asia.

Thank you.

The next question comes from the line of Steve Coffler with Wachovia Securities.

Marcel, other accrued liabilities went up a good amount. Can you tell us what's in there.

There is obviously over the barrel-type of accrual in there. There a various type of tax liability there being accrued. As part of the combination, we took the a crude liability that is we are on the balance sheet and add them to our balance sheet.

Next question.

The next question from Nicko Seiodobopolis from UBS Warburg.

Can you give a sense of Siemans and Ericsson being the two largest customers, my sense is given that Siemens was a big channel partner for units here, did they sell a lot of non-unisphere product this quarter? Can you comment on that and as an extension, Siemens does have a large enterprise business globally and do you know if they are planning to market your product as part of their portfolio of products there. Thank you.

This is Scott -- Siemens both on the revenue and the bookings front was basically uninterrupted by the acquisition and in fact some of the contribution on both revenue and bookings front was consisting of m and t series products. The mix is predominantly e series as you might expect in the quarter immediately following the close of the transaction. There was activity in the other product lines through Siemens as well. Most of the business that has been done across the company of course and the focus of the company remains on service providers and doesn't preclude areas like research and education and federal government and state and local and other opportunities that come along. So we see business in those regards, but the primary focus and the primary contributor to the results is and has been with Siemens and remains to be service providers.

Thanks.

The next question is from Tim Luke with Lehman Brothers.

I was wondering at the geographic mix, if you can give us a sense of how that compares to the 2nd quarter had. Obviously a change in the entity, but how it compares to the region and how that compares going forward.

In terms of the 2nd quarter, our results were about 54% Americas, 31% Europe and 15% Asia pacific. Obviously that is kind of not apples to apples exactly. What we will continue to see and one of the attraction in integration is there was a good complimentary between the strength that we had on the m and t series in North America and the strength that the e series had over seas and we will continue to see the balance of half and half with a strong emphasis on the international channel.

It looked like a big Asian ramp. Is there anything to add on that side in terms of significant wins there?

Most of the announcements just measured in raw numbers were in China, Taiwan, Asia in general. Japan as well. I think what's probably misleading in the percentage comparison is the fact that a significant percentage of business prior to the acquisition came from Unisphere.

Next question.

This is Eric Suffagrew from Pacific Growth Equities. Go ahead.

Can you comment on the Bellsouth deal. Give us a sense for the size of this and I know you shipped some, but can you tell us if there is more to ship or in the way of follow-up opportunities.

Eric, it's Scott. What we can say about Bellsouth aside from the choice in terms of application at the core backbone with the t 640s and importantly, the IPMPLS construct of the network design which we think is representative of where the world is going. It was a very rigorous and very thorough test process that preceded the decision and one that required a great deal of work on our part as well as theirs. Other than that, it's never been our practice nor would it be to comment on volumes or plans of our customers and such. There is a network transformation initiative, but otherwise the comments would have to come from them.

Can you comment as to whether or not you completed the initial agreement for shipments?

No. Any other comments would come from Bellsouth.

The next question is from Gina Sokero with Buckingham Research.

When I calculate out using historical margins on Juniper only business, I get a 56% margin on Unisphere. Given that most of this goes to the channel which should have a lower margin and most of the Unisphere boxes we see compete in a market with about maximum 30% growth margins. Could you comment on why it's a 56% margin and whether it's sustainable?

I'm not sure how you get to the numbers. I think the business model for the e series as well as the m and t are the same in terms of margins being higher on the interface as in the focus we have on interface. When we look at the projection and the cost and we look at the mix and that's how we arrive at that. The guidance for this quarter was fairly accurate on gross margin and we used the same technique to project it forward for the next quarter.

The next question comes from the line of Ross Surkantz from Deutsche Bank Securities.

One short question. In terms of deferred revenues of 44 million versus last quarter, can you give us in terms of the Unisphere for the last quarter.

Most of the increase in deferred revenue came from service revenue. You probably know that when we invoice for a service contract it's a one or two or three-year contract. The revenue is taken as the service period takes place. The big increase there was obviously a piece of it was coming from the E Series service revenue that was not there before and some of the m series as well contributed to it.

Would you say it's pretty minimal?

I wouldn't say it's minimal. Both were a component in the increase.

Thank you.

The next question is from Tad LaFelton from Needham and Company.

I was wondering if you can give us clarification on good will and intangibles balance at the end of the quarter and what the restated units would have been for the 2nd quarter portfolio, in terms of the intangible and good will, most of the other long-term assets of a billion 20 is the combination of good will and intangible and intangible will get amortized between two and six years.

More of an average period of about 5 years. I'm not sure what your question is in terms of the pro forma restatement.

907 units and the 17325 ports for this quarter. What would they have been last quarter on a combined basis?

We don't have that break down.

Thanks.

The next question is from the line of Reg King. Please go ahead.

I was wondering if you can give us more on the revenue. If you could just review what the revenue was with and without Unisphere.

