UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2013
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from__________ to____________
Commission file number 001-34501
JUNIPER NETWORKS, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
77-0422528
(I.R.S. Employer Identification No.)
1194 North Mathilda Avenue
Sunnyvale, California
(Address of principal executive offices)
94089
(Zip code)
(408) 745-2000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, par value $0.00001 per share
Name of Each Exchange on Which Registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
No
No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filings requirements
for the past 90 days. Yes
No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-
K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
(Do not check if a
smaller reporting company)
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
No
The aggregate market value of the common stock held by non-affiliates of the registrant was approximately $6,490,000,000 as of the end of the registrant's
second fiscal quarter (based on the closing sale price for the common stock on the New York Stock Exchange on June 28, 2013). For purposes of this disclosure,
shares of common stock held or controlled by executive officers and directors of the registrant and by persons who hold more than 5% of the outstanding shares
of common stock have been treated as shares held by affiliates. However, such treatment should not be construed as an admission that any such person is an
“affiliate” of the registrant. The registrant has no non-voting common equity.
As of February 21, 2014, there were 501,120,337 shares of the registrant's common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
As noted herein, the information called for by Part III is incorporated by reference to specified portions of the registrant's definitive proxy statement to
be filed in conjunction with the registrant's 2014 Annual Meeting of Stockholders, which is expected to be filed not later than 120 days after the registrant's fiscal
year ended December 31, 2013.
Juniper Networks, Inc.
Form 10-K
Table of Contents
PART I
PART II
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities
Selected Financial Data
Management's Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
PART III
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
PART IV
Exhibits, Financial Statement Schedules
SIGNATURES
Exhibit Index
ITEM 1.
ITEM 1A.
ITEM 1B.
ITEM 2.
ITEM 3.
ITEM 4.
ITEM 5.
ITEM 6.
ITEM 7.
ITEM 7A.
ITEM 8.
ITEM 9.
ITEM 9A.
ITEM 9B.
ITEM 10.
ITEM 11.
ITEM 12.
ITEM 13.
ITEM 14.
ITEM 15.
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Forward-Looking Statement
This Annual Report on Form 10-K (“Report”), including “Management's Discussion and Analysis of Financial Condition and
Results of Operations” in Item 7, contains forward-looking statements regarding future events and the future results of Juniper
Networks, Inc. ("we," "us," or the “Company”) that are based on our current expectations, estimates, forecasts, and projections
about our business, our results of operations, the industry in which we operate and the beliefs and assumptions of our management.
Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “would,” “could,” “intends,” “plans,” “believes,”
“seeks,” “estimates,” variations of such words, and similar expressions are intended to identify such forward-looking statements;
however, the absence of these words or similar expressions does not mean that a statement is not forward-looking. Forward-
looking statements by their nature address matters that are, to different degrees, uncertain, and these forward-looking statements
are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict. Therefore, actual results
may differ materially and adversely from those expressed in any forward-looking statements. Factors that might cause or contribute
to such differences include, but are not limited to, those discussed in this Report under the section entitled “Risk Factors” in
Item 1A of Part I and elsewhere, and in other reports we file with the United States Securities and Exchange Commission ("SEC").
While forward-looking statements are based on reasonable expectations of our management at the time that they are made, you
should not rely on them. We undertake no obligation to revise or update publicly any forward-looking statements for any reason,
except as required by law.
PART I
ITEM 1. Business
Overview
At Juniper Networks, we design, develop, and sell products and services for high-performance networks, which combine scale
and performance with agility and efficiency, so customers can build the best networks for their businesses. Our routing, switching
and security products address the high-performance networking requirements of global service providers, enterprises, governments,
and research and public sector organizations that view the network as critical to their success. Our software, silicon, and systems
represent innovations that transform the experience and economics of networking, helping customers achieve superior performance,
greater choice, and flexibility, while reducing overall total cost of ownership.
We do business in three geographic regions: Americas, Europe, Middle East, and Africa ("EMEA"), and Asia Pacific ("APAC").
During 2013, we operated under two business segments: Platform Systems Division ("PSD") and Software Solutions Division
("SSD"). Our PSD segment primarily offers scalable routing and switching products that are used in service provider, enterprise,
and public sector networks to control and direct network traffic between data centers, core, edge, aggregation, campus, Wide Area
Networks ("WANs"), and consumer and business devices. Our SSD segment offers solutions focused on network security and
network services applications for both service providers and enterprise customers. Both segments offer worldwide services,
including technical support and professional services, as well as educational and training programs to our customers. Together,
our high-performance product and service offerings help our customers convert legacy networks that provide commoditized
services into more valuable assets that provide differentiation, value, and increased performance, reliability, and security to end-
users. During 2013, we consolidated operational oversight and management of all security products within our SSD segment. As
a result of this product realignment, security products previously reported in our PSD segment (including the Branch SRX, Branch
Firewall, and J Series product families) are now reported in our SSD segment. In addition, we realigned our Contrail products
from our PSD segment to our SSD segment. Segment data for prior years has been reclassified to conform to the current year
presentation. See Note 13, Segments, in Notes to Consolidated Financial Statements in Item 8 of Part II of this Report, for further
information about the realignment and financial information regarding each of our PSD and SSD segments, which is incorporated
herein by reference.
During the year ended December 31, 2013, we conducted business in more than 100 countries generating net revenues of $4,669.1
million and net income attributable to Juniper Networks of $439.8 million.
We were incorporated in California in 1996 and reincorporated in Delaware in 1998. Our corporate headquarters are located in
Sunnyvale, California. Our website address is www.juniper.net.
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Strategy
In February 2014, we announced an integrated operating plan ("IOP") to refocus the Company on innovation that matters most
to service providers and enterprises where demand for High-IQ Networks and best-in-class cloud environments are driving growth.
The IOP strategy capitalizes upon our engineering expertise across routing, switching, security, control and network management
to align our focus to become a leading provider of secure High-IQ Networks while serving the needs of Cloud Builders. Through
the execution of the IOP we plan to coalesce our engineering talent, go-to-market teams and R&D around this strategy resulting
in streamlined operations and business portfolio and operational efficiencies. As we implement the IOP, it is possible that our
segments may change.
We believe many of the core tenets of our historical strategic efforts described below carry forward and form the foundation of
our successful implementation of the IOP.
Maintain and Extend Technology Leadership
We are recognized around the world as an innovation leader in networking. Our Junos OS, application-specific integrated circuit
(“ASIC”) technology, and network-optimized product architecture were key elements to establishing and maintaining our
technology leadership.
Leverage Position as Supplier of High-Performance Network Infrastructure
From inception, we have focused on designing, developing, and building high-performance network infrastructure for the world's
most demanding networking environments. We consistently deliver groundbreaking, leading technologies that transform the
economics and experience of networking—significantly improving customer economics by lowering the capital expenditures
required to build networks and the operating expenses required to manage and maintain them. We believe that many customers
will deploy networking equipment from only a few vendors, and that the scale, performance, reliability, and security of our products
will provide us with a competitive advantage, which is critical to be selected as one of those vendors.
Be a Strategic Partner to Our Customers
In developing our solutions, we work very closely with customers to design and build best-in-class products and solutions
specifically designed to meet their complex needs. Over time, we have expanded our understanding of the escalating demands
and risks facing our customers, which has enabled us to design additional capabilities into our products. We believe our close
relationships with, and constant feedback from, our customers have been key elements in our design wins and rapid deployments
to date. We plan to continue to work hand-in-hand with our customers to implement product enhancements, as well as to design
products that meet the evolving needs of the marketplace, while enabling customers to reduce costs. We are committed to investing
in R&D at a level that drives our innovation agenda, enabling us to deliver highly differentiated products and outstanding value
to our customers.
Enable New Internet Protocol ("IP")-Based Services
Our platforms have enabled network operators to quickly build and secure networks cost-effectively and deploy new differentiated
services to drive new sources of revenue more efficiently than legacy network products. By enabling new IP-based services, we
have significantly broadened our service provider business over the last several years, while also significantly expanding our
presence in the enterprise market.
Establish and Develop Industry Partnerships
Our customers have diverse requirements. Therefore, we believe that it is important that we attract and build relationships with
other industry leaders with diverse technologies and services that extend the value of the network to our customers. These
partnerships ensure that our customers have access to those technologies and services, whether through technology integration,
joint development, resale, or other collaboration, in order to better support a broader set of our customers' requirements. In addition,
we believe an open network infrastructure that invites partner innovation provides customers with greater choice and control in
meeting their evolving business requirements, while enabling them to reduce costs.
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Markets and Customers
We sell our high-performance network products and service offerings through direct sales, distributors, value-added resellers
("VARS"), and original equipment manufacturer (“OEM”) partners to end-users in the service provider and enterprise markets.
We believe the network needs for service providers such as carriers—wireless and wireline, cable, and content and Web 2.0 service
companies are converging, as are those of large enterprise and national governments, as these customers focus on High-IQ networks
and cloud environments.
Service Providers
Service providers generally include wireline and wireless carriers, and cable operators, as well as major Internet content and
application providers, including those that provide social networking and search engine services. We support most major service
provider networks in the world and our high-performance network infrastructure offerings are designed and built for the
performance, reliability, and security that service providers demand. We believe our networking infrastructure offerings benefit
our service provider customers by:
• Reducing capital and operational costs by running multiple services over the same network using our high density
and highly reliable platforms;
• Creating new or additional revenue opportunities by enabling new services to be offered to new market segments
based on our product capabilities;
•
•
Increasing customer satisfaction, while lowering costs, by enabling consumers to self-select automatically
provisioned service packages that provide the quality, speed, and pricing they desire; and
Providing increased asset longevity and higher return on investment as our customers' networks can scale to multi-
terabit rates based on the capabilities of our platforms.
While many of these service providers have historically been categorized separately as wireline, wireless, or cable operators, in
recent years, we have seen increased convergence of these different types of service providers through acquisitions, mergers, and
partnerships. We believe these strategic developments are made technically possible as operators invest in the build-out of High-
IQ networks and cloud environments.
We believe that there are several other trends affecting service providers for which we are well positioned to deliver products and
solutions. These trends include: significant growth in IP traffic on service provider networks because of peer-to-peer interaction;
broadband usage; video; an increasing reliance on the network as a mission critical business tool in the strategies of our service
provider customers and of their enterprise customers; the advent of data center "clouds" that concentrate business applications in
large, IP network connected facilities; and growth in mobile traffic as a result of the increase in mobile device usage including
notebooks, netbooks, smartphones, and tablets.
The infrastructure market for service providers includes: products and technology at the network core; the network edge to enable
access; the aggregation layer; the data center where many services are created; security to protect from the inside out and the
outside in; the application awareness and intelligence to optimize the network to meet business and user needs; and the management,
service awareness, and control of the entire infrastructure.
Enterprise
Our high-performance network infrastructure offerings are designed to meet the performance, reliability, and security requirements
of the world's most demanding businesses. The enterprise market generally is comprised of businesses; federal, state, and local
governments; financial services; and research and education institutions. Enterprises and public sector organizations, such as
governments and research and education institutions, that view their networks as critical to their success are able to deploy our
solutions as a powerful component in delivering the advanced network capabilities needed for their leading-edge applications. In
addition, our solutions:
• Assist in the consolidation and delivery of existing services and applications;
• Accelerate the deployment of new services and applications;
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• Offer end-to-end security across every environment—from the data center to campus and branch environments and to
the device itself to assist in the protection and recovery of services and applications; and
• Offer operational improvements that enable cost reductions, including lower administrative, training, customer care,
and labor costs.
As with the service provider market, innovation continues to be a critical component in our strategy for the enterprise market.
High-performance enterprises require High-IQ networks that are global, distributed, and always available. Network equipment
vendors serving these enterprises need to demonstrate performance, reliability, and security with best-in-class open solutions for
maximum flexibility. We offer enterprise solutions and services for data centers, branch and campus applications, distributed and
extended enterprises, and consumer and business devices.
Customers
In 2013 and 2011, no single customer accounted for 10% or more of our net revenues. In 2012, Verizon Communications, Inc.
("Verizon") accounted for 10.3% of our net revenues.
Products and Technology
Early in our history, we developed, marketed, and sold the first commercially available purpose-built IP backbone router optimized
for the specific high-performance requirements of service providers. As the need for core bandwidth continued to increase, the
need for service rich platforms at the edge of the network was created.
In the last seven years, we have expanded our portfolio to address domains in the network: the core, the edge, access and aggregation,
data centers, WANs, and campus and branch. We have systematically focused on how we innovate in silicon, systems, and software
to provide a range of solutions in high-performance networking that can solve unique problems for customers.
Our focus on high-performance networking leads to a focus on three product areas: routing, switching, and security. In each of
the past three fiscal years, routing, switching, security, and services each accounted for more than 10% of our consolidated net
revenues. The following is an overview of our major product families within each of our segments in 2013:
PSD
Routing Products
• ACX Series: Our ACX Series Universal Access Routers cost-effectively address current operator challenges to rapidly
deploy new high-bandwidth services. With industry-leading performance of up to 60Gbps and support for 10GbE
interfaces, the ACX Series is well positioned to address the growing mobile backhaul needs of service providers. The
platforms deliver the necessary scale and performance needed to support multi-generation services.
• MX Series: Our MX Series is a family of high-performance, enterprise class and service provider Ethernet routers that
functions as a Universal Edge platform capable of supporting business, mobile, and residential services in even the fastest-
growing networks and markets. Powerful switching and security features give the MX Series 3D Universal Edge Routers
unmatched flexibility, versatility, and reliability to support advanced services and applications at the edge of the network.
Using our Junos OS and groundbreaking Trio chipset, the MX platforms provide the carrier-class performance, scale,
and reliability to enable service providers and enterprises to support large-scale Ethernet deployments.
• M Series: Our M Series Edge Routers combine IP/MPLS capabilities and can be deployed in small and medium core,
multiservice edge, collapsed POP routing, peering, route reflector, and campus or WAN gateway applications. M Series
provide reliability, stability, security, and a broad array of services. Services include a broad array of VPNs, network-
based security, real-time voice and video, bandwidth on demand, rich multicast of premium content, IPv6 services,
granular accounting, and a services portfolio that continues to grow with every release of Junos OS.
• PTX Series: Our PTX Series Packet Transport Routers are designed for the converged supercore. The system is the first
supercore packet system in the industry, and delivers powerful capabilities based on innovative Express silicon and a
forwarding architecture that is focused on optimizing MPLS and Ethernet. The PTX, now available in two form factors
—PTX5000 and PTX3000, delivers several critical core functionalities and capabilities, including market-leading density
and scalability, cost optimization, high availability, and network simplification. Our PTX Series products can readily
adapt to today's rapidly changing traffic patterns for video, mobility, and cloud-based services.
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•
T Series: Our T Series routers provide the leading features and multi-terabit scale that service providers need to handle
massive growth in core bandwidth requirements. These features include multi-protocol label switching ("MPLS")
Differentiated Services (DiffServ-TE), point-to-multipoint label-switched paths (P2MP LSPs), nonstop routing, unified
in-service software upgrades (unified ISSUs), hierarchical MPLS, to name a few. Introduced in 2002, the T series remains
the industry's best investment protection story with the introduction of the T4000 in 2012.
Switching Products
• EX Series: Our EX Series Ethernet switches address the access, aggregation, and core layer switching requirements of
micro branch, branch office, and campus and data center environments, providing a foundation for the fast, secure, and
reliable delivery of applications able to support strategic business processes. EX Series enterprise Ethernet switches are
designed to deliver operational efficiency, business continuity, and agility, enabling customers to invest in innovative
business initiatives that increase revenue and help them gain a competitive advantage.
• Wireless Local Area Network ("WLAN") Products: Our WLAN product family includes wireless controllers, access points,
and management tools that deliver wireless LAN and WAN solutions for enterprises of all sizes and types.
• QFX Series: Our QFX Series of products offers a revolutionary approach that delivers dramatic improvements in data
center performance, operating costs, and business agility for enterprises, high-performance computing systems, and cloud
providers. Our QFX family, including the QFabric System (QFabric Nodes, Interconnect and Director) and QFX Series
Switches (QFX5100, QFX3600, and QFX3500 Switch implements a single-layer network in the data center, enabling
improvements in speed, scale, and efficiency by removing legacy barriers and improving business agility.
SSD
Security Products
•
•
•
SRX Series Services Gateways for the Data Center: Our high-end SRX Series platforms deliver market-leading
performance, scalability, and service integration in a chassis-based form factor ideally suited for medium to large
enterprise and service provider data centers and large campus environments where scalability, high performance, and
concurrent services, are essential. The SRX Series of dynamic services gateways, running our Junos software, provides
firewall/VPN performance and scalability, and includes the AppSecure suite of next-generation security capabilities
that deliver greater visibility, enforcement, control, and protection over the network.
Secure Access and Access Control Appliances: Our Junos Pulse, Junos Pulse Mobile Security Suite, and SA Series SSL
VPN appliances, designed for use in companies of all sizes, are used to provide secure access to corporate resources
for remote and mobile users from any web-enabled device, regardless of location. Junos Pulse Access Control Service
solutions provide identity-based, location-aware, granular access control that protects clouds and networks from
unauthorized access by wired, wireless, and remotely connected endpoints. Pulse Access Control allows for increased
policy granularity, transparent deployment of Junos Pulse clients, and simplified policy management, which secures
and simplifies bring your own device ("BYOD") initiatives.
SSG Series, ISG Series, and NetScreen Series: Our firewall and VPN systems and appliances are designed to provide
integrated firewall, VPN, and denial of service protection capabilities for both enterprise environments and service
provider network infrastructures. These products range from our SSG Series, which combines LAN/WAN routing
capabilities with unified threat management features such as antivirus, anti-spam, and web filtering technologies, to
our ISG and NetScreen Series firewall and VPN systems, which are designed to deliver high-performance security in
medium/large enterprises, carrier networks, and data centers.
See Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," in Part II of this Report,
and Note 13, Segments, in Notes to Consolidated Financial Statements in Item 8 Part II of this Report, for an analysis of net product
revenues by segment.
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Platform Strategy
In addition to our major product families, our software portfolio was a key technology element in our strategy to be the leader in
high-performance networking.
Our Junos Platform enables our customers to expand network software into the application space, deploy software clients to control
delivery, and accelerate the pace of innovation with an ecosystem of developers. The Junos Platform includes the following
products:
•
Junos OS: At the heart of the Junos Platform is Junos OS. We believe Junos OS is fundamentally superior to other
network operating systems not only in its design, but also in its development capabilities. The advantages of Junos OS
include:
One modular operating system with common base of code and a single, consistent implementation for each
control plane feature;
One software release train extended through a highly disciplined and firmly scheduled development process; and
One common modular software architecture that scales across all Junos-based platforms.
Junos OS is designed to maintain continuous systems and improve the availability, performance, and security of business
applications running across the network. Junos OS helps to automate network operations by providing a single consistent
implementation of features across the network in a single release train that seeks to minimize the complexity, cost, and
risk associated with implementing network features and upgrades. This operational efficiency allows network
administrators more time to innovate and deliver new revenue-generating applications, helping to advance the
economics of high-performance networking.
The security and stability of Junos OS, combined with its modular architecture and common source code base, provides
a foundation for delivering performance, reliability, security, and scale at a lower total cost of ownership than multiple
operating code base environments. With an increasing number of our platforms able to leverage Junos OS, including
routing, switching, and security products, we believe Junos OS provides us a competitive advantage over other major
network equipment vendors.
•
Junos Space: Our Junos Space network management platform offers an open, Service-Oriented Architecture-based
("SOA") platform for creating organic and third-party network management applications to drive network
innovation. Junos Space includes applications for network infrastructure management and automation that help
customers reduce operational cost and complexity and scale services. These include Network Director, Services
Activation Director, Security Director, Service Now, and Service Insight.
Our Contrail network orchestration system offers an open-source, standards-based platform for software-defined networks ("SDN")
and network function virtualization. This platform enables our customers to address their key problems in the area of network
automation, agility, and time-to-service deployment by providing a mechanism to virtualize the network over any physical network
and automating the provisioning and management of networking services (such as security and load balancing). Contrail’s
differentiation includes a distributed architecture that allows us to build in high-availability and in-service upgrade capabilities;
a multi-vendor solution familiar to our customers that allows Contrail to seamlessly interoperate with equipment from major
networking vendors; an open-source licensing model, and an orchestration system-agnostic approach that provides REST APIs
that can be used by customers to work with their own provisioning and management systems.
Significant Product Development Projects
In 2013, we continued to invest in innovation and strengthening our product portfolio, which resulted in new product offerings
during 2013, including a series of new products for the enterprise campus and data center infrastructures, including the EX9200
Ethernet Switch, a programmable core switch, to support emerging applications and growing workloads. Additionally, we enhanced
our MX Series portfolio with the release of the MX104, MX2010, and the MX2020, service provider edge routers designed for
rapid service delivery and application enablement. We also released the world's smallest Supercore, the PTX3000, to address the
scale and flexibility challenges facing service providers as they converge their networks to optimize their business. Furthermore,
to help enterprise organizations and service providers address the challenges associated with managing multiple, geographically
dispersed data centers, we unveiled MetaFabric, a new architecture for next generation data centers. MetaFabric simplifies and
accelerates the deployment and delivery of applications within and across multiple data center locations.
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We also announced the availability of Juniper Networks Contrail, a standards-based and highly scalable network virtualization
and intelligence solution for SDN and introduced OpenContrail, a new initiative that makes the source code library for Contrail
available through an open source license, which we believe will help to foster innovation in SDN. We also announced enhancements
to the SDN-ready MX Series 3D Universal Edge Router portfolio that significantly expands system capacity, subscriber bandwidth
and service performance.
Customer Service
In addition to our products, we offer support, professional, and educational services. We deliver these services directly to our
channel partners and to end-users and utilize a multi-tiered support model, leveraging the capabilities of our partners, and third-
party organizations, as appropriate.
We also train our channel partners in the delivery of support, professional, and educational services to ensure these services are
locally delivered.
As of December 31, 2013, we employed 1,452 people in our worldwide customer service and support organization. We believe
that a broad range of services is essential to the successful customer deployment and ongoing support of our products, and we
employ support engineers, consultants, and educators with proven network experience to provide those services.
Manufacturing and Operations
As of December 31, 2013, we employed 361 people in worldwide manufacturing and operations who primarily manage
relationships with our contract manufacturers, manage our supply chain, and monitor and manage product testing and quality.
As of December 31, 2013, we have subcontracted with Celestica Incorporated and Flextronics International Ltd. for the majority
of our manufacturing activity. In 2013, we completed the disengagement of Plexus Corporation ("Plexus") as a contract
manufacturer as part of our initiative to reduce our contract manufacturers from three to two.
Our manufacturing is primarily conducted through contract manufacturers in the United States ("U.S."), China, Malaysia, Mexico,
and Taiwan. Our contract manufacturers in all locations are responsible for all phases of manufacturing from prototypes to full
production and assist with activities such as material procurement, final assembly, test, control, shipment to our customers, and
repairs. Together with our contract manufacturers, we design, specify, and monitor the tests that are required for our products to
meet internal and external quality standards. These arrangements provide us with the following benefits:
• We can quickly deliver products to customers with turnkey manufacturing and drop-shipment capabilities;
• We gain economies of scale by leveraging our buying power with our contract manufacturers when we purchase large
quantities of components;
• We operate with a minimum amount of dedicated space for manufacturing operations; and
• We can reduce our costs by reducing what would normally be fixed overhead expenses.
Our contract manufacturers build our products based on our rolling product demand forecasts. Each contract manufacturer procures
components necessary to assemble the products in our forecast and tests the products according to agreed upon specifications.
Products are then shipped to our distributors, VARs, or end-users. Generally, we do not own the components, and title to the
products transferred from the contract manufacturers to us and immediately to our customers upon delivery at a designated shipment
location. If the components remain unused or the products remain unsold for a specified period, we may incur carrying charges
or obsolete materials charges for components that our contract manufacturers purchased to build products to meet our forecast or
customer orders.
Although we have contracts with our contract manufacturers, those contracts merely set forth a framework within which the
contract manufacturer may accept purchase orders from us. The contracts do not require them to manufacture our products on a
long-term basis.
We also purchase and hold inventory for strategic reasons and to mitigate the risk of shortages of certain critical component
supplies. The majority of our inventory is production components. As a result, we may incur additional holding costs and
obsolescence charges, particularly resulting from uncertainties in future product demand.
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Our application-specific integrated circuits ("ASICs") are manufactured primarily by sole or limited sources, such as International
Business Machines Corporation (“IBM”), each of which is responsible for all aspects of ASICs production using our proprietary
designs.
By working collaboratively with our suppliers, we have the opportunity to promote socially responsible business practices beyond
our company and into our worldwide supply chain. To this end, we have adopted a supplier code of conduct and promote compliance
with such code of conduct to our suppliers. One element of our supplier code of conduct is adoption and compliance with the
Electronic Industry Code of Conduct (“EICC”). The EICC outlines standards to promote ethical business practices, eliminate
human trafficking, and ensure that working conditions in the electronics industry supply chain are safe, workers are treated with
respect and dignity, and manufacturing processes are environmentally responsible.
Research and Development
We have assembled a team of skilled engineers with extensive experience in the fields of high-end computing, network system
design, ASIC design, security, routing protocols, software applications and platforms, and embedded operating systems. As of
December 31, 2013, we employed 4,135 people in our worldwide R&D organization.
We believe that strong product development capabilities are essential to our strategy of enhancing our core technology, developing
additional applications, integrating that technology, and maintaining the competitiveness and innovation of our product and service
offerings. In our products, we are leveraging our software, ASIC and systems technology, developing additional network interfaces
targeted to our customers' applications, and continuing to develop technology to support the build-out of High-IQ networks and
cloud environments. We continue to expand the functionality of our products to improve performance reliability and scalability,
and to provide an enhanced user interface.
Our R&D process is driven by the availability of new technology, market demand, and customer feedback. We have invested
significant time and resources in creating a structured process for all product development projects. Following an assessment of
market demand, our R&D team develops a full set of comprehensive functional product specifications based on inputs from the
product management and sales organizations. This process is designed to provide a framework for defining and addressing the
steps, tasks, and activities required to bring product concepts and development projects to market. Expenditures for R&D were
$1,043.2 million, $1,101.6 million, and $1,026.8 million in 2013, 2012, and 2011, respectively.
Sales and Marketing
As of December 31, 2013, we employed 2,626 people in our worldwide sales and marketing organization. These sales and marketing
employees operate in different locations around the world in support of our customers.
Our sales organization, with its structure of sales professionals, system engineers, and marketing and channel teams, is generally
split between service provider and enterprise customers. Within each team, sales team members serve the following three geographic
regions: (i) Americas (including United States, Canada, Mexico, Caribbean and Central and South America), (ii) EMEA, and
(iii) APAC. Within each region, there are regional and country teams, as well as major account teams, to ensure we operate close
to our customers.
Our sales teams operate in their respective regions and generally either engage customers directly or manage customer opportunities
through our distribution and reseller relationships or channels as described below.
In the United States and Canada, we sell to several service providers directly and sell to other service providers and enterprise
customers primarily through distributors and resellers. Almost all of our sales outside the United States and Canada are made
through our channel partners.
Direct Sales Structure
Our sales team engages with end-user customers with which we have direct relationships. The terms and conditions of these
arrangements are governed either by customer purchase orders and our acknowledgment of those orders or by purchase
contracts. The direct contracts with these customers set forth only general terms of sale and generally do not require customers to
purchase specified quantities of our products. We directly receive and process customer purchase orders.
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Channel Sales Structure
A critical part of our sales and marketing efforts are our channel partners through which we conduct the majority of our sales. We
utilize various channel partners, including but not limited to:
• A global network of strategic distributor relationships, as well as region-specific or country-specific distributors who
in turn sell to local VARs who sell to end-user customers. Our distribution channel partners sell our SSD product lines
as well as the majority of our PSD product lines, including infrastructure products that are often purchased by our
enterprise customers. These distributors tend to be focused on particular regions or countries within regions. For
example, we have substantial distribution relationships with Ingram Micro in the Americas and Hitachi in Japan. Our
agreements with these distributors are generally non-exclusive, limited by region, and provide product discounts and
other ordinary terms of sale. These agreements do not require our distributors to purchase specified quantities of our
products. Further, most of our distributors sell our competitor's products, and some sell their own competing products.
• VARs and Direct value-added resellers ("DVARs"), including our strategic worldwide resellers referenced below, resell
our products to end-users around the world. These channel partners either buy our products and services through
distributors (VARs), or directly from us, and have expertise in designing, selling, and deploying complex networking
solutions in their respective markets. Our agreements with these channel partners are generally non-exclusive, limited
by region, and provide product discounts and other ordinary terms of sale. These agreements do not require these
channel partners to purchase specified quantities of our products. Increasingly, our service provider customers also
resell our products to their customers or purchase our products for the purpose of providing managed or cloud-based
services to their customers.
•
Strategic worldwide reseller relationships with established historical alliances including Nokia Siemens Networks B.V.
("NSN"), Ericsson Telecom A.B. (“Ericsson”), and IBM. These companies each offer services and products that
complement our own product offerings and act as a reseller, and in some instances integration partners for our products.
Our arrangements with these partners allow them to resell our products on a worldwide, non-exclusive basis, provide
for product discounts, and specify other general terms of sale. These agreements do not require these partners to purchase
specified quantities of our products.
Backlog
Our sales are made primarily pursuant to purchase orders under framework agreements with our customers. At any given time,
we have backlog orders for products that have not shipped. Because customers may cancel purchase orders or change delivery
schedules without significant penalty, we believe that our backlog at any given date may not be a reliable indicator of future
operating results. As of December 31, 2013 and December 31, 2012, our total product backlog was approximately $470.7 million
and $410.5 million, respectively. Our product backlog consists of confirmed orders for products scheduled to be shipped to
customers, generally within the next six months, and excludes both orders from distributors as we recognize product revenue on
sales made through distributors upon sell-through to end-users. Backlog also excludes certain future revenue adjustments for items
such as product revenue deferrals, sales return reserves, service revenue allocations, and early payment discounts.
Seasonality
We, as do many companies in our industry, experience seasonal fluctuations in customer spending patterns, particularly in the first
quarter. Historically, we have experienced stronger customer demand in the fourth quarter. This historical pattern should not be
considered a reliable indicator of our future net revenues or financial performance.
Competition
PSD Business
In the network infrastructure business, Cisco Systems, Inc. ("Cisco") has historically been the dominant player in the market.
However, our principal competitors also include Alcatel-Lucent, Brocade Communications Systems, Inc. ("Brocade"), Extreme
Networks, Inc. ("Extreme Networks"), Hewlett Packard Company ("HP"), and Huawei Technologies Co., Ltd. ("Huawei").
Many of our current and potential competitors, such as Cisco, Alcatel-Lucent, HP, and Huawei, among others, bundle their products
with other networking products in a manner that may discourage customers from purchasing our products. In addition, consolidation
among competitors, or the acquisition of our partners and resellers by competitors, can increase the competitive pressure faced
by us due to their increased size and breadth of their product portfolios. Many of our current and potential competitors have greater
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name recognition and more extensive customer bases that they may leverage to compete more effectively. Increased competition
could result in price reductions, fewer customer orders, reduced gross margins, and loss of market share, negatively affecting our
operating results.
SSD Business
In the market for SSD products, Cisco generally is our primary competitor with its broad range of products. In addition, there are
a number of other competitors for each of the product lines within SSD, including Check Point Software Technologies, Ltd.
("Check Point"), F5 Networks, Inc. ("F5 Networks"), Fortinet, Inc. ("Fortinet"), and Palo Alto Networks, Inc. ("Palo Alto
Networks"), among others. These additional competitors tend to be focused on single product line solutions and, therefore, may
be considered specialized compared to our broader product line. In addition, a number of public and private companies have
announced plans for new products to address the same needs that our products address. We believe that our ability to compete
with Cisco and others depends upon our ability to demonstrate that our products are superior in meeting the needs of our current
and potential customers.
For both product groups, we expect that over time, large companies with significant resources, technical expertise, market
experience, customer relationships, and broad product lines, such as Cisco, Alcatel-Lucent, and Huawei, will introduce new
products designed to compete more effectively in the market. There are also several other companies that claim to have products
with greater capabilities than our products. There continues to be consolidation in this industry, with smaller companies being
acquired by larger, established suppliers of network infrastructure products. We believe this trend is likely to continue.
As a result, we expect to face increased competition in the future from larger companies with significantly more resources than
we have. Although we believe that our technology and the purpose-built features of our products make them unique and will enable
us to compete effectively with these companies, we cannot guarantee that we will be successful.
Environment
We are subject to regulations that have been adopted with respect to environmental matters, such as the Waste Electrical and
Electronic Equipment (“WEEE”), Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment
(“RoHS”), and Registration, Evaluation, Authorization, and Restriction of Chemicals (“REACH”) regulations adopted by the
European Union and China. In addition, we participate in the Carbon Disclosure Project (“CDP”). CDP is a global standardized
mechanism by which companies report their greenhouse gas emissions to institutional investors. It hosts one of the largest registries
of corporate greenhouse gas data in the world at www.cdproject.net. We continue to invest in the infrastructure and systems required
to be able to inventory and measure our carbon footprint on a global basis. We believe we have made significant strides in improving
our energy efficiency around the world.
To date, compliance with federal, state, local, and foreign laws enacted for the protection of the environment has had no material
effect on our capital expenditures, earnings, or competitive position.
In addition, we are committed to the environment by our effort in improving the energy efficiency of key elements in our high-
performance network product offerings. In 2012, we launched a set of carrier-class MPLS switches, the PTX5000 series. In addition
to filling the capacity and density requirement for Internet core growth, PTX5000 also features record energy efficiency of 1.5W
per Gigabit of throughput. The environment will remain a focus area across multiple aspects of our business.
Intellectual Property
Our success and ability to compete are substantially dependent upon our internally developed technology and expertise.
While we rely on patent, copyright, trade secret, and trademark law, as well as confidentiality agreements, to protect our technology,
we also believe that factors such as the technological and creative skills of our personnel, new product developments, frequent
product enhancements, and reliable product maintenance are essential to establishing and maintaining a technology leadership
position. There can be no assurance that others will not develop technologies that are similar or superior to our technology.
In addition, we integrate licensed third-party technology into certain of our products. From time to time, we license additional
technology from third parties to develop new products or product enhancements. There can be no assurance that third-party licenses
will be available or continue to be available to us on commercially reasonable terms. Our inability to maintain or re-license any
third-party licenses required in our products or our inability to obtain third-party licenses necessary to develop new products and
product enhancements could require us to obtain substitute technology of lower quality or performance standards or at a greater
cost, any of which could harm our business, financial condition, and results of operations.
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Our success will depend in part upon our ability to obtain necessary intellectual property rights and protect our intellectual property
rights. We cannot be certain that patents will be issued on the patent applications that we have filed, that we will be able to obtain
the necessary intellectual property rights, or that other parties will not contest our intellectual property rights.
As of December 31, 2013, we had over 2,000 patents worldwide. Patents generally have a term of twenty years from filing. As
our patent portfolio has been built over time, the remaining terms on the individual patents vary.
Employees
As of December 31, 2013, we had 9,483 full-time employees. We have not experienced any work stoppages, and we consider our
relations with our employees to be good. Competition for qualified personnel in our industry is intense. We believe that our future
success depends in part on our continued ability to hire, motivate, and retain qualified personnel. We believe that we have been
successful in recruiting qualified employees, but there is no assurance that we will continue to be successful in the future.
Our future performance depends significantly upon the continued service of our key technical, sales, and senior management
personnel, none of whom are bound by an employment agreement requiring service for any defined period of time. The loss of
one or more of our key employees could have a material adverse effect on our business, financial condition, and results of operations.
Executive Officers of the Registrant
The following sets forth certain information regarding our executive officers as of the filing of this Report:
Name
Shaygan Kheradpir
Pradeep Sindhu
Robyn M. Denholm
Vince Molinaro
Mitchell Gaynor
Rami Rahim
Terrance F. Spidell
Age
53
61
50
50
54
43
45
Chief Executive Officer
Position
Chief Technical Officer and Vice Chairman of the Board
Executive Vice President and Chief Financial and Operations Officer
Executive Vice President and Chief Customer Officer
Executive Vice President, General Counsel and Secretary
Executive Vice President, Platform Systems Division
Vice President, Corporate Controller and Chief Accounting Officer
SHAYGAN KHERADPIR joined Juniper on January 1, 2014 as Chief Executive Officer, and was appointed to the Board on
December 31, 2013. Mr. Kheradpir joined the Company from Barclays PLC where he had been serving as Chief Operations and
Technology Officer since March 2013. Prior to his appointment as Chief Operations and Technology Officer, beginning in January
2011, he was Chief Operating Officer of Barclays global retail business bank. From January 2007 to December 2010, Mr. Kheradpir
served as the Executive Vice President and Chief Information & Technical Officer for Verizon Communications, where he was
responsible for the information technology initiatives of all of Verizon’s business units. Prior to this, Mr. Kheradpir was Senior
Vice President and Chief Information Officer for Verizon Telecom, with oversight of all information technology initiatives for the
company’s wireline communications unit. Mr. Kheradpir began his communications career with GTE in 1987. Mr. Kheradpir was
a member of the National Institute of Standards & Technology VCAT (Visiting Committee on Advanced Technology), an adjunct
professor of electrical engineering at Northeastern University, and holds several patents. He was named to CIO magazine’s Hall
of Fame in 2007. Mr. Kheradpir holds a Bachelor’s, Master’s and Doctorate degree in Electrical Engineering from Cornell
University.
PRADEEP SINDHU founded Juniper in February 1996 and served as CEO and Chairman of the Board until September 1996.
Since then, Dr. Sindhu has served as Vice Chairman of the Board and Chief Technical Officer of Juniper. From September 1984
to February 1991, Dr. Sindhu worked as a Member of the Research Staff, from March 1987 to February 1996, as the Principal
Scientist, and from February 1994 to February 1996, as Distinguished Engineer at the Computer Science Lab at Xerox Corporation,
Palo Alto Research Center, a technology research center. Dr. Sindhu served as a member of the board of directors of Infinera
Corporation, a provider of optical networking equipment, from September 2001 to May 2008.
ROBYN M. DENHOLM joined Juniper in August 2007 as Executive Vice President and Chief Financial Officer. In July 2013, Ms.
Denholm was promoted to Executive Vice President and Chief Financial and Operations Officer. Prior to joining Juniper, Ms.
Denholm was at Sun Microsystems, Inc. ("Sun") from January 1996 to August 2007, where she served in executive assignments
that included Senior Vice President of Corporate Strategic Planning, Senior Vice President of Finance, Vice President and Corporate
Controller (Chief Accounting Officer), Vice President of Finance, Director of Service Division, and Shared Financial Services
APAC and Controller, Australia/New Zealand. Prior to joining Sun, Ms. Denholm served at Toyota Motor Corporation Australia
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for seven years and at Arthur Andersen & Company for five years in various finance assignments. Ms. Denholm is a Fellow of
the Institute of Chartered Accountants of Australia and holds a Bachelor's degree in Economics from the University of Sydney
and a Master's degree in Commerce from the University of New South Wales.
VINCE MOLINARO joined Juniper in 2009, and currently serves as our Executive Vice President and Chief Customer Officer.
Prior to joining Juniper, Mr. Molinaro held senior leadership positions at a number of technology companies including Bell
Laboratories, Lucent Technologies, Alcatel-Lucent and Internap Network Services. He has extensive domestic and international
experience having lived and managed large organizations throughout Europe and the U.S. Mr. Molinaro holds a Bachelor of
Science degree in Biomedical Engineering from Boston University and a Master of Science degree in Electrical Engineering from
University of Bridgeport.
MITCHELL GAYNOR joined Juniper in February 2004 as Vice President, General Counsel, and Secretary and served as Senior
Vice President, General Counsel and Secretary from February 2008 to February 2011 and is currently our Executive Vice President,
General Counsel and Secretary. Prior to joining Juniper, Mr. Gaynor was Vice President, General Counsel, and Secretary of Portal
Software, Inc., a provider of account management software that was subsequently acquired by Oracle Corporation ("Oracle"), and
Sybase, Inc., an enterprise and mobile software company that was subsequently acquired by SAP AG. In private practice, he was
an associate with the law firm of Brobeck, Phleger & Harrison. Mr. Gaynor holds a Law degree from University of California's
Hastings College of the Law and a Bachelor's degree in History from the University of California, Berkeley.
RAMI RAHIM joined Juniper in January 1997 and in October 2012 became Executive Vice President of our Platform Systems
Division, responsible for driving strategy, development, and business growth for Juniper's entire portfolio of routing, switching,
branch, and WLAN products, as well as for the ongoing evolution of our silicon technology and the Junos operating system. Prior
to his current position, Mr. Rahim served Juniper in a number of roles, including Senior Vice President and GM of the Edge and
Aggregation Business Unit and Vice President of Product Management for EABU. Prior to that, Mr. Rahim spent the majority of
his time at Juniper in the development organization where he helped with the architecture, design and implementation of many
Juniper core, edge, and carrier Ethernet products. Mr. Rahim holds a Bachelor of Science degree in Electrical Engineering from
the University of Toronto and a Master of Science degree in Electrical Engineering from Stanford University.
TERRANCE F. SPIDELL joined the Company as Vice President, Assistant Corporate Controller, in August 2011, and has served
as Vice President, Corporate Controller, since November 2012. On February 27, 2013, Mr. Spidell assumed the position of Chief
Accounting Officer of the Company. Before joining the Company, Mr. Spidell was at VeriSign, Inc., a provider of Internet
infrastructure services, as Vice President, Corporate Controller, from June 2009 through July 2011 and as Vice President, Accounting
Operations, from March 2008 through June 2009. Prior to VeriSign, Mr. Spidell held various positions, most recently Senior
Manager, at PricewaterhouseCoopers, a registered public accounting firm, from November 1993 through March 2008. Mr. Spidell
is a Certified Public Accountant and holds a Bachelor in Business Administration, with degrees in Finance and Accounting, from
Boise State University.
Available Information
We file our annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K pursuant to Section 13
(a) or 15(d) of the Securities Exchange Act of 1934, as amended, with the SEC electronically. The SEC maintains a website that
contains reports, proxy and information statements, and other information regarding issuers, including Juniper Networks that file
electronically with the SEC. The address of that website is http://www.sec.gov.
You may obtain a free copy of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K,
and amendments to those reports on our website at http://www.juniper.net, by contacting the Investor Relations Department at our
corporate offices by calling 1-408-936-5396, or by sending an e-mail message to investorrelations@juniper.net. Such reports and
other information are available on our website as soon as reasonably practicable after they are filed electronically with the SEC.
Our Corporate Governance Standards, the charters of our Audit Committee, Compensation Committee, Stock Committee, and
Nominating and Corporate Governance Committee, as well as our Worldwide Code of Business Conduct and Ethics are also
available on our website. Information on our website is not a part of this Report.
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Item 1A. Risk Factors
Factors That May Affect Future Results
Investments in our securities involve significant risks. Even small changes in investor expectations for our future growth and
earnings, whether as a result of actual or rumored financial or operating results, changes in the mix of the products and services
sold, acquisitions, industry changes, or other factors, could trigger, and have triggered in the past, significant fluctuations in the
market price of our common stock. Investors in our securities should carefully consider all of the relevant factors disclosed by us,
including, but not limited to, the following factors, that could affect our business, operating results and stock price.
Our quarterly results are unpredictable and subject to substantial fluctuations; as a result, we may fail to meet the expectations
of securities analysts and investors, which could adversely affect the trading price of our common stock.
Our revenues and operating results may vary significantly from quarter-to-quarter due to a number of factors, many of which are
outside of our control and any of which may cause our stock price to fluctuate.
The factors that may cause our quarterly results to vary quarter by quarter and be unpredictable include, but are not limited to:
limited visibility into customer spending plans, changes in the mix of products and services sold, changes in the mix of geographies
in which our products and services are sold, changing market and economic conditions, current and potential customer consolidation,
competition, customer concentration, long sales and implementation cycles, unpredictable ordering patterns, changes in the amount
and frequency of share repurchases or dividends, regional economic and political conditions, and seasonality. For example, we,
and many companies in our industry, experience adverse seasonal fluctuations in customer spending, particularly in the first quarter.
Furthermore market trends, competitive pressures, commoditization of products, seasonal rebates, increased component or shipping
costs, regulatory impacts and other factors may result in reductions in revenue or pressure on gross margins of certain segments
in a given period, which may necessitate adjustments to our operations. Such adjustments may be difficult or impossible to execute
in the short or medium term.
As a result of these factors, as well as other variables affecting our operating results, we believe that quarter-to-quarter comparisons
of operating results are not necessarily a good indication of what our future performance will be. It is likely that in some future
quarters, our operating results may be below our guidance, our long-term financial model or the expectations of securities analysts
or investors, in which case the price of our common stock may decline. Such a decline could occur, and has occurred in the past,
even when we have met our publicly stated revenues and/or earnings guidance.
Fluctuating economic conditions make it difficult to predict revenues for a particular period and a shortfall in revenues or
increase in costs of production may harm our operating results.
Our revenues and gross margin depend significantly on general economic conditions and the demand for products in the markets
in which we compete. Economic weakness, customer financial difficulties, and constrained spending on network expansion and
enterprise infrastructure have in the past resulted in, and may in the future result in, decreased revenues and earnings. Such factors
could make it difficult to accurately forecast sales and operating results and could negatively affect our ability to provide accurate
forecasts to our contract manufacturers and manage our contract manufacturer relationships and other expenses. In addition,
economic uncertainty concerns over the sovereign debt situation in certain countries in the European Union, as well as continued
turmoil in the geopolitical environment in many parts of the world, have, and may continue to, put pressure on global economic
conditions, which has led, and could continue to lead, to reduced demand for our products, to delays or reductions in network
expansions or infrastructure projects, and/or higher costs of production. Economic weakness may also lead to longer collection
cycles for payments due from our customers, an increase in customer bad debt, restructuring initiatives and associated expenses,
and impairment of investments. Furthermore, instability in the global credit markets may adversely impact the ability of our
customers to adequately fund their expected capital expenditures, which could lead to delays or cancellations of planned purchases
of our products or services. Our operating expenses are largely based on anticipated revenue trends and a high percentage of our
expenses is, and will continue to be, fixed in the short and medium term. Therefore, fluctuations in revenue could cause significant
variations in our operating results and operating margins from quarter to quarter.
Uncertainty about future economic conditions also makes it difficult to forecast operating results and to make decisions about
future investments. Future or continued economic weakness, failure of our customers and markets to recover from such weakness,
customer financial difficulties, increases in costs of production, and reductions in spending on network maintenance and expansion
could have a material adverse effect on demand for our products and consequently on our business, financial condition, and results
of operations.
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A limited number of our customers comprise a significant portion of our revenues and there is an ongoing trend toward
consolidation in the industry in which our customers and partners operate. Any decrease in revenues from our customers or
partners could have an adverse effect on our net revenues and operating results.
A substantial majority of our net revenues depend on sales to a limited number of customers and distribution partners. For example,
Verizon accounted for greater than 10% of our net revenues during 2012. Changes in the business requirements, vendor selection,
financial prospects, capital resources, and expenditures, or purchasing behavior (including product mix purchased) of our key
customers could significantly decrease our sales to such customers or could lead to delays or cancellations of planned purchases
of our products or services, which increases the risk of quarterly fluctuations in our revenues and operating results. Any of these
factors could adversely affect our business, financial condition, and results of operations.
In addition, in recent years, there has been movement towards consolidation in the telecommunications industry (for example, the
acquisitions of Global Crossing by Level 3 Communications and Qwest Communications by CenturyLink and Softbank's purchase
of a controlling interest in Sprint Nextel) and that consolidation trend has continued. If our customers or partners are parties to
consolidation transactions they may delay, suspend or indefinitely reduce or cancel their purchases of our products or other
unforeseen consequences could harm our business, financial condition, and results of operations.
The long sales and implementation cycles for our products, as well as our expectation that some customers will sporadically
place large orders with short lead times, may cause our revenues and operating results to vary significantly from quarter-to-
quarter.
A customer's decision to purchase certain of our products, particularly new products, involves a significant commitment of its
resources and a lengthy evaluation and product qualification process. As a result, the sales cycle may be lengthy. In particular,
customers making critical decisions regarding the design and implementation of large network deployments may engage in very
lengthy procurement processes that may delay or impact expected future orders. Throughout the sales cycle, we may spend
considerable time educating and providing information to prospective customers regarding the use and benefits of our products.
Even after making the decision to purchase, customers may deploy our products slowly and deliberately. Timing of deployment
can vary widely and depends on the skill set of the customer, the size of the network deployment, the complexity of the customer's
network environment, and the degree of hardware and operating system configuration necessary to deploy the products. Customers
with large networks usually expand their networks in large increments on a periodic basis. Accordingly, we may receive purchase
orders for significant dollar amounts on an irregular basis. These long cycles, as well as our expectation that customers will tend
to sporadically place large orders with short lead times, both of which may be exacerbated by the impact of continued global
economic weakness, may cause revenues and operating results to vary significantly and unexpectedly from quarter-to-quarter.
We face intense competition that could reduce our revenues and adversely affect our business and financial results.
Competition is intense in the markets that we address. The PSD market has historically been dominated by Cisco, with competition
coming from other companies such as Alcatel-Lucent, Brocade, Extreme Networks, Hewlett Packard Company, and Huawei. In
the SSD market, we face intense competition from the above companies as well as companies such as Check Point, Cisco, F5
Networks, Fortinet, and Palo Alto Networks. Further, a number of other small public and private companies have products or have
announced plans for new products to address the same challenges and markets that our products address.
In addition, actual or speculated consolidation among competitors, or the acquisition of our partners and/or resellers by competitors,
can increase the competitive pressures faced by us as customers may delay spending decisions or not purchase our products at all.
For example, in 2013, Oracle acquired Acme Packet, Inc., and Cisco acquired Meraki Networks, Inc. and Sourcefire, Inc., which
further consolidated our market. A number of our competitors have substantially greater resources and can offer a wider range of
products and services for the overall network equipment market than we do. If we are unable to compete successfully against
existing and future competitors on the basis of product offerings or price, we could experience a loss in market share and revenues
and/or be required to reduce prices, which could reduce our gross margins, and which could materially and adversely affect our
business, financial condition, and results of operations.
We expect our gross margins to vary over time, and the level of product gross margins achieved by us in recent years may not
be sustainable.
We expect our product gross margins to vary from quarter-to-quarter, and the gross margins we have achieved in recent years may
not be sustainable and may be adversely affected in the future by numerous factors, including customer, product and geographic
mix shifts, increased price competition in one or more of the markets in which we compete, increases in material or labor costs,
increases in inventory carrying costs, excess product component or obsolescence charges from our contract manufacturers,
increased costs due to changes in component pricing or charges incurred due to component holding periods if we do not accurately
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forecast product demand, warranty related issues, or our introduction of new products or entry into new markets with different
pricing and cost structures. For example, in the third quarter of 2012, our margins declined as a result of an inventory charge
resulting from inventory we held in excess of forecasted demand. We determine our operating expenses largely on the basis of
anticipated revenues and a high percentage of our expenses are fixed in the short and medium term. As a result, a failure or delay
in generating or recognizing revenue could cause significant variations in our operating results and operating margin from quarter-
to-quarter. Failure to sustain or improve our gross margins reduces our profitability and may have a material adverse effect on our
business and stock price.
Further, we recently announced an IOP to reduce our operating expenses and to focus on cost controls. We expect that our margins
will, accordingly, vary with our ability to achieve the goals of the IOP. We can provide no assurance that we will meet our announced
expectations, in whole or in part or that our plans will have the intended effects of improving our margins.
To the extent we receive product orders late in a quarter, we may be unable to recognize revenue for these orders in the same
period, which could adversely affect our quarterly revenues.
Generally, our PSD products are not stocked by distributors or resellers due to their cost and complexity and the custom nature
of configurations required by our customers; we generally build such products as orders are received. In recent years, the volume
of orders received late in any given fiscal quarter has generally continued to increase but remains unpredictable. If orders for
certain products are received late in any quarter, we may not be able to recognize revenue for these orders in the same period,
which could adversely affect our ability to meet our expected revenues for such quarter. Additionally, we determine our operating
expenses largely on the basis of anticipated revenues and a high percentage of our expenses are fixed in the short and medium
term. As a result, a failure or delay in generating or recognizing revenue could cause significant variations in our operating results
and operating margin from quarter-to-quarter.
We are dependent on sole source and limited source suppliers for several key components, which makes us susceptible to
shortages or price fluctuations in our supply chain, and we may face increased challenges in supply chain management in the
future.
We rely on single or limited sources of certain of our components. During periods of high demand for electronic products, component
shortages are possible, and the predictability of the availability of such components may be limited. Any future growth in our
business, IT spending and the economy in general is likely to create greater pressures on us and our suppliers to accurately forecast
overall component demand and to establish optimal component inventories. If shortages or delays persist, the price of these
components may increase, or the components may not be available at all. We may not be able to secure enough components at
reasonable prices or of acceptable quality to build new products in a timely manner, and our revenues and gross margins could
suffer until other sources can be developed. For example, from time to time, we have experienced component shortages that
resulted in delays of product shipments. We currently purchase numerous key components, including ASICs, from single or limited
sources. The development of alternate sources for those components is time-consuming, difficult, and costly. In addition, the lead
times associated with certain components are lengthy and preclude rapid changes in quantities and delivery schedules. Also, long-
term supply and maintenance obligations to customers increase the duration for which specific components are required, which
may further increase the risk of component shortages or the cost of carrying inventory. In the event of a component shortage or
supply interruption from these suppliers, we may not be able to develop alternate or second sources in a timely manner. If we are
unable to buy these components in quantities sufficient to meet our requirements on a timely basis, we will not be able to deliver
products and services to our customers, which would seriously affect present and future sales, which would, in turn, adversely
affect our business, financial condition, and results of operations.
In addition, the development, licensing, or acquisition of new products in the future may increase the complexity of supply chain
management. Failure to effectively manage the supply of key components and products would adversely affect our business.
We rely on value-added and other resellers, as well as distribution partners, to sell our products, and disruptions to, or our
failure to effectively develop and manage, our distribution channel and the processes and procedures that support it could
adversely affect our ability to generate revenues from the sale of our products.
Our future success is highly dependent upon establishing and maintaining successful relationships with a variety of value-added
and other reseller and distribution partners, including our worldwide strategic partners such as Ericsson, IBM, and NSN. The
majority of our revenues are derived through value-added resellers and distributors, most of which also sell our competitors’
products, and some of which sell their own competing products. Our revenues depend in part on the performance of these partners.
The loss of or reduction in sales to our resellers or distributors could materially reduce our revenues. For example, in 2011 and
2012, one of our OEM partners, Dell, acquired Force10 and SonicWall, both competitors of ours. As a result, Dell became
increasingly competitive in certain areas, their resale of our products declined, and we ultimately terminated our OEM relationship
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with Dell. Our competitors may in some cases be effective in leveraging their market share positions or in providing incentives
to current or potential resellers and distributors to favor their products or to prevent or reduce sales of our products. If we fail to
develop and maintain relationships with our partners, fail to develop new relationships with value-added resellers and distributors
in new markets, fail to expand the number of distributors and resellers in existing markets, fail to manage, train or motivate existing
value-added resellers and distributors effectively, or if these partners are not successful in their sales efforts, sales of our products
may decrease, and our business, financial condition, and results of operations would suffer.
In addition, we recognize a portion of our revenues based on a sell-through model using information provided by our distributors.
If those distributors provide us with inaccurate or untimely information, the amount or timing of our revenues could be adversely
impacted.
Further, in order to develop and expand our distribution channel, we must continue to offer attractive channel programs to potential
partners and scale and improve our processes and procedures that support the channel. As a result, our programs, processes and
procedures may become increasingly complex and inherently difficult to manage. We have previously entered into OEM agreements
with partners pursuant to which they rebrand and resell our products as part of their product portfolios. These types of relationships
are complex and require additional processes and procedures that may be challenging and costly to implement, maintain and
manage. Our failure to successfully manage and develop our distribution channel and the programs, processes and procedures that
support it could adversely affect our ability to generate revenues from the sale of our products.