We indicated that the e series contributed 47.7 million of the total revenue.

Great. Thank you.

The next question is from the line of David Jackson with Morgan Stanley.

Thanks. Quick question about the number which you gave out for the internal plan for next quarter. Can you give us some idea as to how you see tje breakdown between unisphere and Juniper revenues with the e series and as a subsidiary to that, Marcel, I know you mentioned that the e series accounted for 47.7 million in revenue for this quarter. Were there service revenues associated with unisphere and are they included in that 47.7 million?

David, in terms of the projection, it's hard to project in this environment . No reason to see a significant shift and hard to project the total, let alone the pieces there. I'm sorry, what was the other part?

Does the 47.7 million from the e series in this quarter include service revenues or were there other service revenues for unisphere in addition to that number?

The 47.477 was products revenue.

How much was the service revenue?

We don't have a break down.

Next question.

The next question come from Olak Shaw with Pacific Crest.

Can you talk about 271 and if Bellsouth will use that for 271.

This is Scott. I can speak generally, but I can't comment on any particular region or customer plans. We see a significant opportunity across the country to be a participant in supplying service based on relief. There applications throughout all regions to achieve that deregulation. That is one of the main opportunities that we see and the insertion points for ip and networking. We're optimistic about the climate from regulatory perspective and the likelihood of seeing state by state relief continue and accelerate.

Thank you.

The next question is from the line of Subu Sevranium -- with Goldman Sachs.

Scott, could you talk about different product areas. You talked about the MT and E can you talk about the J and G. What kind of traction have you been getting in that space and where are you in terms of goals of getting a split in products and other markets? Thanks.

With regard to where we see things across the market front, clearly we see the media more edge-based and services-based opportunity than in the core. That's a little bit misleading because in the core, one of the main objectives our customers have is a term they use is to sweat their assets. To get every last ounce of capacity out and run them to the limit before and potentially over before buying more. It's easier to do that in the core in the short-term because you can distribute the load across a large infrastructure. It's difficult to do that at the edge because it's more linear when you add customers. You have to plug in ports. In the short-term it's possible to cheat a little bit by over burdening the core and not seeing the same 1 to 1 impact. That is a bill that will come due. We expect the balance to be more evenly distributed and more linear. With regard to the other market initiatives, we have seen good traction in the mobile market and we are pleased with the partnership as well as the market opportunity as well as the customer penetration, today we have products in more than 20 customers and 14 countries in the mobile market. We have not seen as much traction in the early days in the cable market. There is extensive testing and in the case of others and announcements in the customers who are focused on improving that situation and gaining more traction in the quarters to come. I guess that's probably the best mix distribution I can give you. As it relates to products and an earlier question on the subject of the e series, it's important to remember that we don't have any chassis preferences here. In a market like cable, the g series is the product targeted, but in the edge markets, there will be uses for the e series and uses for the m series as well. We are more focused on making sure interfaces and chassis mix is far less important.

Next question is from the line of Christian Amakost -- with SG Cowen.

I was wondering if you are not going to break out revenue -- I'm sorry. If you won't break out revenue by product, if you can rank the t 640, the j 20 and g 10 by revenue contribution.

I think Scott just explained the focus that we have is on the interface and I think from past experience, we are pretty indifferent as to what type of chassis. Each chassis has a need in the customer's eyes in terms of the capacity they are trying to get to. That's not really in our mind the way we manage the business. We focus more on the application that the customers are trying to run.

Could we discuss wireless versus cable?

We don't plan to break it down at this point.

Thank you.

Next?

Alex Henderson with Salomon Smith Barney.

It's Darryl for Alex. I wanted to review your comment about activity levels in North America. Is it fair to characterize any difference in activity between our box versus the ixc's and when you talk about that, can you tell me whether or not the activity is caused by network utilization rising or is it more strategic like the 271 process that you talked to?

Scott, the activity levels are not specific to incumbent carrier or ixe's. There several opportunities and several sectors across North America and certainly a lost interest in the ixe. They have also significant initiatives and built and expanding on the same ground and in the same ip market space. In terms of the strategic builds versus pure capacity demand, it's hard to find any significant spending that doesn't have a solid and immediate term business case associated with it. We don't expect that to change any time soon. What creates the justification for if there is a strategic category for what create that is is the migration of legacy traffic and network applications on new infrastructures. It's reproportioning existing traffic and looking to funnel new growth and traffic on these new infrastructures.

The next question comes from the line of Steve Cayman with CIBC World Markets.

A question-the matrix for the t 640. Do you have it up and running in the labs or a customer space.

The tx product you refered to with the matrix technology is running. In fact it was demonstrated on the analyst day and was running when we initially announced the t640. We have not yet productized it not so much because we can't, but because there is yet to be proven a need for that much capacity. What is important though is that when someone buys a t 640 today, whether it's Bellsouth or Tellea or anyone else, it's very important that they know that exactly the same system that they bought with the cable can be plugged into a clustered matrix and scaled into a system. Although it isn't needed in raw capacity, it's critical that the modules and the units that are bought today can be plugged into that matrix without an upgrade in the network operation. So that's really the proof point and the road map that has given people comfort to move ahead on the t 640s?