Our ability to process orders and ship products in a timely manner is dependent in part on our business systems and performance
of the systems and processes of third parties such as our contract manufacturers, suppliers, or other partners, as well as the
interfaces between our systems and the systems of such third parties. If our systems, the systems and processes of those third
parties, or the interfaces between them experience delays or fail, our business processes and our ability to build and ship
products could be impacted, and our financial results could be harmed.
Some of our business processes depend upon our information technology ("IT") systems, the systems and processes of third parties,
and the interfaces of our systems with the systems of third parties. For example, our order entry system feeds information into the
systems of our contract manufacturers, which enables them to build and ship our products. If those systems fail or are interrupted,
our processes may function at a diminished level or not at all. This could negatively impact our ability to ship products or otherwise
operate our business, and our financial results could be harmed. For example, although it did not adversely affect our shipments,
an earthquake in late December of 2006 disrupted our communications with China, where a significant part of our manufacturing
occurs. In addition, as discussed later in this "Risk Factors" section, beginning in 2012 and we expect, continuing into 2015, we
have been implementing major changes to our enterprise resource planning ("ERP") system. Any failure of the new system or
interruptions during the transition may impair communications with our manufacturers, and, therefore, adversely affect our ability
to build and ship our products.
We also rely upon the performance of the systems and processes of our contract manufacturers to build and ship our products. If
those systems and processes experience interruption or delay, our ability to build and ship our products in a timely manner may
be harmed. For example, we have experienced instances where our contract manufacturers were not able to ship products in the
time periods expected by us, which prevented us from meeting our commitments to our customers. If we are not able to ship our
products or if product shipments are delayed, our ability to recognize revenue in a timely manner for those products would be
affected and our financial results could be harmed.
Telecommunications and content service provider companies and our other large customers generally require onerous terms
and conditions in our contracts with them. As we seek to sell more products to such customers, we may be required to agree to
terms and conditions that could have an adverse effect on our business or ability to recognize revenues.
Telecommunications and content service provider companies, which comprise a significant portion of our customer base, and
other large companies, because of their size, generally have greater purchasing power than smaller entities and, accordingly, often
request and receive more favorable terms from suppliers, which often translate into more onerous terms and conditions applicable
to us. Recently, our customers, France Telecom-Orange and Deutsche Telekom AG have formed a company for the purpose of
purchasing products from, and negotiating more favorable contractual terms with, suppliers. As we seek to sell more products to
this class of customer, we may be required to agree to such terms and conditions, which may include terms that affect the timing
of our ability to recognize revenue and have an adverse effect on our business, financial condition, and results of operations.
Consolidation among such large customers can further increase their buying power and ability to require onerous terms.
In addition, service providers have purchased products from other vendors who promised but failed to deliver certain functionality
and/or had products that caused problems or outages in the networks of these customers. As a result, these customers may request
additional features from us and require substantial penalties for failure to deliver such features or may require substantial penalties
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for any network outages that may be caused by our products. These additional requests and penalties, if we are required to agree
to them, may require us to defer revenue recognition from such sales, which may negatively affect our business, financial condition,
and results of operations.
System security risks, data protection breaches, and cyber-attacks could compromise our proprietary information, disrupt our
internal operations and harm public perception of our products, which could cause our business and reputation to suffer and
adversely affect our stock price.
In the ordinary course of business, we store sensitive data, including intellectual property, our proprietary business information
and that of our customers, suppliers and business partners on our networks. The secure maintenance of this information is critical
to our operations and business strategy. Increasingly, companies, including Juniper Networks, are subject to a wide variety of
attacks on their networks on an ongoing basis. Despite our security measures, Juniper Networks' information technology and
infrastructure may be vulnerable to penetration or attacks by computer programmers and hackers, or breached due to employee
error, malfeasance or other disruptions. Any such breach could compromise our networks, creating system disruptions or slowdowns
and exploiting security vulnerabilities of our products, and the information stored on our networks could be accessed, publicly
disclosed, lost or stolen, which could subject us to liability to our customers, suppliers, business partners and others, and cause us
reputational and financial harm. In addition, sophisticated hardware and operating system software and applications that we produce
or procure from third parties may contain defects in design or manufacture, including "bugs" and other problems that could
unexpectedly interfere with the operation of our networks.
If an actual or perceived breach of network security occurs in our network or in the network of a customer of our products, regardless
of whether the breach is attributable to our products, the market perception of the effectiveness of our products could be harmed.
Because the techniques used by computer programmers and hackers, many of whom are highly sophisticated and well-funded, to
access or sabotage networks change frequently and generally are not recognized until after they are used, we may be unable to
anticipate or immediately detect these techniques. This could impede our sales, manufacturing, distribution or other critical
functions. In addition, the economic costs to us to eliminate or alleviate cyber or other security problems, bugs, viruses, worms,
malicious software systems and security vulnerabilities could be significant and may be difficult to anticipate or measure because
the damage may differ based on the identity and motive of the programmer or hacker, which are often difficult to identify.
Regulation of industry and the telecommunications industry in particular could harm our operating results and future prospects.
We are subject to laws and regulations affecting the sale of our products in a number of areas. For example, some governments
have regulations prohibiting government entities from purchasing security products that do not meet specified indigenous
certification criteria, even though those criteria may be in conflict with accepted international standards. Other regulations that
may negatively impact our business include country of origin regulations. These types of regulations are in effect or under
consideration in several jurisdictions where we do business.
The Dodd-Frank Wall Street Reform and Consumer Protection Act includes disclosure requirements regarding the use of “conflict
minerals” mined from the Democratic Republic of Congo and adjoining countries (“DRC”) and procedures regarding a
manufacturer's efforts to prevent the sourcing of such “conflict minerals.” These minerals are present in our products. SEC rules
implementing these requirements may have the effect of reducing the pool of suppliers who can supply DRC “conflict free”
components and parts, and we may not be able to obtain DRC conflict free products or supplies in sufficient quantities for our
operations. Since our supply chain is complex, we may face reputational challenges with our customers, stockholders and other
stakeholders if we are unable to sufficiently verify the origins for the "conflict minerals” used in our products.
In addition, environmental regulations relevant to electronic equipment manufacturing or operations may impact our business and
financial condition adversely. For instance, the European Union and China have adopted WEEE and ROHS regulations, which
require producers of electrical and electronic equipment to assume responsibility for collecting, treating, recycling and disposing
of products when they have reached the end of their useful life, as well as REACH regulations, which regulate handling of certain
chemical substances that may be used in our products.
The traditional telecommunications industry is highly regulated, and our business and financial condition could be adversely
affected by changes in regulations relating to the Internet telecommunications industry. Currently, there are few laws or regulations
that apply directly to access to or commerce on IP networks, but future regulations could include sales taxes on products sold via
the Internet and Internet service provider access charges. We could be adversely affected by regulation of IP networks and commerce
in any country where we market equipment and services to service or content providers. Regulations governing the range of
services and business models that can be offered by service providers or content providers could adversely affect those customers'
needs for products designed to enable a wide range of such services or business models. For instance, the U.S. Federal
Communications Commission has issued regulations governing aspects of fixed broadband networks and wireless networks; these
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regulations might impact service provider and content provider business models and as such, providers' needs for Internet
telecommunications equipment and services. Also, many jurisdictions are evaluating or implementing regulations relating to cyber
security, supply chain integrity, privacy and data protection, any of which can affect the market and requirements for networking
and security equipment.
The adoption and implementation of such regulations could reduce demand for our products, increase the cost of building and
selling our products, result in product inventory write-offs, impact our ability to ship products into affected areas and recognize
revenue in a timely manner and require us to spend significant time and expense to comply, and we could face fines and civil or
criminal sanctions or claims if we were to violate or become liable under such regulations. Any of these impacts could have a
material adverse effect on our business, financial condition, and results of operations.
Governmental regulations affecting the import or export of products or affecting products containing encryption capabilities
could negatively affect our revenues.
Certain of our products contain or use encryption technology. The United States and various foreign governments have imposed
controls, export license requirements, and restrictions on the import or export, among other things, encryption technology. In
addition, from time to time, governmental agencies have proposed additional regulation of encryption technology, such as requiring
certification, notifications, review of source code, or the escrow and governmental recovery of private encryption keys. For
example, Russia and China recently have implemented new requirements relating to products containing encryption and India has
imposed special warranty and other obligations associated with technology deemed critical. Governmental regulation of encryption
or IP networking technology and regulation of imports or exports, or our failure to obtain required import or export approval for
our products, could harm our international and domestic sales and adversely affect our revenues. In addition, failure to comply
with such regulations could result in harm to our reputation, penalties, costs, and restrictions on import or export privileges or
adversely affect sales to government agencies or government-funded projects.
If we do not successfully anticipate technological shifts, market needs and opportunities, and develop products and product
enhancements that meet those technological shifts, needs and opportunities, or if those products are not made available in a
timely manner or do not gain market acceptance, we may not be able to compete effectively and our ability to generate revenues
will suffer.
We cannot guarantee that we will be able to anticipate future technological shifts, market needs and opportunities or be able to
develop new products or product enhancements to meet such technological shifts, needs or opportunities in a timely manner or at
all. For example, the move from traditional network infrastructures towards SDN has been receiving considerable attention. In
our view, it will take several years to see the full impact of SDN, and we believe the successful products and solutions in this
market will combine hardware and software elements together. If we fail to anticipate market requirements or fail to develop and
introduce new products or product enhancements to meet those needs in a timely manner, it could cause us to lose customers, and
such failure could substantially decrease or delay market acceptance and sales of our present and future products, which would
significantly harm our business, financial condition, and results of operations. Even if we are able to anticipate, develop, and
commercially introduce new products and enhancements, there can be no assurance that new products or enhancements will
achieve widespread market acceptance.
In addition, in the past two years, we announced new products, including the QFX3000-M QFabric System, T4000 Core Router,
EX9200 Ethernet Switch, MX Series Routers, PTX 3000 Packet Transport Router, and Juniper Networks Contrail. If these or
other new products do not gain market acceptance at a sufficient rate of growth, our ability to meet future financial targets may
be adversely affected. In addition, if we fail to achieve market acceptance at a sufficient rate of growth, our ability to meet future
financial targets and aspirations may be adversely affected. Finally, if we fail to deliver new or announced products to the market
in a timely manner, it could adversely affect the market acceptance of those products and harm our competitive position and our
business and financial results.
Our ability to develop, market, and sell products could be harmed if we are unable to retain or hire key personnel.
Our future success depends upon our ability to recruit and retain the services of executive, engineering, sales and marketing, and
support personnel. The supply of highly qualified individuals, in particular engineers in very specialized technical areas, or sales
people specializing in the service provider and enterprise markets, is limited and competition for such individuals is intense. None
of our officers or key employees is bound by an employment agreement for any specific term. In January 2014, Shaygan Kheradpir
became the new CEO of the Company, succeeding Kevin Johnson, who had served as our CEO since September 2008. The loss
of the services of any of our key employees, the inability to attract or retain personnel in the future or delays in hiring required
personnel, engineers and sales people, and the complexity and time involved in replacing or training new employees, could delay
the development and introduction of new products, and negatively impact our ability to market, sell, or support our products.
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We are a party to lawsuits, investigations, proceedings, and other disputes, which are costly to defend and, if determined
adversely to us, could require us to pay fines or damages, undertake remedial measures or prevent us from taking certain
actions, any or all of which could harm our business, results of operations, financial condition or cash flows.
We, and certain of our current and former officers and current and former members of our Board of Directors, are subject to various
lawsuits. We have been served with lawsuits related to employment matters, commercial transactions and patent infringement, as
well as securities laws. A description of the securities lawsuits can be found in Note 16, Commitments and Contingencies, in Notes
to Consolidated Financial Statements of this Report, under the heading “Legal Proceedings.” In addition, as noted under the
heading of “Legal Proceedings”, the U.S. Securities and Exchange Commission and the U.S. Department of Justice are conducting
investigations into possible violations by the Company of the U.S. Foreign Corrupt Practices Act. Litigation and investigations
are inherently uncertain. We therefore cannot predict the duration, scope, outcome or consequences of these matters. There can
be no assurance that these or any actions or investigations that have been or may in the future be brought against us, our officers,
and our directors will be resolved favorably. In connection with any government investigations, in the event the government takes
action against us or the parties enter into an agreement to settle the matter, we may be required to pay substantial fines and/or
incur other sanctions. The lawsuits and investigations are likely to be expensive and time-consuming to defend, settle, and/or
resolve, and may require us to implement certain remedial measures that could prove costly or disruptive to our business and
operations. The unfavorable resolution of one or more of these matters could have a material adverse effect on our business, results
of operations, financial condition or cash flows.
We are a party to litigation and claims regarding intellectual property rights, resolution of which may be time-consuming and
expensive, as well as require a significant amount of resources to prosecute, defend, or make our products non-infringing.
Our industry is characterized by the existence of a large number of patents and frequent claims and related litigation regarding
patent and other intellectual property rights. We expect that infringement claims may increase as the number of products and
competitors in our market increases and overlaps occur. Third parties have asserted and may in the future assert claims or initiate
litigation related to patent, copyright, trademark, and other intellectual property rights to technologies and related standards that
are relevant to our products. The asserted claims and/or initiated litigation may include claims against us or our manufacturers,
suppliers, partners, or customers, alleging that our products or services infringe proprietary rights. Regardless of the merit of these
claims, they have been and can be time-consuming, result in costly litigation, and may require us to develop non-infringing
technologies or enter into license agreements, or to cease engaging in certain activities or offering certain products or services.
Furthermore, because of the potential for high awards of damages or injunctive relief that are not necessarily predictable, even
arguably unmeritorious claims may be settled for significant amounts of money. If any infringement or other intellectual property
claim made against us by any third-party is successful, if we are required to settle litigation for significant amounts of money, or
if we fail to develop non-infringing technology or license required proprietary rights on commercially reasonable terms and
conditions, our business, financial condition, and results of operations could be materially and adversely affected.
Our financial condition and results of operations could suffer if there is an additional impairment of goodwill or other intangible
assets with indefinite lives.
We are required to test intangible assets with indefinite lives, including goodwill, annually and on an interim basis if an event
occurs or there is a change in circumstance that would more likely than not reduce the fair value of reporting units and intangible
assets below their carrying values. As of December 31, 2013, our goodwill was $4,057.7 million and there were no intangible
assets with indefinite lives. When the carrying value of a reporting unit’s goodwill exceeds its implied fair value of goodwill, a
charge to operations is recorded. If the carrying amount of an intangible asset with an indefinite life exceeds its fair value, a charge
to operations is recognized. Either event would result in incremental expenses for that quarter, which would reduce any earnings
or increase any loss for the period in which the impairment was determined to have occurred.
In the past, we experienced a reduction of $1,280.0 million to the carrying value of goodwill on our Consolidated Balance Sheets,
primarily due to the decline in our market capitalization that occurred over a period of approximately nine months prior to the
impairment review and, to a lesser extent, to a decrease in forecasted future cash flows.
In recent years, economic weakness has contributed to extreme price and volume fluctuations in global stock markets that have
reduced the market price of many technology company stocks, including ours. Declines in our level of revenues or operating
margins, as well as sustained declines in our stock price, increase the risk that goodwill and intangible assets with indefinite lives
may become impaired in future periods.
During the three months ended September 30, 2013, we concluded that there were sufficient indicators to require us to perform
an interim goodwill impairment analysis on our SSD segment. Based on our analysis, we determined that our SSD segment’s
goodwill is not impaired. However, our analysis is sensitive to changes in key assumptions used in our analysis, such as expected
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future cash flows, the degree of volatility in equity and debt markets, and our stock price. If the assumptions used in our analysis
are not realized, it is possible that an impairment charge may need to be recorded in the future. We cannot accurately predict the
amount and timing of any impairment of goodwill or other intangible assets. However, any such impairment would have an adverse
effect on our results of operations.
Changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could
adversely affect our results.
Our future effective tax rates could be subject to volatility or adversely affected by: earnings being lower than anticipated in
countries where we have lower statutory rates and higher than anticipated earnings in countries where we have higher statutory
rates; changes in the valuation of our deferred tax assets and liabilities; expiration of, or lapses in, the R&D tax credit laws applicable
to us; transfer pricing adjustments related to certain acquisitions, including the license of acquired intangibles under our
intercompany R&D cost sharing arrangement; costs related to intercompany restructuring; tax effects of share-based compensation;
or changes in tax laws, regulations, accounting principles, or interpretations thereof. In addition, we are subject to the continuous
examination of our income tax returns by the Internal Revenue Service and other tax authorities. We regularly assess the likelihood
of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. There can
be no assurance that the outcomes from these continuous examinations will not have an adverse effect on our business, financial
condition, and results of operations.
If we fail to accurately predict our manufacturing requirements, we could incur additional costs or experience manufacturing
delays, which would harm our business.
We provide demand forecasts to our contract manufacturers and the manufacturers order components and plan capacity based on
these forecasts. If we overestimate our requirements, our contract manufacturers may assess charges, or we may have liabilities
for excess inventory, each of which could negatively affect our gross margins. For example, in the third quarter of 2012, our gross
margins were reduced as a result of an inventory charge resulting from inventory we held in excess of forecasted demand.
Conversely, because lead times for required materials and components vary significantly and depend on factors such as the specific
supplier, contract terms, and the demand for each component at a given time, and because our contract manufacturers are third-
party manufacturers for numerous other companies, if we underestimate our requirements, as we did in the third quarter of 2010
with respect to certain components, our contract manufacturers may have inadequate time, materials, and/or components required
to produce our products, which could increase costs or could delay or interrupt manufacturing of our products and result in delays
in shipments and deferral or loss of revenues.
We are dependent on contract manufacturers with whom we do not have long-term supply contracts, and changes to those
relationships, expected or unexpected, may result in delays or disruptions that could cause us to lose revenues and damage
our customer relationships.
We depend on independent contract manufacturers (each of which is a third-party manufacturer for numerous companies) to
manufacture our products. Although we have contracts with our contract manufacturers, these contracts do not require them to
manufacture our products on a long-term basis in any specific quantity or at any specific price. In addition, it is time-consuming
and costly to qualify and implement additional contract manufacturer relationships. Therefore, if we fail to effectively manage
our contract manufacturer relationships, which includes failing to provide accurate forecasts of our requirements, or if one or more
of them experiences delays, disruptions, or quality control problems in our manufacturing operations, or if we had to change or
add additional contract manufacturers or contract manufacturing sites, our ability to ship products to our customers could be
delayed. Also, the addition of manufacturing locations or contract manufacturers would increase the complexity of our supply
chain management. Moreover, an increasing portion of our manufacturing is performed in China and other countries and is therefore
subject to risks associated with doing business in other countries. In addition, in 2013, we reduced the number of our contract
manufacturers and transitioned the work of one manufacturer to two of our other existing manufacturers. If we do not manage the
recent transition effectively, we could experience delays or quality issues. Each of these factors could adversely affect our business,
financial condition and results of operations.
Upgrades to key internal systems and processes, and problems with the design or implementation of these systems and processes
could interfere with, and therefore harm, our business and operations.
We previously initiated a multi-year project to upgrade certain key internal systems and processes, including our company-wide
human resources management system, our customer relationship management (“CRM”) system and enterprise resource planning
("ERP") system. In the first quarter of 2010, we implemented a major upgrade of our CRM system. Since 2012, we have been
implementing major changes to our ERP system, which activities we expect to continue into 2015. We have invested, and will
continue to invest, significant capital and human resources in the design and implementation of these systems and processes. Any
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disruptions or delays in the design and implementation of the new systems or processes, particularly any disruptions or delays
that impact our operations, could adversely affect our ability to process customer orders, ship products, provide service and support
to our customers, bill and track our customers, fulfill contractual obligations, record and transfer information in a timely and
accurate manner, file SEC reports in a timely manner, or otherwise run our business. Even if we do not encounter these adverse
effects, the design and implementation of these new systems and processes may be much more costly than we anticipated. If we
are unable to successfully design and implement these new systems and processes as planned, or if the implementation of these
systems and processes is more costly than anticipated, our business, financial condition, and results of operations could be negatively
impacted.
We may face difficulties enforcing our proprietary rights.
We generally rely on a combination of patents, copyrights, trademarks, and trade secret laws and restrictions on disclosure of
confidential and proprietary information, to establish and maintain proprietary rights in our technology and products. Although
we have been issued numerous patents and other patent applications are currently pending, there can be no assurance that any of
our patent applications will result in issued patents or that any of our patents or other proprietary rights will not be challenged,
invalidated, infringed or circumvented or that our rights will, in fact, provide competitive advantages to us or protect our technology,
any of which could result in costly product redesign efforts, discontinuance of certain product offerings and other competitive
harm. Furthermore, the laws of some foreign countries may not protect our proprietary rights to the same extent as do the laws of
the United States. The outcome of any actions taken in these foreign countries may be different than if such actions were determined
under the laws of the United States. Although we are not dependent on any individual patents or group of patents for particular
segments of the business for which we compete, if we are unable to protect our proprietary rights in a market, we may find ourselves
at a competitive disadvantage to others who need not incur the substantial expense, time, and effort required to create innovative
products that have enabled our success.
Our success depends upon our ability to effectively plan and manage our resources and restructure our business through
rapidly fluctuating economic and market conditions.
Our ability to successfully offer our products and services in a rapidly evolving market requires an effective planning, forecasting,
and management process to enable us to effectively scale and adjust our business in response to fluctuating market opportunities
and conditions.
In periods of market expansion, we have increased investment in our business by, for example, increasing headcount and increasing
our investment in R&D, sales and marketing, and other parts of our business.
Conversely, in the third quarter of 2012, to align our cost structure with long-term strategic plans as part of our productivity and
efficiency initiatives, we restructured our business, rebalanced our workforce, and reduced our real estate portfolio. Similarly, in
connection with our recently announced IOP, we expect to initiate a substantial cost reduction plan accomplished through various
restructuring activities across research and development, sales and marking and general and administrative expenses. Many of
our expenses, such as real estate expenses, are fixed costs that cannot be rapidly or easily adjusted in response to fluctuations in
our business or numbers of employees. Moreover, rapid changes in the size of our workforce could adversely affect our ability to
develop and deliver products and services as planned or impair our ability to realize our current or future business objectives. Our
ability to achieve the anticipated cost savings and other benefits from our restructuring initiatives within the expected time frame
is subject to many estimates and assumptions. These estimates and assumptions are subject to significant economic, competitive
and other uncertainties, some of which are beyond our control. If these estimates and assumptions are incorrect, if we are
unsuccessful at implementing changes, or if other unforeseen events occur, our business and results of operations could be adversely
affected.
We are subject to risks arising from our international operations, which may adversely affect our business, financial condition,
and results of operations.
We derive a majority of our revenues from our international operations, and we plan to continue expanding our business in
international markets in the future. We conduct significant sales and customer support operations directly and indirectly through
our distributors and VARs in countries throughout the world and depend on the operations of our contract manufacturers and
suppliers that are located outside of the United States. In addition, a portion of our R&D and our general and administrative
operations are conducted outside the United States. In some countries, we may experience reduced intellectual property protection.
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As a result of our international operations, we are affected by economic, regulatory, social, and political conditions in foreign
countries, including the following:
•
•
•
•
changes in general IT spending,
the imposition of government controls, inclusive of critical infrastructure protection;
changes or limitations in trade protection laws or other regulatory requirements, which may affect our ability to import
or export our products from various countries; and
the impact of the following on service provider and government spending patterns: political considerations, unfavorable
changes in tax treaties or laws, natural disasters, epidemic disease, labor unrest, earnings expatriation restrictions,
misappropriation of intellectual property, military actions, acts of terrorism, political and social unrest and difficulties in
staffing and managing international operations.
Any or all of these factors could have a material adverse impact on our business, financial condition, and results of operations.
Moreover, local laws and customs in many countries differ significantly from or conflict with those in the United States or in other
countries in which we operate. In many foreign countries, particularly in those with developing economies, it is common for others
to engage in business practices that are prohibited by our internal policies and procedures or United States regulations applicable
to us. There can be no assurance that our employees, contractors, channel partners, and agents will not take actions in violation
of our policies and procedures, which are designed to ensure compliance with U.S. and foreign laws and policies. Violations of
laws or key control policies by our employees, contractors, channel partners, or agents could result in termination of our relationship,
financial reporting problems, fines, and/or penalties for us, or prohibition on the importation or exportation of our products, and
could have a material adverse effect on our business, financial condition and results of operations.
We are exposed to fluctuations in currency exchange rates, which could negatively affect our financial condition and results
of operations.
Because a majority of our business is conducted outside the United States, we face exposure to adverse movements in non-U.S.
currency exchange rates. These exposures may change over time as business practices evolve and could have a material adverse
impact on our financial condition and results of operations.
The majority of our revenues and expenses are transacted in U.S. Dollars. We also have some transactions that are denominated
in foreign currencies, primarily the British Pound, Euro, Indian Rupee, and Japanese Yen related to our sales and service operations
outside of the United States. An increase in the value of the U.S. Dollar could increase the real cost to our customers of our products
in those markets outside the United States in which we sell in U.S. Dollars, and a weakened U.S. Dollar could increase the cost
of local operating expenses and procurement of raw materials to the extent we must purchase components in foreign currencies.
Currently, we hedge only those currency exposures associated with certain assets and liabilities denominated in nonfunctional
currencies and periodically hedge anticipated foreign currency cash flows. The hedging activities undertaken by us are intended
to offset the impact of currency fluctuations on certain nonfunctional currency assets and liabilities. However, such attempts to
offset the impact of currency fluctuations are costly and no amount of hedging can be effective against all circumstances, including
long-term declines in the value of the U.S. Dollar. If our attempts to hedge against these risks are not successful, or if long-term
declines in the value of the U.S. Dollar persist, our financial condition and results of operations could be adversely impacted.
Integration of acquisitions could disrupt our business and harm our financial condition and stock price and may dilute the
ownership of our stockholders.
We have made, and may continue to make, acquisitions in order to enhance our business. For example, in 2014, we acquired
WANDL, Inc. and in 2012, we acquired Contrail Systems Inc. ("Contrail") and Mykonos. Acquisitions involve numerous risks,
including problems combining the purchased operations, technologies or products, unanticipated costs and liabilities, diversion
of management's attention from our core businesses, adverse effects on existing business relationships with suppliers and customers,
risks associated with entering markets in which we have no or limited prior experience, and potential loss of key employees. There
can be no assurance that we will be able to integrate successfully any businesses, products, technologies, or personnel that we
might acquire. The integration of businesses that we may acquire is likely to be a complex, time-consuming, and expensive process
and we may not realize the anticipated revenues or other benefits associated with our acquisitions if we fail to successfully manage
and operate the acquired business. If we fail in any acquisition integration efforts and are unable to efficiently operate as a combined
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organization utilizing common information and communication systems, operating procedures, financial controls, and human
resources practices, our business, financial condition, and results of operations may be adversely affected.
Acquisitions may also require us to issue common stock or assume equity awards that dilute the ownership of our current
stockholders, use a substantial portion of our cash resources, assume liabilities, record goodwill and amortizable intangible assets
that will be subject to impairment testing on a regular basis and potential periodic impairment charges, incur amortization expenses
related to certain intangible assets, and incur large and immediate write-offs and restructuring and other related expenses, all of
which could harm our financial condition and results of operations.
If we fail to adequately evolve our financial and managerial control and reporting systems and processes, our ability to manage
and grow our business will be negatively affected.
Our ability to successfully offer our products and implement our business plan in a rapidly evolving market depends upon an
effective planning and management process. We will need to continue to improve our financial and managerial control and our
reporting systems and procedures in order to manage our business effectively in the future. If we fail to continue to implement
improved systems and processes, our ability to manage our business, financial condition, and results of operations may be negatively
affected.
Our products are highly technical and if they contain undetected errors or malware or do not meet customer quality expectations,
our business could be adversely affected, and we may be subject to lawsuits or be required to pay damages in connection with
any alleged or actual failure of our products and services.