Have that tested that in their labs? Has a customer chained a couple of these together and replicated the results?

We have not moved it to any customer networks or had the request to do that. We have demonstrated it several times and shown the capability of the existing production shipments and interfaces to be one in the same of those that plug into it. That's where the necessary comfort has been needed in the market today.

Thanks.

The next question comes from the line of Hassan Iman with Thomas Weisel Partners.

You alluded to the fact that management has been performing a balancing act between various x, along thoses, Juniper is one of the few companies in telecom equipment that is not taking significant steps to downsize despite a significant down revenue run rate. Could you help us understand your thinking along those lines?

It's very much related to the three variables or the three knobs that I mentioned. We have a significant increasing lead with technology today. That is one of the fundamental foundations of the market opportunity that we have. It is important that that be maintained we've also done a careful balancing act between maintaining the financial disciplines and funding the coverage of the market. We do business in 45 countries around the world and we have over $2.5 billion in equipment installed around the world and we are in 22 of the top 25 networks around the world. We have initiatives in mobile, cable, edge, corps and software releases obviously. That is something we believe in fundamentally.

If I were to define the management strategy in how to tune the knobs, it's optimizing and excelling at intermediate term management. If one were to manage a business or to build a long-term franchise and manage on a short-term or 90-day basis for example, it would be possible to post higher earnings than those put forth during the downturn. That would be a short-term focus not capable of sustaining a company. On the other end, if we focused on other priorities, and not intermediate term disciplines, we would set up for the future and not survive until it got there. The abilities and focus are meant to balance not only the variables of market coverage and innovation, but to move it up one level, its managing for the intermediate term. In the next quarter, we have previously for many quarters created positive cash from operations and so we continue to run the business in a healthy and we believe balanced way. We currently carry more than $1 billion in cash on the balance sheet. We are not concerned about our survival. We are focused on managing to this term objective.

So far would it be fair to say you run the business at roughly 150 million break even point?

The guidance that we gave here on the call that was the repeatable results for the quarter would create a loss of one cent a share. One comment worth making talking about repeatable results here, we are not making any market or industry-wide predictions. What we believe is that we can run this business and have the obligation to run this business consistently regardless of market conditions. I think the last person I would listen to today is anybody who said they knew what the market would do next. However we have a job to do regardless of the market conditions. We are going to do it.

Thank you very much.&

Next question.

Ryan Malloy with Soundview.

You mentioned that there were various opportunities with NTT and you were encouraged about the new developments there. Can you give us an update on that status?

Ryan, regarding NTT , we didn't make specific announcements in the last quarter, but that's a very important customer. Japan is an important operation for us. There significant opportunities for us and many very realized in both the long distance and local businesses in both east and west and calm the operations as well as on the mobile side. That was previously a focus customer and user of the e series products as well as a user of the m series products for Juniper. That's a very, very important account and very important market for us. We continue to see opportunity there.

Next question.

The next question is from the line of David Tunaugh with McDonald Investments.

Going back to the Bellsouth deal, do you think that this would open the door for other deployments? I'm sure you are not just talking to one. To the extent you can talk about it, Bellsouth has been conservative on the more leading edge network products. Anything you can talk about -- what they might be trying to do, given the declining Cap-X spending in terms of mpls and --.

David, I can't comment specifically on individual opportunities or customers. We have always had and maintained a precedent that our customers will speak for themselves. A specific basis. I will make a general comment about the regional operating companies and the market place. That's that the opportunity for all of us in this country to take greater advantage of broadband services is not limited by technology. It's imminently possible and demonstrated to be available today. That broad band networks and services in an economical way can be delivered throughout the country. There are significant regulatory issues and concerns. It's very difficult to run a business profitably if you have to make an investment on your own and share the proceeds with people who didn't participate in the capital required to deploy it in the first place. For all of the operators, being freed to go to market and have the opportunity to run a business the way all of us run our businesses which is invest capital and put it to use and enjoy the benefits, with that freedom available to the bell operating companies, we would see significant relief in an embarrassing situation. North America is 12th in the world in broadband deployment. There is clear opportunity for that to improve. It has less to do with technology than others.

Next question.

The next question is from the line of Gabriel Lawry Credit Leanay.

A couple of quickie numbers questions. If you can give us the break down on interest income and interest other expense and the composition of long-term investments.

I don't have those numbers. I will have to get back to you on those. I don't have that break down in front of me.

Thank you.

There no further questions.

Great. Thank you for your participation. There will be an audio replay available in the investor relations section of the website at www.juniper.net. You can call 1-800-633-8284 and enter reservation number 20939190. That's through midnight on October 17. If you have additional questions, please feel free to call investor relations department. Have a nice evening.

That concludes the conference call for today. Thank you for participation and please disconnect your lines.