Our products are highly technical and complex, are critical to the operation of many networks, and, in the case of our security
products, provide and monitor network security and may protect valuable information. Our products have contained and may
contain one or more undetected errors, defects, malware, or security vulnerabilities. Some errors in our products may only be
discovered after a product has been installed and used by end-customers. Any errors, defects, malware or security vulnerabilities
discovered in our products after commercial release could result in monetary penalties, loss of revenues or delay in revenue
recognition, loss of customers, loss of future business and reputation, penalties, and increased service and warranty cost, any of
which could adversely affect our business, financial condition, and results of operations. In addition, in the event an error, defect,
malware, or vulnerability is attributable to a component supplied by a third-party vendor, we may not be able to recover from the
vendor all of the costs of remediation that we may incur. In addition, we could face claims for product liability, tort, or breach of
warranty or indemnification. Defending a lawsuit, regardless of its merit, is costly and may divert management’s attention. If our
business liability insurance coverage is inadequate, or future coverage is unavailable on acceptable terms or at all, our financial
condition and results of operations could be harmed. Moreover, if our products fail to satisfy our customers' quality expectations
for whatever reason, the perception of and the demand for our products could be adversely affected.
If our products do not interoperate with our customers’ networks, installations will be delayed or cancelled and could harm
our business.
Our products are designed to interface with our customers’ existing networks, each of which have different specifications and
utilize multiple protocol standards and products from other vendors. Many of our customers’ networks contain multiple generations
of products that have been added over time as these networks have grown and evolved. Our products must interoperate with many
or all of the products within these networks as well as future products in order to meet our customers’ requirements. If we find
errors in the existing software or defects in the hardware used in our customers’ networks, we may need to modify our software
or hardware to fix or overcome these errors so that our products will interoperate and scale with the existing software and hardware,
which could be costly and could negatively affect our business, financial condition, and results of operations. In addition, if our
products do not interoperate with those of our customers’ networks, demand for our products could be adversely affected or orders
for our products could be cancelled. This could hurt our operating results, damage our reputation, and seriously harm our business
and prospects.
Our products incorporate and rely upon licensed third-party technology, and if licenses of third-party technology do not continue
to be available to us or are not available on terms acceptable to us, our revenues and ability to develop and introduce new
products could be adversely affected.
We integrate licensed third-party technology into certain of our products. From time to time, we may be required to license
additional technology from third-parties to develop new products or product enhancements. Third-party licenses may not be
available or continue to be available to us on commercially reasonable terms. The failure to comply with the terms of any license,
including free open source software, may result in our inability to continue to use such license. Our inability to maintain or re-
license any third-party licenses required in our products or our inability to obtain third-party licenses necessary to develop new
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products and product enhancements, could require us, if possible, to develop substitute technology or obtain substitute technology
of lower quality or performance standards or at a greater cost, any of which could delay or prevent product shipment and harm
our business, financial condition, and results of operations.
We sell our products to customers that use those products to build networks and IP infrastructure, and if the demand for network
and IP systems does not continue to grow, our business, financial condition, and results of operations could be adversely
affected.
A substantial portion of our business and revenues depends on the growth of secure IP infrastructure and on the deployment of
our products by customers that depend on the continued growth of IP services. As a result of changes in the economy, capital
spending or the building of network capacity in excess of demand, all of which have in the past particularly affected
telecommunications service providers, spending on IP infrastructure can vary, which could have a material adverse effect on our
business, financial condition, and results of operations. In addition, a number of our existing customers are evaluating the build-
out of their next generation networks. During the decision-making period when the customers are determining the design of those
networks and the selection of the equipment they will use in those networks, such customers may greatly reduce or suspend their
spending on secure IP infrastructure. Such delays in purchases can make it more difficult to predict revenues from such customers
can cause fluctuations in the level of spending by these customers and, even where our products are ultimately selected, can have
a material adverse effect on our business, financial condition, and results of operations.
We are required to evaluate the effectiveness of our internal control over financial reporting, and any adverse results from
such evaluation may adversely affect investor perception, our stock price and cause us to incur additional expense.
Section 404 of the Sarbanes-Oxley Act of 2002 requires our management to report on, and our independent auditors to attest to,
the effectiveness of our internal control over financial reporting. We have an ongoing program to perform the system and process
evaluation and testing necessary to comply with these requirements. We have and will continue to incur significant expenses and
devote management resources to Section 404 compliance on an ongoing basis. In the event that our Chief Executive Officer, Chief
Financial Officer, or independent registered public accounting firm determine in the future that, our internal controls over financial
reporting are not effective as defined under Section 404, investor perceptions may be adversely affected if our financial statements
are not reliable and could cause a decline in the market price of our stock and otherwise negatively affect our liquidity and financial
condition.
Failure to maintain our credit ratings could adversely affect our cost of funds and related margins, liquidity, competitive position
and access to capital markets.
The major debt rating agencies routinely evaluate our debt. This evaluation is based on a number of factors, which include financial
strength as well as transparency with rating agencies and timeliness of financial reporting. There can be no assurance that we will
be able to maintain our credit ratings and failure to do so could adversely affect our cost of funds and related margins, liquidity,
competitive position and access to capital markets.
Our failure to pay quarterly dividends to our stockholders or the failure to meet our commitments to return capital to our
stockholders could have a material adverse affect on our stock price.
In February 2014, we announced our intention to implement payment of a quarterly dividend commencing in the third quarter of
2014. Our ability to pay quarterly dividends will be subject to, among other things, our financial position and results of operations,
available cash and cash flow, capital requirements and other factors. Any failure to pay or increase future dividends as announced,
reduction or discontinuation of quarterly dividends could have a material adverse affect on our stock price.
In addition, as part of our IOP, the Board of Directors authorized $2.0 billion in share repurchases to be executed through the end
of the first quarter of 2015, including $1.2 billion through an accelerated share repurchase program to be entered into during the
first quarter of 2014. The capital return plan will be funded by a combination of onshore cash and newly issued debt to preserve
our financial flexibility to invest in future growth opportunities and maintain our investment grade credit rating. We can provide
no assurances that we will be able to consummate the debt offering on terms acceptable to us or at all. Any failure to meet our
commitments to return capital to our shareholders could have an material adverse effect on our stock price.
We may be unable to generate the cash flow to service our debt obligations, including the Senior Notes.
In March 2011, we issued senior unsecured notes for an aggregate principle amount of $1.0 billion (see discussion in Note 10,
Long-Term Debt and Financing, in the Notes to Consolidated Financial Statements of this Report). As of December 31, 2013, we
had $999.3 million in outstanding long-term debt. We may not be able to generate sufficient cash flow to enable us to service our
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indebtedness, including the notes, or to make anticipated capital expenditures. Our ability to pay our expenses and satisfy our debt
obligations, refinance our debt obligations and fund planned capital expenditures will depend on our future performance, which
will be affected by general economic, financial, competitive, legislative, regulatory and other factors beyond our control. Based
upon current levels of operations, we believe cash flow from operations and available cash will be adequate for the foreseeable
future to meet our anticipated requirements for working capital, capital expenditures and scheduled payments of principal and
interest on our indebtedness, including the Senior Notes. However, if we are unable to generate sufficient cash flow from operations
or to borrow sufficient funds in the future to service our debt, we may be required to sell assets, reduce capital expenditures,
refinance all or a portion of our existing debt (including the Senior Notes) or obtain additional financing. There is no assurance
that we will be able to refinance our debt, sell assets or borrow more money on terms acceptable to us, or at all.
The indenture that governs the Senior Notes also contains various covenants that limit our ability and the ability of our subsidiaries
to, among other things:
•
•
•
incur liens;
incur sale and leaseback transactions; and
consolidate or merge with or into, or sell substantially all of our assets to, another person.
As a result of these covenants, we are limited in the manner in which we can conduct our business, and we may be unable to
engage in favorable business activities or finance future operations or capital needs. Accordingly, these restrictions may limit our
ability to successfully operate our business. A failure to comply with these restrictions could lead to an event of default, which
could result in an acceleration of the indebtedness. Our future operating results may not be sufficient to enable compliance with
these covenants to remedy any such default. In addition, in the event of an acceleration, we may not have or be able to obtain
sufficient funds to make any accelerated payments, including those under the Senior Notes and any notes issued in connection
with the recently-announced capital return program discussed below.
In addition, in February 2014, we announced a capital return program to be effected over three years. We expect to incur additional
indebtedness to fund actions expected to be taken pursuant to that program.
The investment of our cash balance and our investments in government and corporate debt securities are subject to risks, which
may cause losses and affect the liquidity of these investments.
At December 31, 2013, we had $2,284.0 million in cash and cash equivalents and $1,813.8 million in short- and long-term
investments. We have invested these amounts primarily in asset-backed securities, certificate of deposit, commercial paper,
corporate debt securities, foreign government debt securities, government- sponsored enterprise obligations, money market funds,
mutual funds, publicly-traded equity securities and U.S. government securities. Certain of these investments are subject to general
credit, liquidity, market, sovereign debt, and interest rate risks. Our future investment income may fall short of expectations due
to changes in interest rates or if the decline in fair value of our publicly traded debt or equity investments is judged to be other-
than-temporary. These market risks associated with our investment portfolio may have a negative adverse effect on our liquidity,
financial condition, and results of operations.
Uninsured losses could harm our operating results.
We self-insure against many business risks and expenses, such as intellectual property litigation and our medical benefit programs,
where we believe we can adequately self-insure against the anticipated exposure and risk or where insurance is either not deemed
cost-effective or is not available. We also maintain a program of insurance coverage for various types of property, casualty, and
other risks. We place our insurance coverage with various carriers in numerous jurisdictions. The types and amounts of insurance
that we obtain vary from time to time and from location to location, depending on availability, cost, and our decisions with respect
to risk retention. The policies are subject to deductibles, policy limits, and exclusions that result in our retention of a level of risk
on a self-insurance basis. Losses not covered by insurance could be substantial and unpredictable and could adversely affect our
financial condition and results of operations.
ITEM 1B. Unresolved Staff Comments
Not applicable.
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ITEM 2. Properties
Our corporate headquarters are located on 80 acres of owned land in Sunnyvale, California and includes approximately 0.7 million
square feet of owned buildings that we began occupying in November 2012 and into the first half of 2013, as part of our phased
campus build-out. In addition to our owned facilities, we lease approximately 0.7 million square feet in buildings as part of our
corporate headquarters.
In addition to our leased offices in Sunnyvale, we also lease offices in various locations throughout the United States, Canada,
South America, EMEA, and APAC regions, including offices in Australia, China, Hong Kong, India, Ireland, Israel, Japan, the
Netherlands, Russia, United Arab Emirates, and the United Kingdom. We lease approximately 2.2 million square feet worldwide,
with approximately 54 percent in North America. Each leased facility is subject to an individual lease or sublease, which could
provide various options to renew/terminate the agreement or to expand/contract the leased space.
Our leases expire at various times through November 30, 2022. Our current offices are in good condition and appropriately support
our business needs.
For additional information regarding obligations under our operating leases, see Note 16, Commitments and Contingencies, in
Notes to Consolidated Financial Statements in Item 8 of Part II of this Report, which is incorporated by reference herein. For
additional information regarding properties by operating segment, see Note 13, Segment Information, in Notes to Consolidated
Financial Statements in Item 8 of Part II of this Report, which is incorporated by reference herein.
ITEM 3. Legal Proceedings
The information set forth under the heading “Legal Proceedings” in Note 16, Commitments and Contingencies, in Notes to
Consolidated Financial Statements in Item 8 of Part II of this Report, is incorporated herein by reference.
ITEM 4. Mine Safety Disclosures
Not applicable.
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PART II
ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Price Range of Common Stock
The principal market in which our common stock is traded is the New York Stock Exchange (the "NYSE") under the symbol
JNPR. The following table sets forth the high and low sales prices for our common stock for each full quarterly period within the
two most recent fiscal years as reported on the NYSE.
First quarter
Second quarter
Third quarter
Fourth quarter
Stockholders
2013
2012
High
Low
High
Low
$
$
$
$
22.98
19.62
22.25
22.71
$
$
$
$
18.47
15.62
18.71
18.36
$
$
$
$
25.04
22.89
20.00
20.67
$
$
$
$
19.67
15.31
14.01
15.77
As of February 21, 2014, there were 908 stockholders of record of our common stock and we believe a substantially greater number
of beneficial owners who hold shares through brokers, banks or other nominees.
Dividends
We have never paid cash dividends on our common stock. In February 2014, we announced our intention of declaring a quarterly
cash dividend of $0.10 per share of common stock beginning in the third quarter of 2014. However, the declaration and amount
of any future cash dividends are at the discretion of the Board of Directors and will depend on our financial performance, economic
outlook, and any other relevant considerations.
Securities Authorized for Issuance Under Equity Compensation Plans
For information regarding compensation plans under which equity securities are authorized for issuance, see Note 12, Employee
Benefit Plans, in Notes to Consolidated Financial Statements in Item 8 of Part II of this Report.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
The following table provides share repurchase activity during the three months ended December 31, 2013 (in millions, except per
share amounts):
Total Number
of Shares
Purchased (1)
Average
Price Paid
per Share (1)
Total Number
of Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs (2)
Maximum Dollar
Value of Shares
that May Yet Be
Purchased
Under the Plans
or Programs (2)
Period
October 1 - October 31, 2013
November 1 - November 30, 2013
December 1 - December 31, 2013
Total
________________________________
(1) Amounts include repurchases under our stock repurchase program and repurchases of our common stock for our employees in connection
with net issuances of shares to satisfy minimum tax withholding obligations for the vesting of certain stock awards. The amount of shares
of common stock repurchased from our employees in connection with minimum tax withholdings was not significant during the three
months ended December 31, 2013.
20.23
19.84
20.96
20.47
1,232.9
1,135.1
997.7
0.4
5.0
6.6
12.0
0.3
4.9
6.6
11.8
$
$
$
$
$
$
$
(2) Shares were repurchased under our stock repurchase program approved by the Board in June 2012 and in July 2013, which authorized us
to purchase an aggregate of up to $2.0 billion of our common stock. Future share repurchases under this program will be subject to a review
of the circumstances in place at that time and will be made from time to time in private transactions or open market purchases as permitted
by securities laws and other legal requirements. This program may be discontinued at any time.
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Company Stock Performance
The graph below shows the cumulative total stockholder return over a five-year period assuming the investment of $100 on
December 31, 2008, in each of Juniper Networks' common stock, the Standard & Poor's 500 Stock Index (“S&P 500”), the NYSE
Dow Jones Industrial Average (“DJI”), and the NASDAQ Telecommunications Index (“IXTC”). The graph shall not be deemed
to be incorporated by reference into other SEC filings; nor deemed to be soliciting material or filed with the Commission or subject
to Regulation 14A or 14C or subject to Section 18 of the Exchange Act. The comparisons in the graph below are based upon
historical data and are not indicative of, or intended to forecast, future performance of our common stock.
Stock Performance Graph
JNPR
S&P 500
DJI
IXTC
As of December 31,
2008
2009
2010
2011
2012
2013
$
$
$
$
100.00
100.00
100.00
100.00
$
$
$
$
152.31
126.46
122.60
137.19
$
$
$
$
210.85
145.51
139.81
148.93
$
$
$
$
116.56
148.59
151.47
130.81
$
$
$
$
112.34
172.37
166.87
132.54
$
$
$
$
128.90
228.19
216.20
180.87
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ITEM 6. Selected Financial Data
The following selected consolidated financial data should be read in conjunction with Item 7, “Management's Discussion and
Analysis of Financial Condition and Results of Operations,” and the Consolidated Financial Statements and the notes thereto in
Item 8, “Financial Statements and Supplementary Data,” of this Report, which are incorporated herein by reference.
The information presented below reflects the impact of certain significant transactions and the adoption of certain accounting
pronouncements, which makes a direct comparison difficult between each of the last five fiscal years. For a complete description
of matters affecting the results in the tables below during the three years ended December 31, 2013, see “Notes to Consolidated
Financial Statements” in Item 8 of Part II of this Report.
Consolidated Statements of Operations Data
2013(a)
2012(b)
2011(c)
2010(d)
2009(e)
Years Ended December 31,
Net revenues
Cost of revenues
Gross margin
Operating expenses
Operating income
Other (expense) income, net
Income before income taxes and
noncontrolling interest
Income tax provision
Consolidated net income
Adjust for net loss (income) attributable to
noncontrolling interest
Net income attributable to Juniper Networks
Net income per share attributable to Juniper
Networks common stockholders:
Basic
Diluted
Shares used in computing net income
per share:
Basic
Diluted
$
4,669.1
$
(In millions, except per share amounts)
4,365.4
4,448.7
$
$
4,093.3
1,727.7
2,941.4
2,375.5
565.9
(40.4)
525.5
85.7
439.8
—
1,656.6
2,708.8
2,400.7
308.1
(16.6)
291.5
105.0
186.5
—
1,580.1
2,868.6
2,250.1
618.5
(46.8)
571.7
146.7
425.0
0.1
439.8
$
186.5
$
425.1
$
1,351.5
2,741.8
1,974.2
767.6
10.6
778.2
158.8
619.4
(1.0)
618.4
0.88
0.86
$
$
0.36
0.35
$
$
0.80
0.79
$
$
1.18
1.15
501.8
510.3
520.9
526.2
529.8
541.4
522.4
538.8
$
$
$
$
3,315.9
1,132.7
2,183.2
1,872.5
310.7
1.4
312.1
196.9
115.2
1.8
117.0
0.22
0.22
523.6
534.0
$
$
$
(a)
(b)
(c)
(d)
(e)
Includes the following significant pre-tax items: restructuring and other charges of $47.5 million, interest expense on debt (net of amounts
capitalized) of $45.2 million, and an increase in depreciation expense within research and development of $28.3 million related to a change
in estimate of the useful lives of certain computers and equipment. In addition, includes $64.2 million of significant tax items for a multi-
year claim related to the U.S. production activities deduction, a tax settlement with the Internal Revenue Service ("IRS"), and the
reinstatement of the U.S. federal R&D tax credit on January 2, 2013 retroactive to January 1, 2012.
Includes the following significant pre-tax items: restructuring and other charges of $99.7 million, interest expense on debt (net of amounts
capitalized) of $40.0 million, and a net gain on privately-held investments of $25.5 million.
Includes the following significant pre-tax items: restructuring and other charges of $30.6 million and interest expense on debt (net of
amounts capitalized) of $37.7 million.
Includes pre-tax restructuring charges of $10.8 million. In addition, includes a non-recurring income tax benefit of $54.1 million recorded
in the first quarter from a change in estimate of unrecognized tax benefits related to share-based compensation.
Includes the following significant pre-tax items: Litigation settlement charges of $182.3 million and restructuring charges of $19.5 million.
In addition, includes the following significant tax items: $61.8 million related to the write-off of certain net deferred tax assets resulting
from a change in California income tax law, $52.1 million related to a change in the tax treatment of stock-based compensation expense
in transfer pricing arrangements for certain U.S. multinational companies due to a federal appellate court ruling, and $4.6 million related
to an investigation by the India tax authorities.
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Consolidated Balance Sheet Data
Cash, cash equivalents, and investments
Working capital
Goodwill
Total assets
Long-term debt
Total long-term liabilities
(excluding long-term debt)
Total Juniper Networks stockholders' equity
2013
2012
$
$
4,097.8
2,262.5
4,057.7
10,326.0
999.3
3,837.4
2,178.7
4,057.8
9,832.1
999.2
As of December 31,
2011
(In millions)
4,292.4
$
2,973.0
3,928.1
9,983.8
999.0
2010
2009
$
$
2,821.6
1,742.4
3,927.8
8,467.9
—
2,658.7
1,503.2
3,658.6
7,590.3
—
583.1
7,302.2
$
411.4
6,999.0
$
428.4
7,089.2
$
387.1
6,608.2
$
389.7
5,822.1
$
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ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read with the Consolidated Financial Statements and the related notes in Item 8, of this Report.
The following discussion is based upon our Consolidated Financial Statements included elsewhere in this Report, which have
been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). In the course of operating our
business, we routinely make decisions as to the timing of the payment of invoices, the collection of receivables, the manufacturing
and shipment of products, the fulfillment of orders, the purchase of supplies, and the building of inventory and spare parts, among
other matters. Each of these decisions has some impact on the financial results for any given period. In making these decisions,
we consider various factors including contractual obligations, customer satisfaction, competition, internal and external financial
targets and expectations, and financial planning objectives. For further information about our critical accounting policies and
estimates, see “Critical Accounting Policies and Estimates” section included in this “Management's Discussion and Analysis of
Financial Condition and Results of Operations.”
To aid in understanding our operating results for the periods covered by this Report, we have provided an executive overview and
a summary of the business and market environment. These sections should be read in conjunction with the more detailed discussion
and analysis of our consolidated financial condition and results of operations in this Item 7, our “Risk Factors” section included
in Item 1A of Part I, and our Consolidated Financial Statements and notes thereto included in Item 8 of Part II of this Report.
Business and Market Environment
At Juniper Networks, we design, develop, and sell products and services for high-performance networks, which combine scale
and performance with agility and efficiency, so customers can build the best networks for their businesses. Our routing, switching
and security products address the high-performance networking requirements of global service providers, enterprises, governments,
and research and public sector organizations that view the network as critical to their success. Our silicon, systems, and software
represent innovations that transform the economics and experience of networking, helping customers achieve superior performance,
greater choice, and flexibility, while reducing overall total cost of ownership.
We do business in three geographic regions: Americas, EMEA, and APAC. During 2013, we operated under two business segments:
Platform Systems Division ("PSD") and Software Solutions Division ("SSD"). Our PSD segment primarily offers scalable routing
and switching products that are used in service provider, enterprise, and public sector networks to control and direct network traffic
between data centers, core, edge, aggregation, campus, Wide Area Networks ("WANs"), and consumer and business devices. Our
SSD segment offers solutions focused on network security and network services applications for both service providers and
enterprise customers. Both segments offer worldwide services, including technical support and professional services, as well as
educational and training programs to our customers. During 2013, we realigned certain products from our PSD segment to our
SSD segment in connection with our acquisition of Contrail Systems Inc ("Contrail"). In addition, we consolidated operational
oversight and management of all security products within the SSD segment. As a result of this product realignment, security
products previously reported in the PSD segment (including the Branch SRX, Branch Firewall, and J Series product families) are
now reported in the SSD segment. We reclassified the segment data for the prior years to conform to the current year presentation.
We believe these changes provide investors with increased financial reporting transparency and enable better insight into the
market and performance trends driving our business.
During 2013, we saw revenue growth in both our service provider and enterprise markets as well as a shift in product mix towards
edge routing, switching and data center solutions. We continue to remain focused on turning around the security business as
customers build High-IQ networks and cloud environments. Further, we believe that we are experiencing an improving but still
uncertain global macroeconomic environment in which our customers exercise care and conservatism in their investment
prioritization and project deployments. We expect that our customers will remain thoughtful with their capital spending. We believe
our product gross margins may decline in the future due to competitive pricing pressures, which may be offset by additional
operational improvements and cost efficiencies. Nevertheless, we are focused on executing our strategy to address the market
trends of mobile Internet and cloud computing and we continue to believe there are positive long-term fundamentals for high-
performance networking, including High-IQ networking, as well as cloud environments for data centers.
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We continued to invest in innovation and strengthening our product portfolio, which resulted in new product offerings during
2013, including a series of new products for the enterprise campus and data center infrastructures, including the EX9200 Ethernet
Switch, a programmable core switch, to support emerging applications and growing workloads. Additionally, we enhanced our
MX Series portfolio with the release of the MX104, the MX2010, and the MX2020, service provider edge routers designed for
rapid service delivery and application enablement. We also released the world's smallest Supercore, the PTX3000, to address the
scale and flexibility challenges facing service providers as they converge their networks to optimize their business. Furthermore,
to help enterprise organizations and service providers address the challenges associated with managing multiple, geographically
dispersed data centers, we unveiled MetaFabric, a new architecture for next generation data centers. MetaFabric simplifies and
accelerates the deployment and delivery of applications within and across multiple data center locations.
We also announced the availability of Juniper Networks Contrail, a standards-based and highly scalable network virtualization
and intelligence solution for SDN and introduced OpenContrail, a new initiative that makes the source code library for Contrail
available through an open source license, which we believe will help to foster innovation in SDN. We also announced enhancements
to the SDN-ready MX Series 3D Universal Edge Router portfolio that significantly expands system capacity, subscriber bandwidth
and service performance.
During 2013, we initiated a restructuring plan (the "2013 Restructuring Plan") to continue to improve our cost structure and
rationalize our product portfolio and rebalance our investments. The 2013 Restructuring Plan consists of workforce reductions,
contract terminations, and project cancellations of which $28.3 million were recorded in 2013. We were not able to achieve the
full benefit of our cost savings goal of $100.0 million in 2013. See Note 9, Restructuring and Other Charges, in Notes to Consolidated
Financial Statements in Item 8 of Part II of this Report, for further discussion of our restructuring activities.
In February 2014, we announced an integrated operating plan ("IOP") to refocus the Company on innovation that matters most
to service providers and enterprises where demand for High-IQ Networks and best-in-class cloud environments are driving growth.
The IOP strategy capitalizes upon our engineering expertise across routing, switching, security, control and network management
to align our focus to become a leading provider of secure High-IQ Networks while serving the needs of Cloud Builders. Through
the execution of the IOP, we plan to coalesce our engineering talent, go-to-market teams and R&D around this strategy resulting
in streamlined operations and business portfolio and operational efficiencies. As we implement the IOP, it is possible that our
segments may change.
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Table of Contents
Financial Results and Key Performance Metrics Overview
The following table provides an overview of our key financial metrics for the years ended December 31, 2013, 2012, and 2011
(in millions, except per share amounts, percentages, days sales outstanding ("DSO"), and book-to-bill):
2013
2012
2011
2013 vs. 2012
2012 vs. 2011
As of and for the Years Ended December 31,
Net revenues
$ 4,669.1
$ 4,365.4
$ 4,448.7
Gross Margin
Percentage of net revenues
$ 2,941.4
$ 2,708.8
$ 2,868.6
63.0%
62.1%
64.5%
$ Change
% Change
303.7
7%
$ Change
(83.3)
$
% Change
(2)%
232.6
9%
$ (159.8)
(6)%
$
$
Operating income
Percentage of net revenues
Net income attributable to
Juniper Networks
Percentage of net revenues
Net income per share
attributable to Juniper Networks
common stockholders:
Basic
Diluted
Stock repurchase plan activity
Operating cash flows
DSO (*)
Book-to-bill (*)
$
565.9
12.1%
$
308.1
$
7.1%
618.5
13.9%
$
257.8
84%
$ (310.4)
(50)%
$
439.8
$
186.5
$
425.1
$
253.3
136%
$ (238.6)
(56)%
9.4%
4.3%
9.6%
$
$
$
$
0.88
0.86
570.6
842.3
$
$
$
$
0.36
0.35
645.6
642.4
$
$
$
$
0.80
0.79
541.2
986.7
41
>1
35
>1
46
1
$
$
$
$
0.52
0.51
(75.0)
199.9
6
144%
146%
(12)%
$
(0.44)
(0.44)
$ 104.4
$
31%
17%
$ (344.3)
(11)
(55)%
(56)%
19%
(35)%
(24)%
Deferred revenue
$ 1,069.3
$
923.4
$
967.0
$
145.9
16%
$
(43.6)
(5)%
________________________________
(*) DSO and book-to-bill are for the fourth quarter ended 2013, 2012, and 2011.
• Net Revenues: During 2013, compared to 2012, we experienced net revenue growth in the Americas, in both service
provider and enterprise, offset by declines in revenue in APAC and EMEA. The year-over-year increase in our net revenues
during 2013 was primarily due to increases in edge routing, switching, and services, partially offset by a decline in our
security products.
• Gross Margin: Our gross margin as a percentage of net revenues increased in 2013, compared to 2012, primarily due to
higher restructuring and other charges recorded in 2012, partially offset by higher inventory provisions in 2013 for legacy
platforms.
• Operating Income: Our operating income as a percentage of revenues increased in 2013, compared to 2012, primarily
due to growth in net revenues. Also contributing to the increase in operating income were lower restructuring and other
charges of $52.2 million compared to 2012.
•
Stock Repurchase Plan Activity: Under our stock repurchase programs, we repurchased approximately 28.9 million shares
of our common stock in the open market at an average price of $19.76 per share for an aggregate purchase of $570.6
million during the year ended December 31, 2013.
• Operating Cash Flows: Operating cash flows increased in 2013, compared to 2012, primarily due to higher net income,
the timing of payments to our vendors, higher deferred revenue, and lower taxes paid, partially offset by the timing of
payments for incentive compensation to our employees and the timing of receipts from our customers.
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• DSO: DSO is calculated as the ratio of ending accounts receivable, net of allowances, divided by average daily net sales
for the preceding 90 days. DSO for the quarter ended December 31, 2013 increased by 6 days, or 17% compared to the
quarter ended December 31, 2012. The increase was primarily due to large multi-year service renewals at the end of the
period which increased our outstanding receivables compared to the same period in 2012. DSO for the quarter ended
December 31, 2012 decreased 11 days, or 24% compared to the quarter ended December 31, 2011. The decrease was
primarily due to shipment linearity, resulting in a greater proportion of the periods shipments converted to cash by the
end of the period and an increase in collections on our outstanding receivables.
• Book-to-Bill: Book-to-bill represents the ratio of product orders booked divided by product revenues during the respective
period. Book-to-bill was greater than one for both the quarters ended December 31, 2013 and December 31, 2012
indicating strong product demand, and one for the quarter ended December 31, 2011.
• Deferred Revenue: Total deferred revenue increased $145.9 million to $1,069.3 million as of December 31, 2013,
compared to $923.4 million as of December 31, 2012, primarily due to an increase in deferred service revenue driven by
the execution of several multi-year support agreements, and to a lesser extent an increase in annual agreement renewals,
slightly offset by a decrease in deferred product revenue.
Critical Accounting Policies and Estimates
The preparation of the financial statements and related disclosures in conformity with U.S. GAAP requires us to make judgments,
assumptions, and estimates that affect the amounts reported in the Consolidated Financial Statements and the accompanying notes.
On an ongoing basis, we evaluate our estimates, including those related to sales returns, pricing credits, warranty costs, allowance
for doubtful accounts, impairment of long-term assets, especially goodwill and intangible assets, contract manufacturer exposures
for carrying and obsolete material charges, assumptions used in the valuation of share-based compensation, and litigation. We
base our estimates and assumptions on current facts, historical experience, and various other factors that we believe are reasonable
under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. For further information about our significant accounting policies, see Note 2,
Significant Accounting Policies, in Notes to Consolidated Financial Statements in Item 8 of Part II of this Report, which describes
the significant accounting policies and methods used in the preparation of the Consolidated Financial Statements. The accounting
policies described below are significantly affected by critical accounting estimates. Such accounting policies require significant
judgments, assumptions, and estimates used in the preparation of the Consolidated Financial Statements and actual results could
differ materially from the amounts reported based on these policies. To the extent there are material differences between our
estimates and the actual results, our future consolidated results of operations may be affected.
• Goodwill. We make significant estimates, assumptions, and judgments when valuing goodwill and other intangible assets
in connection with the initial purchase price allocation of an acquired entity, as well as when evaluating impairment of
goodwill and other intangible assets on an ongoing basis. These estimates are based upon a number of factors, including
historical experience, market conditions, and information obtained from the management of the acquired company. Critical
estimates in valuing certain intangible assets include, but are not limited to, historical and projected customer retention
rates, anticipated growth in revenue from the acquired customer and product base, and the expected use of the acquired
assets. These factors are also considered in determining the useful life of the acquired intangible assets. The amounts and
useful lives assigned to identified intangible assets impacts the amount and timing of future amortization expense.
We evaluate goodwill on an annual basis as of November 1st or more frequently if an event occurs or circumstances
change that would more likely than not reduce the fair value of the reporting units below their carrying amount. Goodwill
is tested for impairment at the reporting unit level, which is one level below our operating segment level, by comparing
the reporting unit's carrying value, including goodwill, to the fair value of the reporting unit. The fair values of the
reporting units are estimated using significant judgment based on a combination of the income and the market approaches.
Under the income approach, we estimate fair value of a reporting unit based on the present value of forecasted future
cash flows that the reporting unit is expected to generate over its remaining life. Under the market approach, we estimate
fair value of our reporting units based on an analysis that compares the value of the reporting units to values of publicly-
traded companies in similar lines of business. If the fair value of the reporting unit does not exceed the carrying value of
the net assets assigned to the reporting unit, then we perform the second step of the impairment test in order to determine
the implied fair value of the reporting unit's goodwill. When the carrying value of a reporting unit's goodwill exceeds its
implied fair value, we record an impairment loss equal to the difference. Determining the fair value of a reporting unit
is highly judgmental in nature and involves the use of significant estimates and assumptions. These estimates and
assumptions include revenue growth rates and operating margins used to calculate projected future cash flows, operating
trends, risk-adjusted discount rates, future economic and market conditions and determination of appropriate market
comparables. We base our fair value estimates on assumptions we believe to be reasonable but that are unpredictable and
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Table of Contents
inherently uncertain. Actual future results may differ from those estimates. In addition, we make certain judgments and
assumptions in allocating shared assets and liabilities to determine the carrying values for each of our reporting units. As
of December 31, 2013, goodwill recorded for our PSD segment and SSD segment was $1,616.6 million and $2,441.1
million, respectively. The fair value of our reporting units, in particular SSD, are sensitive to events or changes in
circumstances, such as adverse changes in operating results or macro-economic conditions, changes in management's
business strategy, or declines in our stock price. A hypothetical 5% decrease in the estimated fair value of our reporting
units would result in the fair value of our SSD segment to be equal to its carrying value. See Item 1A of Part I, "Risk
Factors," for more information.
•
Inventory Valuation and Contract Manufacturer Liabilities. Inventory consists primarily of component parts to be used
in the manufacturing process and is stated at lower of average cost or market. A provision is recorded when inventory is
determined to be in excess of anticipated demand or obsolete, to adjust inventory to its estimated realizable value. In
determining the provision, we also consider estimated recovery rates based on the nature of the inventory. As of December
31, 2013 and December 31, 2012, our inventory balances were $52.7 million and $57.2 million, respectively.
We establish a liability for non-cancelable, non-returnable purchase commitments with our contract manufacturers for
quantities in excess of our demand forecasts or obsolete materials charges for components purchased by the contract
manufacturers based on our demand forecasts or customer orders. We also take estimated recoveries of aged inventory
into consideration when determining the liability. As of December 31, 2013 and December 31, 2012, our contract
manufacturer liabilities were $22.9 million and $27.7 million, respectively.
Significant judgment is used in establishing our forecasts of future demand, recovery rates based on the nature and age
of inventory, and obsolete material exposures. We perform a detailed analysis and review of data used in establishing our
demand forecasts. If the actual component usage and product demand are significantly lower than forecast, which may
be caused by factors within and outside of our control, or if there were a higher incidence of inventory obsolescence
because of rapidly changing technology and our customer requirements, we may be required to increase our inventory
write-downs and contract manufacturer liabilities, which could have an adverse impact on our gross margins and
profitability. We regularly evaluate our exposure for inventory write-downs and adequacy of our contract manufacturer
liabilities. Inventory and supply chain management remains an area of focus as we balance the risk of material obsolescence
and supply chain flexibility in order to reduce lead times.
• Revenue recognition. Revenue is recognized when all of the following criteria have been met: (1) persuasive evidence
of an arrangement exists, (2) delivery has occurred, (3) sales price is fixed or determinable, and (4) collectability is
reasonably assured. We enter into contracts to sell our products and services, and while some of our sales agreements
contain standard terms and conditions, there are agreements that contain multiple elements or non-standard terms and
conditions. As a result, significant contract interpretation may be required to determine the appropriate accounting,
including whether the deliverables specified in a multiple element arrangement should be treated as separate units of
accounting for revenue recognition purposes, and, if so, how the price should be allocated among the elements and when
to recognize revenue for each element. Changes in the allocation of the sales price between elements may impact the
timing of revenue recognition but will not change the total revenue recognized on the contract.
Under our revenue recognition policies, we allocate revenue to each element based on a selling price hierarchy. The
selling price for a deliverable is based on our vendor-specific objective evidence (“VSOE”) if available, third-party
evidence ("TPE") if VSOE is not available, or estimated selling price (“ESP”) if neither VSOE nor TPE is available. We
establish VSOE of selling price using the price charged for a deliverable when sold separately. TPE of selling price is
established by evaluating largely interchangeable competitor products or services in stand-alone sales to similarly situated
customers. ESP is established considering internal factors such as margin objectives, pricing practices and controls,
customer segment pricing strategies and product life cycle. Consideration is also given to market conditions such as
industry pricing strategies and technology life cycles. When determining ESP, we apply management judgment to establish
margin objectives and pricing strategies and to evaluate market conditions and product life cycles. We do not use TPE
as we do not consider our products to be similar or interchangeable to our competitors' products in standalone sales to
similarly situated customers. Revenue from maintenance service contracts is deferred and recognized ratably over the
contractual support period, which is generally one to three years. We applied ESP to the majority of our product revenue
and VSOE to our service revenue in 2013, 2012, and 2011.
•
Income Taxes. We are subject to income taxes in the United States and numerous foreign jurisdictions. Significant judgment
is required in evaluating our uncertain tax positions and determining our taxes. Although we believe our reserves are
reasonable, no assurance can be given that the final tax outcome of these matters will not be different from that which is
reflected in our historical income tax provisions and accruals. We adjust these reserves in light of changing facts and
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Table of Contents
circumstances, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome
of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the
period in which such determination is made.
Significant judgment is also required in determining any valuation allowance recorded against deferred tax assets. In
assessing the need for a valuation allowance, we consider all available evidence, including past operating results, estimates
of future taxable income, and the feasibility of tax planning strategies. In the event that we change our determination as
to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding
impact to the provision for income taxes in the period in which such determination is made.
Our provision for income taxes is subject to volatility and could be adversely affected by earnings being lower than
anticipated in countries that have lower tax rates and higher than anticipated in countries that have higher tax rates; by
changes in the valuation of our deferred tax assets and liabilities; by expiration of or lapses in the R&D tax credit laws;
by transfer pricing adjustments, including the effect of acquisitions on our intercompany R&D cost-sharing arrangement
and legal structure; by tax effects of nondeductible compensation; by tax costs related to intercompany realignments; by
changes in accounting principles; or by changes in tax laws and regulations, including possible U.S. changes to the taxation
of earnings of our foreign subsidiaries, the deductibility of expenses attributable to foreign income, or the foreign tax
credit rules. Significant judgment is required to determine the recognition and measurement attributes prescribed in the
accounting guidance for uncertainty in income taxes. The accounting guidance for uncertainty in income taxes applies
to all income tax positions, including the potential recovery of previously paid taxes, which if settled unfavorably could
adversely affect our provision for income taxes or additional paid-in capital. In addition, we are subject to the continuous
examination of our income tax returns by the Internal Revenue Service (“IRS”) and other tax authorities. We regularly
assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision
for income taxes. There can be no assurance that the outcomes from these continuous examinations will not have an
adverse effect on our operating results and financial condition.
•
Loss Contingencies. We use significant judgment and assumptions to estimate the likelihood of loss or impairment of an
asset, or the incurrence of a liability, in determining loss contingencies. An estimated loss contingency is accrued when
it is probable that an asset has been impaired or a liability has been incurred and the amount of loss can be reasonably
estimated. We record a charge equal to the minimum estimated liability for litigation costs or a loss contingency only
when both of the following conditions are met: (i) information available prior to issuance of our consolidated financial
statements indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the
financial statements and (ii) the range of loss can be reasonably estimated. We regularly evaluate current information
available to us to determine whether such accruals should be adjusted and whether new accruals are required.
Recent Accounting Pronouncements
See Note 2, Significant Accounting Policies, in Notes to the Consolidated Financial Statements in Item 8 of Part II of this Report,
for a full description of recent accounting pronouncements, including the expected dates of adoption and estimated effects on
financial condition and results of operations, which is incorporated herein by reference.
Results of Operations
The following table presents product and service net revenues (in millions, except percentages):
2013
2012
2011
2013 vs. 2012
2012 vs. 2011
Years Ended December 31,
Product
Percentage of net revenues
Service
Percentage of net revenues
$ 3,519.9
$ 3,262.1
$ 3,478.3
$
257.8
75.4%
74.7%
1,149.2
1,103.3
24.6%
25.3%
78.2%
970.4
21.8%
45.9
8%
4%
$ Change
% Change
$ Change
$ (216.2)
% Change
(6)%
132.9
14%
Total net revenues
$ 4,669.1
$ 4,365.4
$ 4,448.7
$
303.7
7%
$
(83.3)
(2)%
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2013 Compared to 2012
The increase in product revenues in 2013, compared to 2012, was primarily due to an increase in the volume of sales of our edge
routing products and switching products to both service provider and enterprise customers, reflecting customer demand for high-
performance networking, such as High-IQ networks, and cloud environments for data centers. Also contributing to the increase
in product revenues was new product introductions for the enterprise campus and data center infrastructures, partially offset by a
decrease in sales of our security products.
The increase in service revenue in 2013, compared to 2012, was primarily driven by strong contract renewals from our installed
base across our routing, switching, and security products.
2012 Compared to 2011
The decrease in product revenues in 2012, compared to 2011, was primarily due to a decline in sales of our core and edge routing,
and firewall products, partially offset by an increase in our switching and high-end SRX products.
The increase in service revenues in 2012, compared to 2011, was primarily driven by strong contract renewals for certain edge
routing, switching and security products.
Net Revenues by Market and Customer
The following table presents net revenues by market (in millions, except percentages):
2013
2012
2011
2013 vs. 2012
2012 vs. 2011
Years Ended December 31,
Service Provider
Percentage of net revenues
Enterprise
Percentage of net revenues
$ 3,054.2
$ 2,811.2
$ 2,833.0
$
243.0
65.4%
64.4%
63.7%
1,614.9
1,554.2
1,615.7
60.7
34.6%
35.6%
36.3%
9%
4%
$ Change
% Change
$ Change
(21.8)
$
% Change
(1)%
(61.5)
(4)%
Total net revenues
$ 4,669.1
$ 4,365.4
$ 4,448.7
$
303.7
7%
$
(83.3)
(2)%
Market
We sell our high-performance network products and service offerings from both our PSD and SSD segments to two primary
markets: service provider and enterprise. Determination of which market a particular revenue transaction relates to is based
primarily upon the customer's industrial classification code, but may also include subjective factors such as the intended use of
the product. The service provider market generally includes wireline and wireless carriers, and cable operators, as well as major
Internet content and application providers, including those that provide social networking and search engine services. The enterprise
market generally is comprised of businesses; federal, state, and local governments; financial services; and research and education
institutions.
2013 Compared to 2012
Net revenues from sales to the service provider market increased in 2013, compared to 2012, primarily due to an increase in sales
to content providers and cable providers in the Americas, partially offset by a slight decrease in sales with wireless carriers, while
the service provider market in EMEA and APAC was relatively flat. In addition, service provider demand for switching and data
center solutions in 2013 was stronger than in 2012.
Net revenues from the enterprise market increased in 2013, compared to 2012, primarily due to broad-based growth in the Americas
enterprise market, as well as recognition of a large U.S. federal government contract, partially offset by weaker demand in APAC
and EMEA.
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2012 Compared to 2011
Net revenues from sales to the service provider market decreased in 2012, compared to 2011, primarily due to reduced routing
purchases by some of our international and content service providers, partially offset by strong growth from large service providers
in the Americas.
Net revenues generated from the enterprise market decreased in 2012, compared to 2011, primarily due to lower revenue in federal
and financial services, offset by our expanding presence in APAC and EMEA.
Customer
No customer accounted for greater than 10% of our net revenues during the year ended December 31, 2013 and 2011. During the
year ended December 31, 2012, Verizon accounted for 10.3% of our net revenues.
Net Revenues by Geographic Region
The following table presents net revenues by geographic region (in millions, except percentages):
Americas:
United States
Other
Total Americas
2013
2012
2011
2013 vs. 2012
2012 vs. 2011
$ Change
% Change
$ Change
% Change
Years Ended December 31,
$ 2,381.5
$ 2,067.5
$ 2,015.8
$
314.0
232.0
2,613.5
218.4
2,285.9
222.2
2,238.0
13.6
327.6
15%
6%
14%
$
51.7
(3.8)
47.9
3%
(2)%
2%
Percentage of net revenues
56.0%
52.4%
50.3%
EMEA
Percentage of net revenues
APAC
Percentage of net revenues
1,256.9
1,266.3
1,339.8
(9.4)
(1)%
(73.5)
(5)%
26.9%
798.7
17.1%
29.0%
813.2
18.6%
30.1%
870.9
19.6%
(14.5)
(2)%
(57.7)
(7)%
Total net revenues
$ 4,669.1
$ 4,365.4
$ 4,448.7
$
303.7
7%
$
(83.3)
(2)%
2013 Compared to 2012
Net revenues in the Americas increased in 2013, compared to 2012, primarily due to an increase in revenues from both the service
provider and enterprise markets. The increase in service provider revenues was due to an increase in sales to content providers
and cable providers, partially offset by a slight decrease in sales to carriers. The increase in enterprise revenues in 2013, compared
to 2012, was primarily attributable to a broad-based improvement in customer demand as well as the recognition of a large U.S.
federal government contract.
Net revenues in EMEA decreased in 2013, compared to 2012, primarily due to a decline in revenues in the enterprise market
attributable to certain large sales in 2012.
Net revenues in APAC decreased in 2013, compared to 2012, primarily due to lower revenues in enterprise resulting from weaker
conditions in the China enterprise market. Service provider revenues were relatively flat as a decline in sales with certain large
service providers in Japan were offset by higher revenue with certain large carriers in China. Additionally, the recognition of
revenue from a large service provider in Singapore was offset by declines in revenues from certain service providers in APAC.
2012 Compared to 2011
Net revenues in the Americas increased in 2012, compared to 2011, primarily due to increased sales in the United States to certain
service providers, offset by a decline in the enterprise market particularly among federal and financial services customers.
Net revenues in EMEA decreased in 2012, compared to 2011, primarily due to decreased sales in Western and Southern Europe,
which we believe was a result of the challenging economic climate in those areas. The decrease was partially offset by increased
revenues in the Middle East and from a top service provider in Eastern Europe, across a broad range of our product portfolio.
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Net revenues in APAC decreased in 2012, compared to 2011, primarily due to a decrease in sales to a certain service provider
customer in Japan, following a large product deployment that occurred in 2011.
Gross Margins
The following table presents gross margins (in millions, except percentages):
Years Ended December 31,
2013
2012
2011
2013 vs. 2012
2012 vs. 2011
$ Change
% Change
$ 2,243.3
$ 2,058.1
$ 2,323.0
$
185.2
63.7%
63.1%
66.8%
698.1
650.7
545.6
47.4
60.7%
59.0%
56.2%
9%
7%
$ Change
$ (264.9)
% Change
(11)%
105.1
19%
$ 2,941.4
$ 2,708.8
$ 2,868.6
$
232.6
9%
$ (159.8)
(6)%
63.0%
62.1%
64.5%
Product gross margin
Percentage of product revenues
Service gross margin
Percentage of service revenues
Total gross margin
Percentage of net revenues
2013 Compared to 2012
Product gross margin percentage increased slightly in 2013, compared to 2012, primarily due to higher restructuring and other
charges recorded in 2012, partially offset by higher inventory provisions in 2013 for legacy platforms. Product gross margin
benefited from cost reductions in the supply chain in 2013, which more than offset the impact of higher pricing discounts.
Service gross margin increased in 2013, compared to 2012, primarily due to higher service revenues and greater efficiency in the
delivery of services.
2012 Compared to 2011
Product gross margin percentage decreased in 2012, compared to 2011, primarily due to a $44.3 million inventory charge related
to component inventory held in excess of forecasted demand and to an intangible asset impairment charge of $16.1 million related
to our 2012 restructuring activities. To a lesser extent, the decrease was due to an increase in the size and number of strategic
contracts with lower margins and to a shift in product mix to lower margin products.
Service gross margin increased in 2012, compared to 2011, primarily due to higher service revenues, combined with a continuing
focus on operational improvements and cost efficiencies.
Operating Expenses
The following table presents operating expenses (in millions, except percentages):
Research and development
Percentage of net revenues
Sales and marketing
Percentage of net revenues
General and administrative
Percentage of net revenues
Restructuring and other charges
Percentage of net revenues
Total operating expenses
Percentage of net revenues
Years Ended December 31,
2013
2012
2011
2013 vs. 2012
2012 vs. 2011
$ Change
% Change
$ Change
% Change
$ 1,043.2
$ 1,101.6
$ 1,026.8
$
(58.4)
(5)%
$
74.8
22.3%
25.2%
23.1%
1,075.9
1,045.5
1,005.2
30.4
3%
40.3
23.1%
24.0%
22.6%
7%
4%
217.3
206.8
187.5
10.5
5%
19.3
10%
4.7%
39.1
0.8%
4.7%
46.8
1.1%
4.2%
30.6
0.7%
(7.7)
(16)%
16.2
53%
$ 2,375.5
$ 2,400.7
$ 2,250.1
$
(25.2)
(1)%
$
150.6
7%
50.9%
55.0%
50.6%
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Our operating expenses have historically been driven by personnel-related costs, including wages, commissions, bonuses, vacation,
benefits, share-based compensation, and travel, and we expect this trend to continue. Facility and information technology (“IT”)
departmental costs are allocated to other departments based on usage and headcount. Facility and IT related headcount was 396,
368, and 375, as of December 31, 2013, 2012, and 2011, respectively. We had a total of 9,483, 9,234, and 9,129 employees as of
December 31, 2013, 2012, and 2011, respectively.
We expect to initiate a substantial cost reduction plan in connection with the IOP accomplished through various restructuring
activities resulting in annualized operating expense savings of $160 million across research and development, sales and marking
and general and administrative expenses. We are not able to make a reasonable estimate of future restructuring costs associated
with the IOP.
2013 Compared to 2012
Research and development expense decreased in 2013, compared to 2012, primarily due to lower depreciation expense of $28.3
million attributable to the extended useful lives of computers and equipment in 2013 as well as lower prototype development costs
of $18.6 million. In addition, outside services, facilities, and IT costs decreased related to the cancellation of certain projects and
facility closures. The decrease in research and development expense was partially offset by increases in personnel-related expenses
primarily attributable to higher share-based compensation expense, and to a lesser extent, higher variable compensation. Research
and development headcount increased 1% from 4,081 as of December 31, 2012 to 4,135 as of December 31, 2013. Additionally,
we continued to shift headcount to lower cost regions.
Sales and marketing expense increased in 2013, compared to 2012, primarily due to higher personnel-related expenses related to
an increase in commission expense driven by improved sales achievement, partially offset by lower share-based compensation
expense and lower outside service and travel due to our cost reduction efforts and creating efficiency in our sales activities. Sales
and marketing headcount decreased 2% from 2,680 as of December 31, 2012 to 2,626 as of December 31, 2013 as a result of our
restructuring activities.
General and administrative expense increased in 2013, compared to 2012, primarily due to higher litigation costs. The increase
in general and administrative expense was partially offset by lower personnel-related expenses, primarily share-based compensation
expense. General and administrative headcount increased 6% from 486 as of December 31, 2012 to 513 as of December 31, 2013
to support our finance-related initiatives, including our ERP implementation.
Restructuring and other charges decreased in 2013, compared to 2012, due to higher charges recorded in 2012 in connection with
our 2012 Restructuring Plan. During 2013, we implemented the 2013 Restructuring Plan and incurred restructuring charges of
$39.1 million related to workforce reductions, contract terminations, project cancellations, and facility closures in connection with
our plans. In connection with our 2013 Restructuring Plan, we expect to record aggregate future charges of up to $2.0 million
related to severance charges. See Note 9, Restructuring and Other Charges, in Notes to Consolidated Financial Statements in
Item 8 of Part II of this Report, for further discussion of our restructuring activities.
2012 Compared to 2011
Research and development expense increased in 2012, compared to 2011, primarily due to an increase in engineering program
costs driven by new product initiatives in the first half of the year in addition to higher variable compensation. Our research and
development headcount decreased by 1% as of December 31, 2012, to 4,081 compared to 4,138 as of December 31, 2011, as a
result of our restructuring activities in the second half of 2012.
Sales and marketing expense increased slightly in 2012, compared to 2011, primarily due to an increase in personnel-related
expenses from a 4% increase in headcount from 2,568 employees as of December 31, 2011 to 2,680 employees as of December
31, 2012, as well as higher demo costs associated with bringing new products to market. These increases were partially offset by
lower commissions and a decrease in outside services.
General and administrative expense increased in 2012, compared to 2011, primarily due to an increase in outside professional
services, which consists of legal and consulting fees to support our finance-related initiatives, including our ERP implementation.
The increase in general and administrative expense was also attributable to the increase in general and administrative headcount
which increased 5% from 463 as of December 31, 2011 to 486 as of December 31, 2012.
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Restructuring and other charges increased in 2012, compared to 2011, due to the 2012 Restructuring Plan initiated in the third
quarter of 2012 to bring our cost structure in line with our desired long-term financial and strategic model. To a lesser extent, we
also incurred charges related to a restructuring plan (the "2011 Restructuring Plan") implemented in the third quarter of 2011 to
align our business operations with macroeconomic and other market conditions. During 2012, we incurred $46.8 million of
restructuring and other charges related to our restructuring plans primarily for workforce reductions and facility closures.
Share-Based Compensation
Share-based compensation expense associated with equity incentive awards ("awards"), which include stock options, restricted
stock units ("RSUs"), restricted stock awards ("RSAs") and performance share awards ("PSAs"), as well as our Employee Stock
Purchase Plan ("ESPP") was recorded in the following cost and expense categories (in millions, except percentages):
2013
2012
2011
2013 vs. 2012
2012 vs. 2011
$ Change
% Change
$ Change
% Change
Years Ended December 31,
Cost of revenues - Product
$
4.7
$
4.6
$
4.6
$
Cost of revenues - Service
Research and development
Sales and marketing
General and administrative
15.4
127.6
70.9
26.0
17.0
109.1
81.6
31.1
15.7
97.7
70.9
33.3
Total
$
244.6
$
243.4
$
222.2
$
0.1
(1.6)
18.5
(10.7)
(5.1)
1.2
2%
(9)%
17%
(13)%
(16)%
—%
$
$
—
1.3
11.4
10.7
(2.2)
21.2
—%
8%
12%
15%
(7)%
10%
2013 Compared to 2012
Share-based compensation expense remained consistent in 2013, compared to 2012. Offsetting increases in expense related to
RSAs assumed in connection with our acquisition of Contrail at the end of 2012 were decreases in actual shares vested and a
decline in grant date fair values due to our lower stock prices.
2012 Compared to 2011
Share-based compensation expense increased in 2012, compared to 2011, primarily due to a higher number of RSU awards granted
as well as a change in standard vesting terms from four years to three years for those RSU awards granted in 2012. This increase
was partially offset by a decrease in stock options grants valued at a lower fair value and a decrease in expense associated with
PSAs due to lower achievement of performance targets.
Other Expense, Net and Income Tax Provision
The following table presents other expense, net and income tax provision (in millions, except percentages):
2013
2012
2011
2013 vs. 2012
2012 vs. 2011
Years Ended December 31,
Interest income
Interest expense
Other
Total other expense, net
Percentage of net revenues
$
8.7
(58.4)
9.3
$ (40.4)
$
11.0
(52.9)
25.3
$ (16.6)
$
9.7
(49.5)
(7.0)
$ (46.8)
(0.9)%
(0.4)%
(1.1)%
$ Change
(2.3)
(5.5)
(16.0)
(23.8)
$
$
% Change
(21)%
10%
(63)%
143%
$ Change
1.3
(3.4)
32.3
30.2
$
$
% Change
13%
7%
(461)%
(65)%
Income tax provision
Effective tax rate
$
85.7
16.3 %
$ 105.0
$ 146.7
$
(19.3)
(18)%
$
(41.7)
(28)%
36.0 %
25.7 %
Other Expense, Net
Interest income primarily includes interest income from our cash, cash equivalents, and investments. Interest expense primarily
includes interest, net of capitalized interest expense from our long-term debt and customer financing arrangements. Other typically
consists of investment and foreign exchange gains and losses and other non-operational income and expense items.
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2013 Compared to 2012
Interest income decreased in 2013, compared to 2012, due to lower cash balances and interest rates, as well as a shift to certain
investments yielding lower interest.
Interest expense increased in 2013, compared to 2012, primarily due to higher capitalized interest in 2012 resulting from our
phased campus build-out.
Other expense was lower in 2013, compared to 2012, due to higher net gains recorded in 2012 related to our privately-held
investments which included a $14.7 million gain from the acquisition of our privately-held investment in Contrail.
2012 Compared to 2011
Interest income increased in 2012, compared to 2011, primarily due to a higher balance of long-term investments yielding higher
interest.
Interest expense increased in 2012, compared to 2011, primarily due to the issuance of $1.0 billion of our senior notes (the "Notes")
near the end of the first quarter of 2011 and related interest expense of $40.0 million, net of capitalized interest.
In 2012, we recognized gains in Other of $45.5 million, including a gain of $14.7 million from the acquisition of our privately-
held investment in Contrail, and impairment losses of $20.0 million included in Other, related to our privately-held investments.
In 2011, Other included certain legal expenses unrelated to current or recent operations of approximately $7.0 million.
Income Tax Provision
The effective rate for 2013 was lower than the federal statutory rate of 35% primarily due to the benefit of the federal research
and development ("R&D") credit, a tax settlement with the Internal Revenue Service (“IRS”), recognition of domestic production
activities deductions, and earnings in foreign jurisdictions, which are subject to lower tax rates.
The effective tax rate for 2012 was substantially similar to the federal statutory rate of 35%. The increase in the overall effective
tax rate for 2012 compared to 2011 was primarily due to the effect of changes in foreign earnings and the exclusion of the benefit
for the federal R&D credit which expired on December 31, 2011.
The effective tax rate for 2011 differed from the federal statutory rate of 35% primarily due to the federal R&D credit and the
benefit of earnings in foreign jurisdictions, which are subject to lower tax rates.
Our effective tax rate could fluctuate significantly on a quarterly basis and could be adversely affected to the extent earnings are
lower than anticipated in countries that have lower statutory rates and higher than anticipated in countries that have higher statutory
rates. Our effective tax rate could also fluctuate due to changes in the valuation of our deferred tax assets or liabilities, or by
changes in tax laws, regulations, or accounting principles, as well as certain discrete items. As a result of the expiration of the
federal research and development credit on December 31, 2013, we expect our effective tax rate to increase in 2014. See Item1A
of Part I, "Risk Factors" of this Report for a description of relevant risks which may adversely affect our results.
For a complete reconciliation of our effective tax rate to the U.S. federal statutory rate of 35% and further explanation of our
income tax provision, see Note 14, Income Taxes, in Notes to Consolidated Financial Statements in Item 8 of Part II of this Report.
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Segment Information
For a description of the products and services for each segment, see Item 1, Business, in Part I of this Report. A description of the
measures included in segment contribution margin can also be found in Note 13, Segment Information, in Notes to the Consolidated
Financial Statements in Item 8 of Part II of this Report. Select segment financial data for each of the three years in the period
ended December 31, 2013 was as follows:
Platform Systems Division Segment
(in millions, except percentages)
2013
2012
2011
2013 vs. 2012
2012 vs. 2011
$ Change
% Change
$ Change
% Change
Years Ended December 31,
PSD product revenues:
Routing
Switching
Total PSD product revenues
PSD service revenues
Total PSD revenues
$ 2,243.6
638.0
2,881.6
796.6
$ 3,678.2
$ 1,946.8
554.8
2,501.6
769.2
$ 3,270.8
$ 2,166.1
495.8
2,661.9
645.0
$ 3,306.9
$
$
296.8
83.2
380.0
27.4
407.4
15%
15%
15%
4%
12%
$ (219.3)
59.0
(160.3)
124.2
(36.1)
$
(10)%
12%
(6)%
19%
(1)%
PSD contribution margin (*)
Percentage of PSD revenues
_______________________________
(*) A reconciliation of total segment contribution margin to income before income taxes and noncontrolling interest can be found in Note 13,
$ (150.4)
$ 1,426.8
$ 1,276.4
$ 1,621.0
44.1%
39.0%
43.1%
(11)%
344.6
27%
$
Segments, in Notes to Consolidated Financial Statement in Item 8 of this Report.
2013 Compared to 2012
PSD product revenues increased in 2013, compared to 2012, primarily due to higher revenue from edge routing and switching
products, specifically due to the growth in MX, PTX, EX, and QFabric product families as result of new products and enhancements
for the enterprise campus and data center infrastructures.
A majority of our service revenues are earned from customers that purchase our products and enter into contracts for support
services. PSD service revenues increased in 2013, compared to 2012, primarily due to strong contract renewals for support services.
PSD contribution margin as a percent of PSD revenues increased in 2013, compared to 2012, primarily due to a combination of
revenue growth and lower operating expenses.
2012 Compared to 2011
PSD product revenues decreased in 2012, compared to 2011, due to the decline in sales of our core and edge routing products.
The decline in sales was primarily attributable to lower spending by international customers and by content service provider
customers in Americas, partially offset by an increase in sales of our switching products. PSD service revenues increased in 2012,
compared to 2011, primarily due to strong contract renewals for support services.
PSD contribution margin as a percent of PSD revenues decreased in 2012, compared to 2011, primarily due to a decline in revenues.
The decrease was also attributable to a shift in product mix to lower margin products and higher prototype development costs in
2012. The decrease in contribution margin was partially offset by reduced costs as a result of a continuing focus on operational
improvements and cost efficiencies.
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Software Solutions Division Segment
(in millions, except percentages)
2013
2012
2011
2013 vs. 2012
2012 vs. 2011
$ Change
% Change
$ Change
% Change
Years Ended December 31,
SSD product revenues:
Security
Routing
Total SSD product revenues
SSD service revenues
Total SSD revenues
$
$
564.3
74.0
638.3
352.6
990.9
$
669.9
90.6
760.5
334.1
$ 1,094.6
$
698.3
118.1
816.4
325.4
$ 1,141.8
$ (105.6)
(16.6)
(122.2)
18.5
$ (103.7)
(16)%
(18)%
(16)%
6%
(9)%
$
$
(28.4)
(27.5)
(55.9)
8.7
(47.2)
(4)%
(23)%
(7)%
3%
(4)%
SSD contribution margin (*)
Percentage of SSD revenues
_______________________________
(*) A reconciliation of contribution margin to income before income taxes and noncontrolling interest can be found in Note 13, Segments, in
398.4
40.2%
473.6
43.3%
504.4
44.2%
(16)%
(30.8)
(75.2)
(6)%
$
$
$
$
$
Notes to Consolidated Financial Statement in Item 8 of this Report.
2013 Compared to 2012
SSD product revenues decreased in 2013, compared to 2012, primarily due to a decline in sales of security products, driven by
lower demand for high-end SRX products by service providers. Revenues from branch SRX security products improved slightly
in 2013, compared to 2012. SSD service revenues increased in 2013, compared to 2012, primarily driven by strong contract
renewals for support services.
SSD contribution margin as a percentage of SSD revenues decreased in 2013, compared to 2012, due to lower revenue and a
decrease in gross margin, partially offset by lower operating expenses.
2012 Compared to 2011
SSD product revenues decreased in 2012, compared to 2011, primarily due to a decline in the sales of our high-end and branch
firewall products and routing services products, partially offset by an increase in sales of our high-end SRX products. SSD service
revenues increased in 2012, compared to 2011, primarily driven by strong contract renewals for support services.
SSD contribution margin as a percentage of SSD revenues remained relatively stable in 2012, compared to 2011, due to a shift in
product mix to lower margin products offset by reduced costs as a result of our continued focus on operational improvements and
cost efficiencies.
Liquidity and Capital Resources
Historically, we have funded our business primarily through our operating activities, the issuance of our common stock, and the
issuance of our long-term debt. The following table shows our capital resources (in millions, except percentages):
Working capital
Cash and cash equivalents
Short-term investments
Long-term investments
Total cash, cash equivalents, and investments
Long-term debt
Net cash, cash equivalents, and investments
As of December 31,
2013
2,262.5
2,284.0
561.9
1,251.9
4,097.8
999.3
3,098.5
$
$
$
$
$
$
2012
$ Change
2,178.7
2,407.8
441.5
988.1
3,837.4
999.2
2,838.2
$
$
$
83.8
(123.8)
120.4
263.8
260.4
0.1
260.3
% Change
4%
(5)%
27%
27%
7%
—%
9%
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The significant components of our working capital are cash and cash equivalents, short-term investments, and accounts receivable,
reduced by accounts payable, accrued liabilities, and short-term deferred revenue. Working capital increased by $83.8 million
during the year ended December 31, 2013, primarily due to an increase in current assets, primarily accounts receivable and short-
term investments, and lower accounts payable, partially offset by a decrease in cash and cash equivalents.
Summary of Cash Flows
As of December 31, 2013, our cash and cash equivalents decreased by $123.8 million from December 31, 2012 primarily due to
cash used in our investing and financing activities related to the repurchase of our common stock, purchase of investments, and
capital expenditures.
The following table summarizes cash flows from our Consolidated Statements of Cash Flows (in millions, except percentages):
2013
2012
2011
2013 vs. 2012
2012 vs. 2011
Years Ended December 31,
842.3
$
642.4
$ (564.4) $ (596.7) $ (707.2) $
986.7
$
$
199.9
32.3
31%
(5)%
$ Change % Change
$ Change % Change
$ (344.3)
110.5
$
(16)%
(35)%
$ (401.7) $ (548.3) $
819.0
$
146.6
(27)%
$(1,367.3)
(167)%
Net cash provided by operating activities $
Net cash used in investing activities
Net cash (used in) provided by financing
activities
Operating Activities
2013 Compared to 2012
Cash flows from operations increased by $199.9 million in 2013, compared to 2012, primarily due to higher consolidated net
income, the timing of payments to our vendors, higher deferred revenue, and lower taxes paid, partially offset by the timing of
payments for incentive compensation to our employees and the timing of collections on our outstanding receivables.
2012 Compared to 2011
Cash flow from operations decreased by $344.3 million in 2012, compared to 2011, primarily due to lower consolidated net income,
higher taxes paid, timing of payments to our vendors, and a decrease in deferred revenue, offset by the timing of collections of
our outstanding receivables.
Investing Activities
2013 Compared to 2012
Net cash used in investing activities decreased by $32.3 million in 2013, compared to 2012, primarily due to lower spending on
acquisitions and asset purchases as well as lower capital expenditures as we completed our phased campus build-out, partially
offset by higher purchases of investments.
2012 Compared to 2011
Net cash used in investing activities decreased by $110.5 million in 2012, compared to 2011, primarily due to fewer purchases of
investments, offset by higher spending on asset purchases, property and equipment, and acquisitions. During 2011, we invested
the proceeds from the issuance of the Notes in available-for-sale securities and purchased property and equipment for the phased
campus build-out of our corporate headquarters in Sunnyvale, CA.
Financing Activities
2013 Compared to 2012
Net cash used in financing activities decreased by $146.6 million in 2013, compared to 2012, primarily due to lower purchases
and retirement of our common stock, partially offset by an increase in proceeds from employee stock option exercises as well as
proceeds from customer financing arrangements.
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2012 Compared to 2011
Net cash used in financing activities was $548.3 million in 2012 and net cash provided by financing activities was $819.0 million
in 2011. The change from 2011 to 2012 was primarily due to the issuance of the Notes in 2011 and an increase in purchases and
retirement of common stock and fewer proceeds from employee stock option exercises in 2012.
Stock Repurchase Activities and Dividends
In July 2013, our Board of Directors (the “Board”) approved a stock repurchase program that authorized us to repurchase up to
$1.0 billion of our common stock from time to time at management's discretion. The authorization was in addition to the $1.0
billion stock repurchase program approved by our Board and announced in June 2012 and the $1.0 billion stock repurchase program
approved by the Board in February 2010. As of December 31, 2013, there was $997.7 million of authorized funds remaining under
our stock repurchase programs.
As part of our IOP announced in February 2014, we committed to return a minimum of $3.0 billion to shareholders over the next
three years through a combination of share repurchases and dividends. As part of this plan, the Board of Directors has authorized
$2.0 billion in share repurchases to be executed through the end of the first quarter of 2015, including $1.2 billion through an
accelerated share repurchase program to be entered into during the first quarter of 2014. We will also initiate a quarterly cash
dividend of $0.10 per share of common stock beginning in the third quarter of 2014, with the expectation to increase the dividend
over time. These activities will be funded by a combination of existing cash balances and debt offerings.
The following table summarizes our repurchases and retirements of common stock under our stock repurchase programs and
repurchases associated with minimum tax withholdings (in millions, except per share amounts):
2013
Repurchases under stock repurchase programs
Repurchases for tax withholding
2012
Repurchases under stock repurchase programs
Repurchases for tax withholding
2011
Repurchases under stock repurchase programs
Repurchases for tax withholding
Deferred Revenue
Shares
Repurchased
Average price
per share
Amount
Repurchased
28.9
0.4
35.8
0.2
17.5
0.2
$
$
$
$
$
$
19.76
20.23
18.05
23.40
30.93
35.98
$
$
$
$
$
$
570.6
7.2
645.6
5.0
541.2
7.4
Deferred product revenue represents unrecognized revenue related to shipments to distributors that have not sold through to end-
users, undelivered product commitments, and other shipments that have not met all revenue recognition criteria. Deferred product
revenue is recorded net of the related costs of product revenue. Deferred service revenue represents customer payments made in
advance for services, which include technical support, hardware and software maintenance, professional services, and training.
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The following table summarizes our deferred product and service revenues (in millions):
As of December 31,
2013
2012
Deferred product revenue:
Undelivered product commitments and other product deferrals
$
184.9
$
Distributor inventory and other sell-through items
Deferred gross product revenue
Deferred cost of product revenue
Deferred product revenue, net
Deferred service revenue
Total
118.7
303.6
(58.6)
245.0
824.3
$
1,069.3
$
256.9
138.4
395.3
(99.4)
295.9
627.5
923.4
As of December 31, 2013, net deferred product revenue decreased $50.9 million to $245.0 million, compared to $295.9 million
as of December 31, 2012, primarily due to strong channel sales resulting in lower ending channel inventory and the timing of
future feature releases. As of December 31, 2013, the increase in deferred service revenue of $196.8 million attributed the execution
of several multi-year support agreements, and to a lesser extent an increase in annual agreement renewals.
Off-Balance Sheet Arrangements
As of December 31, 2013 and 2012, we did not have any relationships with unconsolidated entities or financial partnerships, such
as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose
of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. It is not our business practice to
enter into off-balance sheet arrangements. However, in the normal course of business, we enter into contracts consisting of
guarantees of product and service performance, guarantees related to third-party customer-financing arrangements, customs and
duties guarantees, and standby letters of credit for certain lease facilities. See Note 16, Commitments and Contingencies, in Notes
to Consolidated Financial Statements in Item 8 of Part II of this Report for additional information regarding our guarantees.
Contractual Obligations
Our principal commitments consist of obligations outstanding under operating leases, purchase commitments, debt, and other
contractual obligations. The following table summarizes our principal contractual obligations as of December 31, 2013 and the
effect such obligations are expected to have on our liquidity and cash flow in future periods (in millions):
Operating leases (1)
Purchase commitments (1)
Long-term debt (2)
Interest payment on long-term debt (2)
Other contractual obligations (1)
Total
Payments Due by Period
Total
Less than
1 year
1-3 years
3-5 years
More than
5 years
$
225.2
$
49.4
$
69.5
$
49.4
$
491.4
1,000.0
779.3
112.9
491.4
—
46.9
87.5
—
300.0
88.8
5.4
—
—
75.2
—
56.9
—
700.0
568.4
20.0
$ 2,608.8
$
675.2
$
463.7
$
124.6
$ 1,345.3
(1) See Note 16, Commitments and Contingencies, in Notes to Consolidated Financial Statements in Item 8 of Part II of this Report for additional
information regarding our contractual commitments.
(2) See Note 10, Long-Term Debt and Financing, in Notes to Consolidated Financial Statements in Item 8 of Part II of this Report for additional
information regarding our debt.
As of December 31, 2013, we had $114.4 million included in long-term income taxes payable in the Consolidated Balance Sheets
for unrecognized tax positions. At this time, we are unable to make a reasonably reliable estimate of the timing of payments related
to this amount due to uncertainties in the timing of tax audit outcomes. As a result, this amount is not included in the table above.
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Legal Proceedings
See Note 16, Commitments and Contingencies, in Notes to Consolidated Financial Statements in Item 8 of Part II of this Report,
for additional information on liabilities that may arise from litigation and contingencies.
Liquidity and Capital Resource Requirements
Liquidity and capital resources may be impacted by our operating activities as well as acquisitions and investments in strategic
relationships that we have made or we may make in the future.
In August 2013, we filed an automatic shelf registration statement with the SEC to replace our previous shelf registration statement,
which expired pursuant to SEC rules in September 2013. The August 2013 automatic shelf registration statement enables us to
offer for sale, from time to time, an unspecified amount of securities in one or more offerings and is intended to give us flexibility
to take advantage of financing opportunities as needed or deemed desirable in light of market conditions. Any offerings of securities
under the automatic shelf registration statement will be made pursuant to a prospectus.
We have been focused on managing our annual equity usage as a percentage of our common stock outstanding to align with peer
group competitive levels and have made changes in recent years to reduce the number of shares underlying the equity awards we
grant. Our intention for 2013 was to target the number of shares underlying equity awards granted on an annual basis at 2.75% or
less of our common stock outstanding on a pure share basis (where each option, RSU, RSA or PSA granted is counted as one
share). Based upon shares underlying our grants to date of options, RSUs, RSAs, and PSAs, we achieved the goal for 2013. In
2013, we repurchased 28.9 million at a cost of $570.6 million, and expect to continue to calibrate our buybacks in future quarters
with market conditions at the time. We have also managed our equity compensation programs to reduce the overall number of
shares subject to outstanding awards over the past two years. We have reduced the use of stock options in our equity compensation
programs. The total number of common shares subject to our outstanding awards in connection with Juniper plans was 43.8 million,
54.2 million, and 58.2 million shares as of December 31, 2013, 2012, and 2011, respectively, reflecting a consecutive decline for
the three years ended December 31, 2013.
Based on past performance and current expectations, we believe that our existing cash and cash equivalents, short-term, and long-
term investments, together with cash generated from operations and access to capital markets will be sufficient to fund our
operations, IOP, and anticipated growth for at least the next twelve months. We believe our working capital is sufficient to meet
our liquidity requirements for capital expenditures, commitments, and other liquidity requirements associated with our existing
operations during the same period. However, our future liquidity and capital requirements may vary materially from those now
planned depending on many factors, including, but not limited to:
•
•
•
•
•
•
•
•
•
•
•
•
level and mix of our product, sales, and gross profit margins;
our business, product, capital expenditures and R&D plans;
repurchases of our common stock and dividends;
incurrence and repayment of debt and related interest obligations;
litigation expenses, settlements, and judgments, or similar items related to resolution of tax audits;
volume price discounts and customer rebates;
accounts receivable levels that we maintain;
acquisitions and/or funding of other businesses, assets, products, or technologies;
changes in our compensation policies;
capital improvements for new and existing facilities;
technological advances;
our competitors' responses to our products and/or pricing;
50
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•
•
•
•
•
•
•
our relationships with suppliers, partners, and customers;
possible future investments in raw material and finished goods inventories;
expenses related to future restructuring plans;
tax expense associated with share-based awards;
issuance of share-based awards and the related payment in cash for withholding taxes in the current year and possibly
during future years;
level of exercises of stock options and stock purchases under our equity incentive plans; and
general economic conditions and specific conditions in our industry and markets, including the effects of disruptions in
global credit and financial markets, international conflicts, and related uncertainties.
Further, we cannot provide any assurance that additional sources of capital, including debt, will be available to us on terms
acceptable to us or at all.
ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk
We maintain an investment portfolio of various holdings, types, and maturities. The value of our investments is subject to market
price volatility. In addition, as of December 31, 2013, 60% of our cash, cash equivalents, and marketable securities were held
outside of the U.S. Our marketable securities are generally classified as available-for-sale and, consequently, are recorded on our
Consolidated Balance Sheets at fair value with unrealized gains or losses reported as a separate component of accumulated other
comprehensive income. These investments are also reviewed to identify and evaluate indications of potential other-than-temporary
impairments as discussed in Note 4, Cash Equivalents and Investments, in Notes to Consolidated Financial Statements in Item 8
of Part II of this Report.
At any time, a rise in interest rates could have a material adverse impact on the fair value of our investment portfolio. Conversely,
a decline in interest rates could have a material impact on interest income from our investment portfolio. We do not currently
hedge these interest rate exposures. We recognized immaterial gains and losses during the years ended December 31, 2013, 2012,
and 2011, related to the sales of our investments.
The following tables present hypothetical changes in fair value of our available-for-sale fixed income securities held as of
December 31, 2013 and 2012 that are sensitive to changes in interest rates (in millions):
Valuation of Securities Given an Interest Rate
Decrease of X BPS
(150 BPS)
(100 BPS)
(50 BPS)
Fair Value
as of
December 31,
2013
Valuation of Securities Given an Interest Rate
Increase of X BPS
50 BPS
100 BPS
150 BPS
Available-for-sale fixed income
securities
$ 1,741.6
$ 1,734.4
$ 1,727.1
$ 1,719.9
$ 1,712.6
$ 1,705.3
$ 1,698.1
Valuation of Securities Given an Interest Rate
Decrease of X BPS
(150 BPS)
(100 BPS)
(50 BPS)
Fair Value
as of
December 31,
2012
Valuation of Securities Given an Interest Rate
Increase of X BPS
50 BPS
100 BPS
150 BPS
Available-for-sale fixed income
securities
$ 1,618.8
$ 1,611.6
$ 1,604.4
$ 1,597.4
$ 1,590.0
$ 1,582.8
$ 1,575.6
These instruments are not leveraged and are held for purposes other than trading. The modeling technique used measures the
changes in fair value arising from selected potential changes in interest rates. Market changes reflect immediate hypothetical
parallel shifts in the yield curve of plus or minus 50 basis points (“BPS”), 100 BPS, and 150 BPS, which are representative of the
historical movements in the Federal Funds Rate.
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Foreign Currency Risk and Foreign Exchange Forward Contracts
Periodically, we use derivatives to hedge against fluctuations in foreign exchange rates. We do not enter into derivatives for
speculative or trading purposes.
We use foreign currency forward contracts to mitigate variability in gains and losses generated from the re-measurement of certain
monetary assets and liabilities denominated in non-functional currencies. These derivatives are carried at fair value with changes
recorded in other expense, net in our Consolidated Statements of Operations in the same period as the changes in the fair value
from the re-measurement of the underlying assets and liabilities. These foreign exchange contracts have maturities of one year or
less.
Our sales and costs of product revenues are primarily denominated in U.S. Dollars. Our cost of service revenue and operating
expenses are denominated in U.S. Dollars as well as other foreign currencies including the British Pound, the Euro, Indian Rupee,
and Japanese Yen. Approximately 76% of such costs and operating expenses are denominated in U.S. Dollars. Periodically, we
use foreign currency forward and/or option contracts to hedge certain forecasted foreign currency transactions to reduce variability
in cost of service revenue and operating expenses caused by non-U.S. Dollar denominated operating expense and costs. In designing
a specific hedging approach, we consider several factors, including offsetting exposures, significance of exposures, costs associated
with entering into a particular hedge instrument, and potential effectiveness of the hedge. These derivatives are designated as cash
flow hedges and have maturities of less than one year. The effective portion of the derivative's gain or loss is initially reported as
a component of accumulated other comprehensive income and, upon occurrence of the forecasted transaction, is subsequently
reclassified into the line item in the Consolidated Statements of Operations to which the hedged transaction relates. We record the
ineffectiveness of the hedging instruments, which was immaterial during the years ended December 31, 2013, 2012, and 2011,
respectively, in other expense, net on our Consolidated Statements of Operations. The change in operating expenses including
cost of service revenue, research and development, sales and marketing, and general and administrative expenses, due to foreign
currency fluctuations was approximately an increase of 0.8% and 1.5% and a decrease of 1% in 2013, 2012, and 2011, respectively.
We have performed a sensitivity analysis as of December 31, 2013 and as of December 31, 2012, using a modeling technique that
measures the change in the amount of non-U.S. dollar cash, cash equivalents and marketable securities arising from a hypothetical
10% movement in the levels of foreign currency exchange rates relative to the U.S. dollar, with all other variables held constant.
The foreign currency exchange rates we used were based on market rates in effect on December 31, 2013 and December 31, 2012,
respectively. The sensitivity analysis indicated that a hypothetical 10% movement in foreign currency exchange rates would change
the amount of cash, cash equivalents and marketable securities we would report in U.S. Dollars as of December 31, 2013 and
December 31, 2012 by less than 1%.
Equity Price Risk
Our portfolio of publicly-traded equity securities and our non-qualified deferred compensation (“NQDC”) plan, which may also
hold publicly-traded equity securities, are inherently exposed to equity price risk as the stock market fluctuates.
We do not purchase our publicly-traded equity securities, classified as available-for-sale securities on our Consolidated Balance
Sheets, for speculative purposes. As of December 31, 2013 and December 31, 2012, our portfolio of publicly-traded equity
securities had an estimated fair value of $114.6 million and $2.9 million, respectively. A hypothetical 30% adverse change in the
stock prices of our publicly-traded equity securities would result in a loss in the fair value of $34.5 million and $0.9 million as of
December 31, 2013 and December 31, 2012, respectively.
Investments under the NQDC plan are considered trading securities and are also reported at fair value on our Consolidated Balance
Sheets. As of December 31, 2013 and December 31, 2012, the total investments under our NQDC plan were $15.4 million and
$12.6 million, respectively. A hypothetical 30% adverse change on the total investments under the NQDC plan would result in a
loss in the fair value of $4.6 million and $3.8 million as of December 31, 2013 and December 31, 2012, respectively.
We have also invested in privately-held companies. These investments are carried at cost. In 2013, 2012, and 2011 we recorded
impairment charges of $2.8 million, $20.0 million, and $1.8 million, respectively, on our investments in privately-held companies
that we judged to be other than temporary as discussed in Note 5, Fair Value Measurements, in Notes to Consolidated Financial
Statements in Item 8 of Part II of this Report. The aggregate cost of our investments in privately-held companies was $57.2 million
and $32.0 million as of December 31, 2013 and December 31, 2012, respectively.
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ITEM 8. Financial Statements and Supplementary Data
Juniper Network, Inc.
Index to Consolidated Financial Statements
Reports of Independent Registered Public Accounting Firm
Management's Report on Internal Control Over Financial Reporting
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Consolidated Statements of Changes in Stockholders' Equity
Notes to Consolidated Financial Statements
Note 1. Description of Business and Basis of Presentation
Note 2. Significant Accounting Policies
Note 3. Business Combinations
Note 4. Cash Equivalents and Investments
Note 5. Fair Value Measurements
Note 6. Derivative Instruments
Note 7. Goodwill and Purchased Intangible Assets
Note 8. Other Financial Information
Note 9. Restructuring and Other Charges
Note 10. Long-Term Debt and Financing
Note 11. Equity
Note 12. Employee Benefit Plans
Note 13. Segments
Note 14. Income Taxes
Note 15. Net Income per Share
Note 16. Commitments and Contingencies
Note 17. Selected Quarterly Financial Data (Unaudited)
Note 18. Subsequent Events
Page
54
56
57
58
59
60
61
62
62
62
68
71
75
77
78
80
82
83
84
86
92
94
98
99
101
103
53
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Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of Juniper Networks, Inc.
We have audited the accompanying consolidated balance sheets of Juniper Networks, Inc. as of December 31, 2013 and 2012,
and the related consolidated statements of operations, comprehensive income, changes in stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 2013. Our audits also included the financial statement schedule listed
in the Index at Item 15(a)2. These financial statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above, present fairly, in all material respects, the consolidated financial position
of Juniper Networks, Inc., at December 31, 2013 and 2012, and the consolidated results of its operations and its cash flows for
each of the three years in the period ended December 31, 2013, in conformity with U.S generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
Juniper Networks, Inc.'s internal control over financial reporting as of December 31, 2013, based on criteria established in Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992
Framework) and our report dated February 25, 2014 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
San Jose, California
February 25, 2014
54
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Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of Juniper Networks, Inc.
We have audited Juniper Networks, Inc.'s internal control over financial reporting as of December 31, 2013, based on criteria
established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (1992 Framework) (the COSO criteria). Juniper Networks, Inc.'s management is responsible for maintaining effective
internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting
included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express
an opinion on the company's internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control
over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in
the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets
of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Juniper Networks, Inc. maintained, in all material respects, effective internal control over financial reporting as
of December 31, 2013 based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Juniper Networks, Inc. as of December 31, 2013, and 2012 and the related consolidated statements
of operations, comprehensive income, changes in stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 2013, of Juniper Networks, Inc. and our report dated February 25, 2014, expressed and unqualified opinion
thereon.
/s/ Ernst & Young LLP
San Jose, California
February 25, 2014
55
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Management's Report on Internal Control Over Financial Reporting
The management of Juniper Networks, Inc. (the “Company”) is responsible for establishing and maintaining adequate internal
control over financial reporting for the Company. The Company's internal control over financial reporting is a process designed
under the supervision of the Company's principal executive and principal financial officers to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of the Company's financial statements for external purposes in
accordance with U.S. generally accepted accounting principles.
The Company's internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the Company are being made
only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company's assets that could have
a material effect on the Consolidated Financial Statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2013, based
on the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal
Control - Integrated Framework as published in 1992. In May 2013, COSO released a new framework which companies could
adopt in 2013. The Company will adopt this framework in 2014. Based on that assessment, management concluded that, as of
December 31, 2013, the Company's internal control over financial reporting was effective.
The effectiveness of the Company's internal control over financial reporting as of December 31, 2013 has been audited by Ernst &
Young LLP, the independent registered public accounting firm that audits the Company's Consolidated Financial Statements, as
stated in their report preceding this report, which expresses an unqualified opinion on the effectiveness of the Company's internal
control over financial reporting as of December 31, 2013.
56
Juniper Networks, Inc.
Consolidated Statements of Operations
(In millions, except per share amounts)
Table of Contents
Net revenues:
Product
Service
Total net revenues
Cost of revenues:
Product
Service
Total cost of revenues
Gross margin
Operating expenses:
Research and development
Sales and marketing
General and administrative
Restructuring and other charges
Total operating expenses
Operating income
Other expense, net
Income before income taxes and noncontrolling interest
Income tax provision
Consolidated net income
Adjust for net income attributable to noncontrolling interest
Net income attributable to Juniper Networks
Net income per share attributable to Juniper Networks
common stockholders:
Basic
Diluted
Shares used in computing net income per share:
Basic
Diluted
Years Ended December 31,
2013
2012
2011
$
$
3,519.9
1,149.2
4,669.1
$
3,262.1
1,103.3
4,365.4
1,276.6
451.1
1,727.7
2,941.4
1,043.2
1,075.9
217.3
39.1
2,375.5
565.9
(40.4)
525.5
85.7
439.8
—
439.8
0.88
0.86
501.8
510.3
$
$
$
1,204.0
452.6
1,656.6
2,708.8
1,101.6
1,045.5
206.8
46.8
2,400.7
308.1
(16.6)
291.5
105.0
186.5
—
186.5
0.36
0.35
520.9
526.2
$
$
$
$
$
$
3,478.3
970.4
4,448.7
1,155.3
424.8
1,580.1
2,868.6
1,026.8
1,005.2
187.5
30.6
2,250.1
618.5
(46.8)
571.7
146.7
425.0
0.1
425.1
0.80
0.79
529.8
541.4
See accompanying Notes to Consolidated Financial Statements
57
Table of Contents
Juniper Networks, Inc.
Consolidated Statements of Comprehensive Income
(In millions)
Consolidated net income
Other comprehensive income (loss), net of tax:
Available-for-sale securities(*):
Change in unrealized gains on available-for-sale securities, net of
tax provision of ($37.9) and ($0.6) for 2013 and 2012, respectively
Reclassification adjustment for realized net gains on available-for-
sale securities included in net income, net of tax provision of $0.4
and $0.2 for 2013 and 2012, respectively
Net change in unrealized gains (losses) on available-for-sale
securities, net of taxes
Cash flow hedges(*):
Change in unrealized gains (losses) on cash flow hedges, net of tax
benefit of $1.7 and $0.2 for 2013 and 2012, respectively
Reclassification adjustment for realized (gains) losses included in
net income, net of tax benefit of ($0.8) and ($1.0) for 2013 and
2012, respectively
Net change in unrealized (losses) gains on cash flow hedges, net
of taxes
Change in foreign currency translation adjustments
Other comprehensive income (loss), net of tax
Comprehensive income
Comprehensive loss attributable to noncontrolling interest
Years Ended December 31,
2013
2012
2011
$
439.8
$
186.5
$
425.0
65.1
(1.0)
64.1
0.7
(1.5)
(0.8)
(3.4)
59.9
499.7
—
3.2
(1.2)
2.0
7.4
6.5
13.9
6.4
22.3
208.8
—
2.5
(3.8)
(1.3)
(7.9)
(0.7)
(8.6)
(6.4)
(16.3)
408.7
0.1
408.8
Comprehensive income attributable to Juniper Networks
_____________________________
(*) Taxes related to available-for-sale securities and cash flow hedges were not material for 2011.
499.7
$
$
208.8
$
See accompanying Notes to Consolidated Financial Statements
58
Table of Contents
Juniper Networks, Inc.
Consolidated Balance Sheets
(In millions, except par values)
December 31,
2013
December 31,
2012
Current assets:
ASSETS
Cash and cash equivalents
Short-term investments
Accounts receivable, net of allowance for doubtful accounts of $5.4 and $9.5 as of
December 31, 2013 and 2012, respectively
Deferred tax assets, net
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Long-term investments
Restricted cash and investments
Purchased intangible assets, net
Goodwill
Other long-term assets
Total assets
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
Accrued compensation
Deferred revenue
Other accrued liabilities
Total current liabilities
Long-term debt
Long-term deferred revenue
Long-term income tax payable
Other long-term liabilities
Total liabilities
Commitments and contingencies (Note 16)
Juniper Networks stockholders' equity:
Convertible preferred stock, $0.00001 par value; 10.0 shares authorized;
none issued and outstanding
Common stock, $0.00001 par value; 1,000.0 shares authorized; 495.2 shares and
508.4 shares issued and outstanding as of December 31, 2013 and 2012, respectively
Additional paid-in capital
Accumulated other comprehensive income
Accumulated deficit
Total Juniper Networks stockholders' equity
Noncontrolling interest
Total stockholders' equity
Total liabilities and stockholders' equity
$
$
$
$
$
2,284.0
561.9
578.3
79.8
199.9
3,703.9
882.3
1,251.9
89.5
106.9
4,057.7
233.8
10,326.0
200.4
273.9
705.8
261.3
1,441.4
999.3
363.5
114.4
105.2
3,023.8
$
$
2,407.8
441.5
438.4
172.6
140.4
3,600.7
811.9
988.1
106.4
128.9
4,057.8
138.3
9,832.1
209.3
279.3
693.5
239.9
1,422.0
999.2
229.9
112.4
69.1
2,832.6
—
—
—
9,868.9
64.6
(2,631.3)
7,302.2
—
7,302.2
10,326.0
$
—
9,905.7
4.7
(2,911.4)
6,999.0
0.5
6,999.5
9,832.1
See accompanying Notes to Consolidated Financial Statements
59
Table of Contents
Juniper Networks, Inc.
Consolidated Statements of Cash Flows
(In millions)
Cash flows from operating activities:
Consolidated net income
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Non-cash share-based compensation expense
Depreciation, amortization, and accretion
Restructuring and other charges
Deferred income taxes
(Gain) loss on investments, net
Excess tax benefits from share-based compensation
Loss on disposal of fixed assets
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable, net
Prepaid expenses and other assets
Accounts payable
Accrued compensation
Income taxes payable
Other accrued liabilities
Deferred revenue
Net cash provided by operating activities
Cash flows from investing activities:
Purchases of property and equipment
Purchases of available-for-sale investments
Proceeds from sales of available-for-sale investments
Proceeds from maturities of available-for-sale investments
Purchases of trading investments
Proceeds from sales of privately-held investments
Purchases of privately-held investments
Payments for business acquisitions, net of cash and cash equivalents acquired
Purchase of licensed software
Changes in restricted cash
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from issuance of common stock
Purchases and retirement of common stock
Payment for capital lease obligation
Issuance of long-term debt, net
Customer financing arrangements
Excess tax benefits from share-based compensation
Net cash (used in) provided by financing activities
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental disclosures of cash flow information:
Cash paid for interest, net of amounts capitalized
Cash paid (received) for income taxes, net
Non-cash investing activities:
Issuance of common stock and equity awards assumed in business acquisitions
Property and equipment acquired under capital lease
Licensed software acquired
Years Ended December 31,
2013
2012
2011
$
439.8
$
186.5
$
425.0
244.6
189.9
47.5
72.2
(11.3)
(1.9)
1.4
(139.9)
(127.4)
(9.5)
(5.4)
(38.5)
34.9
145.9
842.3
(233.1)
(1,776.0)
1,135.6
366.2
(3.7)
9.4
(41.3)
(10.0)
(10.0)
(1.5)
(564.4)
141.7
(577.8)
(1.4)
—
33.9
1.9
(401.7)
(123.8)
2,407.8
2,284.0
57.4
105.1
$
$
$
— $
— $
— $
242.7
187.9
99.7
(18.2)
(26.7)
(7.2)
0.6
139.1
(29.2)
(121.2)
54.8
(7.5)
(5.3)
(53.6)
642.4
(348.7)
(1,496.5)
894.2
559.7
(4.1)
36.5
(12.2)
(139.4)
(65.3)
(20.9)
(596.7)
99.1
(650.6)
(1.4)
—
(2.6)
7.2
(548.3)
(502.6)
2,910.4
2,407.8
50.1
118.7
16.5
3.7
19.0
$
$
$
$
$
$
217.8
170.0
30.6
7.2
0.3
(45.0)
—
18.6
28.5
33.9
(32.2)
53.2
(3.4)
82.2
986.7
(266.3)
(2,297.3)
1,281.2
645.4
(5.2)
2.6
(35.7)
(30.7)
—
(1.2)
(707.2)
346.9
(548.6)
—
991.6
(15.9)
45.0
819.0
1,098.5
1,811.9
2,910.4
34.4
(2.1)
—
—
—
$
$
$
$
$
$
See accompanying Notes to Consolidated Financial Statements
60
Table of Contents
Juniper Networks, Inc.
Consolidated Statements of Changes in Stockholders' Equity
(In millions)
Juniper Networks
Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Shares
Amount
Noncontrolling
Interest
Total
Stockholders'
Equity
Balance at December 31, 2010
Consolidated net income (loss)
Other comprehensive loss, net
Issuance of common stock
Repurchase and retirement of common stock
Share-based compensation expense
Tax benefit from employee stock option plans
Balance at December 31, 2011
Consolidated net income
Other comprehensive income, net
Issuance of common stock
Shares assumed in connection with business
acquisitions
Repurchase and retirement of common stock
Share-based compensation expense
Tax effects from employee stock option plans
Balance at December 31, 2012
Consolidated net income
Other comprehensive income, net
Issuance of common stock
Dissolution of non-controlling interest
Repurchase and retirement of common stock
Share-based compensation expense
Tax effects from employee stock option plans
Balance at December 31, 2013
525.4
—
—
18.7
(17.7)
—
—
526.4
—
—
12.2
5.8
(36.0)
—
—
508.4
—
—
16.0
—
(29.2)
—
—
$
$ — $ 9,717.8
—
—
345.5
—
—
—
—
—
—
(259.4)
217.8
57.5
— 10,079.2
—
—
—
—
99.2
—
—
—
—
—
—
—
—
—
—
—
—
—
16.5
(525.1)
242.7
(6.8)
9,905.7
—
—
142.2
—
(418.1)
244.9
(5.8)
(1.3) $
Accumulated
Deficit
(3,108.3) $
425.1
—
—
—
(16.3)
—
—
—
—
(17.6)
—
22.3
—
—
—
—
—
4.7
—
59.9
—
—
—
—
—
(289.2)
—
—
(2,972.4)
186.5
—
—
—
(125.5)
—
—
(2,911.4)
439.8
—
—
—
(159.7)
—
—
(2,631.3) $
$
0.6
(0.1)
—
—
—
—
—
0.5
—
—
—
—
—
—
—
0.5
—
—
—
(0.5)
—
—
—
6,608.8
425.0
(16.3)
345.5
(548.6)
217.8
57.5
7,089.7
186.5
22.3
99.2
16.5
(650.6)
242.7
(6.8)
6,999.5
439.8
59.9
142.2
(0.5)
(577.8)
244.9
(5.8)
— $
7,302.2
495.2
$ — $ 9,868.9
$
64.6
$
See accompanying Notes to Consolidated Financial Statements
61
Table of Contents
Juniper Networks, Inc.
Notes to Consolidated Financial Statements
Note 1. Description of Business and Basis of Presentation
Description of Business
Juniper Networks, Inc. (the “Company” or “Juniper”) designs, develops, and sells products and services for high-performance
networks, which combine scale and performance with agility and efficiency, so customers can build the best networks for their
businesses. The Company serves the high-performance networking requirements of global service providers, enterprises,
governments, and research and public sector organizations that view the network as critical to their success.
Basis of Presentation
The Consolidated Financial Statements, which include the Company and its wholly-owned subsidiaries, are prepared in accordance
with U.S. generally accepted accounting principles (“U.S. GAAP”). All inter-company balances and transactions have been
eliminated. Certain amounts in the prior years' Consolidated Financial Statements have been reclassified to conform to the current
year presentation.
During 2013, the Company consolidated operational oversight and management of all security products within the Software
Solutions Division ("SSD") segment. As a result of this product realignment, security products previously reported in the Platform
Systems Division ("PSD") segment (including the Branch SRX, Branch Firewall, and J Series product families) are now reported
in the SSD segment. In addition, the Company realigned its Contrail products from the PSD segment to the SSD segment. The
Company reclassified the segment data for the prior years to conform to the current year presentation. These changes did not
impact previously reported consolidated net revenues, operating income, net income, and net income per share. See Note 13,
Segments, for further discussion of the Company's product realignments.
The Company previously owned a 60 percent interest in a joint venture with Nokia Siemens Networks B.V. (“NSN”). Given the
Company's majority ownership interest in the joint venture, the accounts of the joint venture have been consolidated with the
accounts of the Company, and a noncontrolling interest was recorded for the noncontrolling investor's interests in the net assets
and operations of the joint venture. In July 2011, NSN and the Company entered into an agreement to cease operation of and
terminate the joint venture and subsequently NSN assumed the activities of the joint venture. The Company terminated the joint
venture in 2013 and the termination did not have a material effect on the Company's financial position or results of operations.
Note 2. Significant Accounting Policies
Cash, Cash Equivalents and Investments
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand, demand deposits with banks, highly liquid investments in money market funds,
commercial paper, government securities, certificates of deposit, and corporate debt securities, which are readily convertible into
cash. All highly liquid investments purchased with original maturities of three months or less are classified as cash and cash
equivalents.
Investments in Available-for-Sale and Trading Securities
The Company's investments in publicly-traded debt and equity securities are classified as available-for-sale. Available-for-sale
investments are initially recorded at cost and periodically adjusted to fair value in the Consolidated Balance Sheets. Unrealized
gains and losses on these investments are reported as a separate component of accumulated other comprehensive income. Realized
gains and losses are determined based on the specific identification method and are reported in the Consolidated Statements of
Operations.
The Company periodically evaluates its investments to determine if impairment charges are required. The Company considers
various factors in determining whether to recognize an impairment charge, including the length of time the investment has been
in a loss position, the extent to which the fair value has been less than the Company's cost basis, the investment's financial condition,
and near-term prospects of the investee. If the Company determines that the decline in an investment's fair value is other than
temporary, the difference is recognized as an impairment loss in its Consolidated Statements of Operations.
62
Table of Contents
Juniper Networks, Inc.
Notes to Consolidated Financial Statements (Continued)
The Company's non-qualified compensation plan is invested in mutual funds which are classified as trading securities and reported
at fair value in the Consolidated Balance Sheets. The realized and unrealized holding gains and losses are reported in the
Consolidated Statements of Operations.
Privately-Held Investments
The Company has privately-held investments, which are included in other long-term assets in the Consolidated Balance Sheets.
These investments are carried at cost, adjusted for any impairment, as the Company does not have a controlling interest and does
not have the ability to exercise significant influence over these companies. These investments are inherently high risk as the market
for technologies or products manufactured by these companies are usually in their early stages at the time of the investment by
the Company and such markets may never be significant. The Company measures the fair value of privately-held investments
using an analysis of the financial conditions and near term prospects of the investees, including recent financing activities and
their capital structure. Realized gains and losses, if any, are reported in the Consolidated Statements of Operations.
Fair Value
Fair value is defined as the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. When determining fair value, the Company considers the principal or most
advantageous market in which it transacts, and considers assumptions that market participants would use when pricing the asset
or liability. The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into
three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the
fair value measurement:
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability,
either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. These inputs
are valued using market based approaches.
Level 3 – Inputs are unobservable inputs based on the Company’s assumptions. These inputs, if any, are valued using internal
financial models.
Derivatives
The Company uses derivatives to partially offset its market exposure to fluctuations in certain foreign currencies. The Company
does not enter into derivatives for speculative or trading purposes.
The Company uses foreign currency forward or option contracts to hedge certain forecasted foreign currency transactions relating
to operating expenses. These derivatives are designated as cash flow hedges. Execution of these cash flow hedge derivatives
typically occurs every month with maturities of one year or less. These derivatives are carried at fair value and the effective portion
of the derivative's gain or loss is initially reported as a component of accumulated other comprehensive income, and upon occurrence
of the forecasted transaction, is subsequently reclassified into the costs of services or operating expense line item to which the
hedged transaction relates. The Company records any ineffectiveness of the hedging instruments in other expense, net, on its
Consolidated Statements of Operations. Cash flows from such hedges are classified as operating activities. All amounts within
other comprehensive income are expected to be reclassified into earnings within the next twelve months.
The Company also uses foreign currency forward contracts to mitigate variability in gains and losses generated from the
remeasurement of certain monetary assets and liabilities denominated in foreign currencies. These derivatives do not qualify for
special hedge accounting treatment. These derivatives are carried at fair value with changes recorded in other expense, net in the
Consolidated Statements of Operations. Changes in the fair value of these derivatives are largely offset by remeasurement of the
underlying assets and liabilities. Cash flows from such derivatives are classified as operating activities. These foreign exchange
forward contracts have maturities of one year or less.
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Inventory
Juniper Networks, Inc.
Notes to Consolidated Financial Statements (Continued)
Inventory consists primarily of component parts to be used in the manufacturing process and is stated at the lower of cost or market.
Cost is computed using standard cost, which approximates actual cost, on a first-in, first-out basis. A charge is recorded to cost of
product when inventory is determined to be in excess of anticipated demand or considered obsolete. The point of loss recognition,
a new, lower-cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the
restoration or increase in the newly established cost basis.
Property and Equipment
Property and equipment are recorded at cost less accumulated depreciation. Depreciation is calculated using the straight-line
method, over the estimated useful lives of the following assets:
Computers, equipment, and software
Furniture and fixtures
Building and building improvements
Land improvements
Leasehold improvements
Estimated Useful Life (years)
3 to 5
5
7 to 40
10 to 40
Lease term, not to exceed 10 years
Construction in progress is related to the construction or development of property and equipment that have not yet been placed in
service for their intended use. Depreciation for equipment commences once it is placed in service and depreciation for buildings
and leasehold improvements commences once they are ready for their intended use.
Effective April 1, 2013, the Company extended the useful lives of certain computers and equipment based on actual historical
usage, which demonstrated longer useful lives, as well as the planned use of these assets. The change was accounted for as a
change in estimate and applied prospectively. During the year ended December 31, 2013, this change in accounting estimate
decreased depreciation expense by approximately $28.3 million or $0.04 per diluted share.
Goodwill and Other Long-Lived Assets
Goodwill represents the future economic benefits arising from other assets acquired in a business combination or an acquisition
that are not individually identified and separately recorded. The excess of the purchase price over the estimated fair value of net
assets of businesses acquired in a business combination is recognized as goodwill. Goodwill is tested for impairment annually
during the fourth quarter or more frequently if certain indicators are present. Other intangible assets acquired in a business
combination and determined to have an indefinite useful life are not amortized but are assessed for potential impairment annually
or when events or circumstances indicate that their carrying amounts might be impaired.
The Company performs its annual goodwill impairment analysis at its reporting unit level, which may be one level below its
operating segment level during the fourth quarter of each year or more frequently if certain indicators are present. The fair value
of the Company's reporting units is determined using both the income and market valuation approaches. Under the income approach,
the fair value of the reporting unit is based on the present value of estimated future cash flows that the reporting unit is expected
to generate over its remaining life. Under the market approach, the value of the reporting unit is based on an analysis that compares
the value of the reporting unit to values of publicly traded companies in similar lines of business. In the application of the income
and market valuation approaches, the Company is required to make estimates of future operating trends and judgments on discount
rates and other variables. Actual future results related to assumed variables could differ from these estimates.
Long-lived assets, such as property, plant, and equipment, and purchased intangible assets subject to amortization, are reviewed
for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset, or asset group, to
estimated undiscounted future cash flows expected to be generated by the asset, or asset group. An impairment charge is recognized
by the amount by which the carrying amount of the asset, or asset group, exceeds its fair value.
The Company amortizes intangible assets with estimable useful lives on a straight-line basis over their useful lives.
64
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Revenue Recognition
Juniper Networks, Inc.
Notes to Consolidated Financial Statements (Continued)
Revenue is recognized when all of the following criteria have been met:
• Persuasive evidence of an arrangement exists. The Company generally relies upon sales contracts or agreements, and
customer purchase orders to determine the existence of an arrangement.
• Delivery has occurred. The Company uses shipping terms and related documents, or written evidence of customer
acceptance, when applicable, to verify delivery or performance.
•
Sales price is fixed or determinable. The Company assesses whether the sales price is fixed or determinable based on the
payment terms and whether the sales price is subject to refund or adjustment.
• Collectability is reasonably assured. The Company assesses collectability based on creditworthiness of customers as
determined by its credit checks, their payment histories, or changes in circumstances that indicate that collectability is
not reasonably assured.
When sales arrangements contain multiple elements, including software and non-software components that function together to
deliver the tangible products' essential functionality, the Company allocates revenue to each element based on a selling price
hierarchy. The selling price for a deliverable is based on either vendor-specific objective evidence (“VSOE”) if available, third-
party evidence (“TPE”) if VSOE is not available, or estimated selling price (“ESP”) if neither VSOE nor TPE is available. The
Company then recognizes revenue on each deliverable in accordance with its policies for product and service revenue recognition.
VSOE of selling price is based on the price charged when the element is sold separately. In determining VSOE, the Company
requires that a substantial majority of the selling prices fall within a reasonable range based on historical discounting trends for
specific products and services. TPE of selling price is established by evaluating largely interchangeable competitor products or
services in stand-alone sales to similarly situated customers. However, as the Company's products contain a significant element
of proprietary technology and its solutions offer substantially different features and functionality, the comparable pricing of third-
party products with similar functionality typically cannot be obtained. ESP is established considering multiple factors including,
but not limited to pricing practices in different geographies and through different sales channels, gross margin objectives, internal
costs, competitor pricing strategies, and industry technology lifecycles.
In multiple element arrangements where software deliverables are included, revenue is allocated to each separate unit of accounting
for each of the non-software deliverables and to the software deliverables as a group using the relative selling prices of each of
the deliverables in the arrangement based on the aforementioned selling price hierarchy. If the arrangement contains more than
one software deliverable, the arrangement consideration allocated to the software deliverables as a group is then allocated to each
software deliverable using the residual method when VSOE of fair value of the undelivered items exists. Under the residual method,
the amount of revenue allocated to delivered elements equals the total arrangement consideration less the aggregate fair value of
any undelivered elements. If VSOE of one or more undelivered items does not exist, revenue from the entire arrangement is
deferred and recognized at the earlier of: (i) delivery of those elements or (ii) when fair value can be established unless maintenance
services is the only undelivered element, in which case, the entire arrangement fee is recognized ratably over the maintenance
service period.
The Company limits the amount of revenue recognition for delivered elements to the amount that is not contingent on the future
delivery of products or services or subject to customer-specific return or refund privileges.
The Company records reductions to revenue for estimated product returns and pricing adjustments, such as rebates and price
protection, in the same period that the related revenue is recorded. The amount of these reductions is based on historical sales
returns and price protection credits, specific criteria outlined in rebate agreements, and other factors known at the time.
A portion of the Company's sales is made through distributors under agreements allowing for pricing credits or rights of return.
As reliable estimates of these credits or returns cannot be made, product revenue on sales made through these distributors is
recognized upon sell-through as reported by the distributors to the Company. Deferred revenue on shipments to distributors reflects
the effects of distributor pricing credits given and the amount of gross margin expected to be realized upon sell-through. Deferred
revenue is recorded net of the related product costs of revenue.
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Table of Contents
Juniper Networks, Inc.
Notes to Consolidated Financial Statements (Continued)
Service revenues include revenue from maintenance, training, and professional services. Maintenance is offered under renewable
contracts. Revenue from maintenance service contracts is deferred and recognized ratably over the contractual support period,
which is generally one to three years. Revenue from training and professional services is recognized as services are completed or
ratably over the contractual period, which is generally one year or less.
Allowance for Doubtful Accounts
The allowance for doubtful accounts is based on the Company's assessment of the collectability of customer accounts. The Company
regularly reviews its receivables that remain outstanding past their applicable payment terms and establishes an allowance by
considering factors such as historical experience, credit quality, age of the accounts receivable balances, and current economic
conditions that may affect a customer's ability to pay.
Warranty Reserves
The Company generally offers a one-year warranty on all of its hardware products, a 90-day warranty on the media that contains
the software embedded in the products. Warranty costs are recognized as part of the Company's cost of sales based on associated
material costs, labor costs, and overhead at the time revenue is recognized. Material costs are estimated primarily based upon the
historical costs to repair or replace product returns within the warranty period. Labor and overhead costs are estimated primarily
based upon historical trends in the cost to support customer cases within the warranty period.
Contract Manufacturer Liabilities
The Company establishes a liability for non-cancelable, non-returnable purchase commitments with its contract manufacturers
for carrying charges, quantities in excess of its demand forecasts, or obsolete material charges for components purchased by the
contract manufacturers to meet the Company’s demand forecast or customer orders. The demand forecasts are based upon historical
trends and analysis from the Company's sales and marketing organizations, adjusted for overall market conditions.
Research and Development
Costs to research, design, and develop the Company's products are expensed as incurred.
Software Development Costs
Capitalization of software development costs for software to be sold, leased, or otherwise marketed begins when a product's
technological feasibility has been established and ends when a product is available for general release to customers. Generally,
the Company's products are released soon after technological feasibility has been established. As a result, costs incurred between
achieving technological feasibility and product general availability have not been significant. The Company capitalizes costs
associated with internal-use software systems that have reached the application development stage and are primarily attributable
to the Company's enterprise resource planning ("ERP") implementation. Such capitalized costs include external direct costs utilized
in developing or obtaining the applications and payroll and payroll-related costs for employees, who are directly associated with
the development of the applications.
Advertising
Advertising costs are charged to sales and marketing expense as incurred. Advertising expense was $20.1 million, $20.0 million,
and $17.2 million, for 2013, 2012, and 2011, respectively.
Foreign Currency
Assets and liabilities of foreign operations with non-U.S. Dollar functional currency are translated to U.S. Dollars using exchange
rates in effect at the end of the period. Revenue and expenses are translated to U.S. Dollars using average exchange rates for the
period. The resulting translation adjustments are included in the Company’s Consolidated Balance Sheets in the stockholders’
equity section as a component of accumulated other comprehensive income. For the Company’s international subsidiaries in which
the functional currency is the U.S. dollar, the Company records foreign exchange gains and losses for assets and liabilities in the
Consolidated Statements of Operations. Remeasurement adjustments are recorded in other expense, net in the Consolidated
Statements of Operations.
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Table of Contents
Loss Contingencies
Juniper Networks, Inc.
Notes to Consolidated Financial Statements (Continued)
The Company is subject to the possibility of various loss contingencies arising in the ordinary course of business. Management
considers the likelihood of loss related to an asset, or the incurrence of a liability, as well as its ability to reasonably estimate the
amount of loss, in determining loss contingencies. An estimated loss contingency is accrued when it is probable that an asset has
been impaired or a liability has been incurred and the amount of loss can be reasonably estimated. The Company regularly evaluates
current information available to determine whether such accruals should be adjusted and whether new accruals are required.
Share-Based Compensation
The Company utilizes the Black-Scholes-Merton (“BSM”) option-pricing model to estimate the fair value of its stock options and
Employee Stock Purchase Plan ("ESPP") shares. The Company determines the fair value of its restricted stock units ("RSUs"),
restricted stock awards ("RSAs"), and performance share awards ("PSAs") based on the closing market price of the Company’s
common stock on the date of grant. Share-based compensation expense is based on the fair value of the underlying awards and
amortized on a straight-line basis, net of estimated forfeitures. With respect to PSAs, that generally vest after three years, for the
portion of the award attributable to each performance year, the Company recognizes PSA expense on a straight-line basis over the
remaining vesting period starting in the period in which the annual performance targets are set for each such performance year,
to the extent that the performance target is expected to be met.
The BSM model requires various highly subjective assumptions that represent management's best estimates of volatility, risk-free
interest rate, expected life, and dividend yield. The expected volatility is based on the implied volatility of market-traded options
on the Company's common stock, adjusted for other relevant factors including historical volatility of the Company’s common
stock over the most recent period commensurate with the estimated expected life of the Company’s stock options. The expected
life of a stock option award is based on historical experience.
Provision for Income Taxes
Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases
of assets and liabilities and their reported amounts. Valuation allowances are recorded to reduce deferred tax assets to the amount
that will more likely than not be realized.
The Company accounts for uncertainty in income taxes using a two-step approach to recognizing and measuring uncertain tax
positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates
that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation
processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized
upon settlement. The Company classifies the liability for unrecognized tax benefits as current to the extent that the Company
anticipates payment (or receipt) of cash within one year. Interest and penalties related to uncertain tax positions are recognized in
the provision for income taxes.
Concentrations of Risk
Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents,
investments, and accounts receivable. The Company invests only in high-quality credit instruments and maintains its cash, cash
equivalents and available-for-sale investments in fixed income securities with several high-quality institutions. Deposits held with
banks, including those held in foreign branches of global banks, may exceed the amount of insurance provided on such deposits.
These deposits may be redeemed upon demand and, therefore, bear minimal credit risk.
The Company’s derivatives expose it to credit risk to the extent that counterparties may be unable to meet the terms of the agreement.
To mitigate concentration of risk related to its derivatives, the Company establishes counterparty limits to major credit-worthy
financial institutions. In addition, the potential risk of loss with any one counterparty resulting from this type of credit risk is
monitored and the derivatives transacted with these entities are relatively short in duration. Therefore, the Company does not
expect material losses as a result of defaults by counterparties.
Generally, credit risk with respect to accounts receivable is diversified due to the number of entities comprising the Company's
customer base and their dispersion across different geographic locations throughout the world. The Company performs ongoing
credit evaluations of its customers and generally does not require collateral on accounts receivable. During the years ended
67
Table of Contents
Juniper Networks, Inc.
Notes to Consolidated Financial Statements (Continued)
December 31, 2013 and December 31, 2011, no single customer accounted for 10% or more of net revenues. During the year
ended December 31, 2012, Verizon Communications, Inc. ("Verizon") accounted for 10.3% of net revenues.
The Company relies on sole suppliers for certain of its components such as application-specific integrated circuits ("ASICs") and
custom sheet metal. Additionally, the Company relies primarily on a limited number of significant independent contract
manufacturers for the production of its products. The inability of any supplier or manufacturer to fulfill supply requirements of
the Company could negatively impact future operating results.
Use of Estimates
The preparation of the financial statements and related disclosures in conformity with U.S. GAAP requires the Company to make
judgments, assumptions, and estimates that affect the amounts reported in the Consolidated Financial Statements and the
accompanying notes. The Company bases its estimates and assumptions on current facts, historical experience, and various other
factors that it believes are reasonable under the circumstances, to determine the carrying values of assets and liabilities that are
not readily apparent from other sources. To the extent there are material differences between the Company's estimates and the
actual results, the Company's future consolidated results of operation may be affected.
Recent Accounting Pronouncements
In July 2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2013-11,
Income Taxes (Topic 740)—Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar
Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force) ("ASU 2013-11") to provide
explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward,
a similar tax loss, or a tax credit carryforward exists. ASU 2013-11 is effective for fiscal years, and interim periods within those
years, beginning after December 31, 2013. The Company intends to adopt this standard prospectively in the first quarter of 2014
and the adoption will not result in a change to the tax provision. The Company does not expect a significant impact to its presentation
of long-term taxes payable or its deferred tax assets.
Note 3. Business Combinations
The Company's Consolidated Financial Statements include the operating results of acquired businesses from the date of each
acquisition. Pro forma results of operations for these acquisitions have not been presented as the financial impact to the Company's
consolidated results of operations, both individually and in aggregate, is not material. Additional information, if any, existing as
of the acquisition dates but unknown to the Company may become known during the remainder of the measurement period, not
to exceed 12 months from the acquisition date, which may result in changes to the amounts and allocations recorded.
The Company completed one business combination in 2013, three business combinations in 2012, and two business combinations
in 2011 for cash consideration including the fair value of vested share-based awards assumed, if any, of approximately $10.0
million, $187.3 million, and $30.5 million, respectively.
The following table presents the purchase consideration allocations for these acquisitions based upon acquisition-date fair values,
including cash and cash equivalents acquired (in millions):
Net tangible assets acquired
Intangible assets acquired
Goodwill
Total
2013 Acquisitions
0.1
$
9.9
—
10.0
$
2012 Acquisitions
3.5
$
54.1
129.7
187.3
$
2011 Acquisitions
1.7
$
28.4
0.4
30.5
$
The Company recognized $0.9 million, $2.0 million, and $9.6 million of acquisition-related costs during the years ended
December 31, 2013, 2012, and 2011, respectively. These acquisition-related costs were expensed in the period incurred as general
and administrative expenses in the Consolidated Statements of Operations.
The goodwill recognized for the 2012 and 2011 acquisitions was primarily attributable to expected synergies and was not deductible
for U.S. federal income tax purposes.
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2013 Acquisition
Juniper Networks, Inc.
Notes to Consolidated Financial Statements (Continued)
During 2013, the Company completed a business combination for approximately $10.0 million in cash consideration of which
$0.1 million was allocated to net tangible assets acquired and $9.9 million to intangible assets. Intangible assets acquired consisted
of existing technology with a weighted-average estimated useful life of five years.
2012 Acquisitions
Contrail
On December 14, 2012, the Company acquired the remaining ownership interest in Contrail, increasing its ownership from 12%
to 100%, in a cash and stock transaction for approximately $91.7 million. Contrail, a privately-held software networking company,
provides software-defined networking solutions technology that augments Juniper's portfolio of products and services.
The aggregate consideration of $91.7 million was allocated as follows: net tangible assets acquired of $3.6 million, including cash
and cash equivalents of $8.6 million; intangible assets of $17.4 million; and recognized goodwill of $70.7 million, which was
assigned to the Company's PSD segment. Refer to Note 7, Goodwill and Purchased Intangible Assets, for discussion of the
reclassification of goodwill from its PSD segment to its SSD segment related to this acquisition.
The Company previously accounted for its investment in Contrail at cost, which was $3.0 million prior to the acquisition. As of
the acquisition date, the fair value of the Company's previous equity interest in Contrail was remeasured to its fair value of $17.7
million, which was based upon adjustments market participants would consider when estimating the fair value of the previously
held interest in Contrail. This resulted in a $14.7 million gain, which was reported within other expense, net in the Consolidated
Statements of Operations.
Mykonos Software, Inc.
On February 13, 2012, the Company acquired 100% of the equity securities of Mykonos Software, Inc. ("Mykonos") for $82.6
million in cash. The acquisition of Mykonos extended Juniper Networks' security portfolio with an intrusion deception system
capable of detecting an attacker before an attack is in process. In connection with this acquisition, the Company acquired net
tangible liabilities of $0.2 million, intangible assets of $24.3 million, and recognized goodwill of $58.5 million, which was assigned
to the Company's SSD segment.
BitGravity, Inc.
On March 8, 2012, the Company acquired a source code license and patent joint-ownership related to the service management
layer of BitGravity, Inc.'s ("BitGravity") Content Delivery Network ("CDN") technology for $13.0 million in cash. In connection
with this acquisition, the Company acquired net tangible assets of $0.1 million, intangible assets of $12.4 million, and recognized
goodwill of $0.5 million, which was assigned to the Company's SSD segment.
Intangible Assets Acquired
The following table presents details of the intangible assets acquired for the business combinations completed during 2012 as of
their respective acquisition dates (in millions, except years):
Contrail
Mykonos
BitGravity
Existing technology
Trade name and trademarks
In-process research and development
Total
Weighted
Average
Estimated
Useful
Life
(In Years)
6
7
N/A
6
Amount
$
$
19.3
1.0
4.0
24.3
Weighted
Average
Estimated
Useful
Life
(In Years)
3
—
—
3
Amount
$
$
12.4
—
—
12.4
Weighted
Average
Estimated
Useful
Life
(In Years)
—
—
N/A
—
Amount
$
$
—
—
17.4
17.4
69
Table of Contents
Juniper Networks, Inc.
Notes to Consolidated Financial Statements (Continued)
Acquired in-process research and development (“IPR&D”) consists of existing research and development projects at the time of
the acquisition. Projects that qualify as IPR&D assets represent those that have not yet reached technological feasibility and have
no alternative future use. After initial recognition, acquired IPR&D assets are accounted for as indefinite-lived intangible assets.
Development costs incurred after acquisition on acquired development projects are expensed as incurred. Upon completion of
development, acquired IPR&D assets are considered amortizable intangible assets. If the IPR&D project is abandoned, the Company
writes off the related purchased intangible asset in the period it is abandoned.
2011 Acquisitions
OpNext
On February 9, 2011, the Company acquired certain IP assets of OpNext for $26.0 million in cash, which was accounted for as a
business combination. The acquisition of OpNext's ASIC technology furthered Juniper's next-generation development of converged
packet optical solutions for the Company's service provider customers. In connection with this acquisition, the Company acquired
the fair value of intangible assets of $25.7 million and recognized goodwill of $0.3 million.
Brilliant
On February 18, 2011, the Company acquired certain assets of Brilliant, including all the intellectual property ("IP") for $4.5
million in cash. This IP assisted the Company in extending its market position by delivering solutions that offer greater flexibility
for service providers as they deployed 3G and 4G networks. In connection with this acquisition, the Company acquired net tangible
assets of $1.7 million, intangible assets of $2.7 million, and recognized goodwill of $0.1 million.
Intangible Assets Acquired
The following table presents details of the intangible assets acquired for the business combinations completed during 2011 as of
their respective acquisition dates (in millions, except years):
Existing or core technology
Support agreements and related relationships
Patents
Total
OpNext
Brilliant
Weighted Average
Estimated Useful
Life (In Years)
10
4
—
9
Amount
20.6
5.1
—
25.7
$
$
Weighted Average
Estimated Useful
Life (In Years)
5
—
5
5
Amount
1.3
—
1.4
2.7
$
$
70
Table of Contents
Juniper Networks, Inc.
Notes to Consolidated Financial Statements (Continued)
Note 4. Cash Equivalents and Investments
Investments in Available-for-Sale and Trading Securities
The following tables summarize the Company's unrealized gains and losses and fair value of investments designated as available-
for-sale and trading securities as of December 31, 2013 and December 31, 2012 (in millions):
Amortized
Cost
Gross Unrealized
Gains
Gross Unrealized
Losses
Estimated Fair
Value
As of December 31, 2013
Fixed income securities:
Asset-backed securities
Certificates of deposit
Commercial paper
Corporate debt securities
Foreign government debt securities
Government-sponsored enterprise obligations
U.S. government securities
Total fixed income securities
Money market funds
Mutual funds
Publicly-traded equity securities
Total available-for-sale securities
Trading securities in mutual funds(*)
Total
Reported as:
Cash equivalents
Restricted investments
Short-term investments
Long-term investments
Total
$
$
$
$
249.9
27.6
6.9
813.6
10.7
306.2
303.3
1,718.2
1,043.7
3.9
12.0
2,777.8
15.4
2,793.2
996.2
87.5
459.0
1,250.5
2,793.2
$
$
$
$
________________________________
(*) Balance includes the Company's non-qualified deferred compensation plan assets.
0.1
—
—
2.0
—
0.1
0.1
2.3
—
0.1
104.5
106.9
—
106.9
$
$
— $
0.1
104.9
1.9
106.9
$
(0.1) $
—
—
(0.3)
—
(0.1)
(0.1)
(0.6)
—
—
(1.9)
(2.5)
—
(2.5) $
— $
—
(2.0)
(0.5)
(2.5) $
249.9
27.6
6.9
815.3
10.7
306.2
303.3
1,719.9
1,043.7
4.0
114.6
2,882.2
15.4
2,897.6
996.2
87.6
561.9
1,251.9
2,897.6
71
Table of Contents
Juniper Networks, Inc.
Notes to Consolidated Financial Statements (Continued)
Amortized
Cost
Gross Unrealized
Gains
Gross Unrealized
Losses
Estimated Fair
Value
As of December 31, 2012
Fixed income securities:
Asset-backed securities
Certificates of deposit
Commercial paper
Corporate debt securities
Foreign government debt securities
Government-sponsored enterprise obligations
U.S. government securities
Total fixed income securities
Money market funds
Mutual funds
Publicly-traded equity securities
Total available-for-sale securities
Trading securities in mutual funds(*)
Total
Reported as:
Cash equivalents
Restricted investments
Short-term investments
Long-term investments
Total
$
$
$
$
226.2
42.5
22.4
533.4
5.0
270.7
494.4
1,594.6
1,145.2
2.9
3.0
2,745.7
12.6
2,758.3
1,225.9
105.5
441.3
985.6
2,758.3
$
$
$
$
0.3
—
—
2.3
—
0.3
0.1
3.0
—
0.1
—
3.1
—
3.1
$
$
— $
0.1
0.3
2.7
3.1
$
(0.1) $
—
—
(0.1)
—
—
—
(0.2)
—
—
(0.1)
(0.3)
—
(0.3) $
— $
—
(0.1)
(0.2)
(0.3) $
226.4
42.5
22.4
535.6
5.0
271.0
494.5
1,597.4
1,145.2
3.0
2.9
2,748.5
12.6
2,761.1
1,225.9
105.6
441.5
988.1
2,761.1
_______________________________
(*) Balance includes the Company's non-qualified deferred compensation plan assets.
The following table presents the maturities of the Company's fixed income securities as of December 31, 2013 (in millions):
Due within one year
Due between one and five years
Total
Amortized
Cost
Gross Unrealized
Gains
Gross Unrealized
Losses
Estimated Fair
Value
$
$
467.7
1,250.5
1,718.2
$
$
0.3
2.0
2.3
$
$
— $
(0.6)
(0.6) $
468.0
1,251.9
1,719.9
The Company had 178 and 98 investments in unrealized loss positions as of December 31, 2013 and December 31, 2012,
respectively. The gross unrealized losses related to these investments were primarily due to changes in market interest rates and
stock prices. The Company reviews its investments to identify and evaluate investments that have an indication of possible
impairment. The Company aggregates its investments by category and length of time the securities have been in a continuous
unrealized loss position to facilitate its evaluation.
For available-for-sale debt securities that have unrealized losses, the Company evaluates whether (i) it has the intention to sell
any of these investments and (ii) whether it is not more likely than not that it will be required to sell any of these investments
before recovery of the entire amortized cost basis. As of December 31, 2013, the Company anticipates that it will recover the entire
amortized cost basis of such available-for-sale debt securities and has determined that no other-than-temporary impairments
associated with credit losses were required to be recognized during the year ended December 31, 2013, 2012, and 2011.
For available-for-sale equity securities that have unrealized losses, the Company evaluates whether there is an indication of other-
than-temporary impairments. This determination is based on several factors, including the financial condition and near-term
prospects of the issuer and the Company’s intent and ability to hold the publicly-traded equity securities for a period of time
sufficient to allow for any anticipated recovery in market value. During the years ended December 31, 2013, 2012, and 2011, the
Company did not recognize other-than-temporary impairments associated with these investments.
72
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Juniper Networks, Inc.
Notes to Consolidated Financial Statements (Continued)
There were no material gross realized gains or losses from available-for-sale and trading securities during the years ended
December 31, 2013, 2012, and 2011.
The following tables present the Company's available-for-sale securities that were in an unrealized loss position as of December 31,
2013 and December 31, 2012 (in millions):
Less than 12 Months
12 Months or Greater
Total
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
As of December 31, 2013
Fixed income securities:
Asset-backed securities(1)
Corporate debt securities(1)
Foreign government debt securities(2)
Government-sponsored enterprise obligations
U.S. government securities
Total fixed income securities
Publicly-traded equity securities
$
153.0
$
156.1
10.0
123.1
119.7
561.9
6.8
Total available-for sale securities
$
568.7
$
(0.1) $
(0.3)
—
(0.1)
(0.1)
(0.6)
(1.9)
(2.5) $
0.6
9.7
—
—
—
10.3
—
$
— $
153.6
$
—
—
—
—
—
—
165.8
10.0
123.1
119.7
572.2
6.8
10.3
$
— $
579.0
$
(0.1)
(0.3)
—
(0.1)
(0.1)
(0.6)
(1.9)
(2.5)
________________________________
(1) Balance greater than 12 months includes investments that were in an immaterial unrealized loss position as of December 31, 2013.
(2) Balance for less than 12 months include investments that were in an immaterial unrealized loss position as of December 31, 2013.
As of December 31, 2012
Fixed income securities:
Asset-backed securities (1)
Certificates of deposit(2)
Commercial paper(2)
Corporate debt securities
Government-sponsored enterprise obligations(2)
U.S. government securities(2)
Total fixed income securities
Publicly-traded equity securities
Less than 12 Months
12 Months or Greater
Total
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
$
55.1
$
(0.1) $
0.1
$
— $
55.2
$
(0.1)
0.3
10.0
116.0
30.0
68.2
279.6
2.9
—
—
(0.1)
—
—
(0.2)
(0.1)
(0.3) $
—
—
—
—
—
0.1
—
0.1
—
—
—
—
—
—
—
0.3
10.0
116.0
30.0
68.2
279.7
2.9
$
— $
282.6
$
—
—
(0.1)
—
—
(0.2)
(0.1)
(0.3)
Total available-for-sale securities
$
282.5
$
________________________________
(1) Balance greater than 12 months includes investments that were in an immaterial unrealized loss position as of December 31, 2012.
(2) Balance for less than 12 months include investments that were in an immaterial unrealized loss position as of December 31, 2012.
Restricted Cash and Investments
The Company classifies cash and investments designated as available-for-sale securities as restricted cash and investments on its
Consolidated Balance Sheets for: (i) amounts held in escrow accounts, as required in connection with certain acquisitions completed
between 2005 and 2013; (ii) the India Gratuity Trust and Israel Retirement Trust, which cover statutory severance obligations in
the event of termination of any of the Company's India and Israel employees, respectively; and (iii) the Directors and Officers
("D&O") indemnification trust.
73
Table of Contents
Privately-Held Investments
Juniper Networks, Inc.
Notes to Consolidated Financial Statements (Continued)
As of December 31, 2013 and December 31, 2012, the carrying values of the Company’s privately-held investments of $57.2
million and $32.0 million, respectively, were included in other long-term assets in the Consolidated Balance Sheets. During 2013,
certain privately-held investments with carrying values of $12.2 million became public and were reclassified to short-term
investments and resulted in net unrealized gains of $102.7 million and recorded as a component of accumulated comprehensive
income in the Consolidated Balance Sheets.
The Company reviews its investments to identify and evaluate investments that have an indication of possible impairment. The
Company adjusts the carrying value for its privately-held investments for any impairment if the fair value is less than the carrying
value of the respective assets on an other-than-temporary basis.
During the years ended December 31, 2013, 2012, and 2011, the Company determined that certain privately-held investments
were other-than-temporarily impaired, resulting in impairment charges of $2.8 million, $20.0 million, and $1.8 million, respectively,
that were recorded within other expense, net in the Consolidated Statements of Operations.
74
Table of Contents
Juniper Networks, Inc.
Notes to Consolidated Financial Statements (Continued)
Note 5. Fair Value Measurements
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following tables provide a summary of assets and liabilities measured at fair value on a recurring basis and as reported in the
Consolidated Balance Sheets (in millions):
Fair Value Measurements at December 31, 2013 Using:
Quoted Prices in
Active Markets For
Identical Assets
Significant Other
Observable
Remaining Inputs
Significant Other
Unobservable
Remaining Inputs
(Level 1)
(Level 2)
(Level 3)
Total
Assets measured at fair value:
Available-for-sale securities:
Asset-backed securities
Certificates of deposit
Commercial paper
Corporate debt securities
Foreign government debt securities
Government-sponsored enterprise obligations
Money market funds (1)
Mutual funds (2)
Publicly-traded equity securities
U.S. government securities
Total available-for-sale securities
Trading securities in mutual funds (3)
Derivative assets:
Foreign exchange contracts
Total assets measured at fair value
Liabilities measured at fair value:
Derivative liabilities:
Foreign exchange contracts
Total liabilities measured at fair value
Total assets measured at fair value, reported as:
Cash equivalents
Restricted investments
Short-term investments
Long-term investments
Prepaid expenses and other current assets
Total assets measured at fair value
Total liabilities measured at fair value, reported as:
Other accrued liabilities
Total liabilities measured at fair value
$
$
$
$
$
$
$
$
— $
249.9
$
— $
—
—
—
—
—
1,043.7
4.0
114.6
197.2
1,359.5
15.4
—
27.6
6.9
815.3
10.7
306.2
—
—
—
106.1
1,522.7
—
3.0
—
—
—
—
—
—
—
—
—
—
—
—
249.9
27.6
6.9
815.3
10.7
306.2
1,043.7
4.0
114.6
303.3
2,882.2
15.4
3.0
1,374.9
$
1,525.7
$
— $
2,900.6
— $
— $
(0.7) $
(0.7) $
— $
— $
(0.7)
(0.7)
965.1
$
31.1
$
— $
87.6
246.5
75.7
—
—
315.4
1,176.2
3.0
—
—
—
—
996.2
87.6
561.9
1,251.9
3.0
1,374.9
$
1,525.7
$
— $
2,900.6
— $
— $
(0.7) $
(0.7) $
— $
— $
(0.7)
(0.7)
________________________________
(1) Balance includes $83.6 million of restricted investments measured at fair market value, related to the Company's D&O trust and acquisitions
related escrows.
(2) Balance relates to the restricted investments measured at fair market value of the Company's India Gratuity Trust.
(3) Balance relates to the investments measured at fair value related to the Company's non-qualified deferred compensation plan assets.
75
Table of Contents
Juniper Networks, Inc.
Notes to Consolidated Financial Statements (Continued)
Assets measured at fair value:
Available-for-sale securities:
Asset-backed securities
Certificates of deposit
Commercial paper
Corporate debt securities
Foreign government debt securities
Government-sponsored enterprise obligations
Money market funds (1)
Mutual funds (2)
Publicly-traded equity securities
U.S. government securities
Total available-for-sale securities
Trading securities in mutual funds (3)
Derivative assets:
Foreign exchange contracts
Total assets measured at fair value
Liabilities measured at fair value:
Derivative liabilities:
Foreign exchange contracts
Total liabilities measured at fair value
Total assets measured at fair value, reported as:
Cash equivalents
Restricted investments
Short-term investments
Long-term investments
Prepaid expenses and other current assets
Total assets measured at fair value
Total liabilities measured at fair value, reported as:
Other accrued liabilities
Total liabilities measured at fair value
Fair Value Measurements at December 31, 2012 Using:
Quoted Prices in
Active Markets For
Identical Assets
Significant Other
Observable
Remaining Inputs
Significant Other
Unobservable
Remaining Inputs
(Level 1)
(Level 2)
(Level 3)
Total
$
— $
226.4
$
— $
—
—
—
—
254.9
1,145.2
1.0
2.9
275.9
1,679.9
12.6
—
42.5
22.4
535.6
5.0
16.1
—
2.0
—
218.6
1,068.6
—
3.5
—
—
—
—
—
—
—
—
—
—
—
—
226.4
42.5
22.4
535.6
5.0
271.0
1,145.2
3.0
2.9
494.5
2,748.5
12.6
3.5
$
$
$
$
$
$
$
1,692.5
$
1,072.1
$
— $
2,764.6
— $
— $
0.1
0.1
$
$
— $
— $
0.1
0.1
1,048.7
$
177.2
$
— $
1,225.9
103.6
224.4
315.8
—
2.0
217.1
672.3
3.5
—
—
—
—
105.6
441.5
988.1
3.5
1,692.5
$
1,072.1
$
— $
2,764.6
— $
— $
0.1
0.1
$
$
— $
— $
0.1
0.1
_______________________________
(1) Balance includes $102.6 million of restricted investments measured at fair market value, related to the Company's D&O trust and acquisition
related escrows.
(2) Balance relates to the restricted investments measured at fair market value of the Company's India Gratuity Trust.
(3) Balance relates to the investments measured at fair value related to the Company's non-qualified deferred compensation plan assets.
The Company's Level 2 available-for-sale fixed income securities are priced using quoted market prices for similar instruments
or non-binding market prices that are corroborated by observable market data. The Company uses inputs such as actual trade data,
benchmark yields, broker/dealer quotes, or alternative pricing sources with reasonable levels of price transparency which are
obtained from quoted market prices, independent pricing vendors, or other sources, to determine the ultimate fair value of these
assets. The Company's derivative instruments are classified as Level 2, as they are not actively traded and are valued using pricing
models that use observable market inputs. The Company's policy is to recognize asset or liability transfers among Level 1, Level
76
Table of Contents
Juniper Networks, Inc.
Notes to Consolidated Financial Statements (Continued)
2, and Level 3 at the beginning of the quarter in which a change in circumstances resulted in a transfer. During the year ended
December 31, 2013, the Company transferred approximately $287.4 million of government agency bonds within government
sponsored enterprise obligations from Level 1 to Level 2 primarily due to the use of additional valuation inputs more appropriately
classified as Level 2 inputs. During the year ended December 31, 2013, the Company had no transfers to Level 3. During the year
ended December 31, 2012, the Company had no transfers between levels of the fair value hierarchy of its assets or liabilities
measured at fair value.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Certain of the Company's assets, including intangible assets, goodwill, and privately-held investments, are measured at fair value
on a nonrecurring basis if impairment is indicated.
Privately-held investments, which are normally carried at cost, are measured at fair value due to events and circumstances that
the Company identified as significantly impacting the fair value of investments. The Company estimates the fair value of its
privately-held investments using an analysis of the financial condition and near-term prospects of the investee, including recent
financing activities and their capital structure. Purchased intangible assets are measured at fair value primarily using discounted
cash flow projections.
The following table presents assets measured at fair value on a nonrecurring basis and the related impairment losses included in
the Consolidated Statements of Operations (in millions):
Privately-held investments
Purchased intangible assets, net
Total losses for nonrecurring basis
As of December 31,
2013
2012
Fair Value
Losses
Fair Value
Losses
$
$
2.0
—
$
$
(2.8) $
— $
(2.8)
— $
—
$
(20.0)
(5.4)
(25.4)
These assets were classified as Level 3 assets due to the absence of quoted market prices and/or inherent lack of liquidity.
As of December 31, 2013 and 2012, the Company had no liabilities measured at fair value on a nonrecurring basis.
Assets and Liabilities Not Measured at Fair Value
The carrying amounts of the Company's accounts receivable, financing receivables, accounts payable, and other accrued liabilities
approximate fair value due to their short maturities. As of December 31, 2013 and December 31, 2012, the estimated fair value
of the Company’s long-term debt was approximately $1,023.5 million and $1,090.7 million, respectively, based on quoted market
prices (Level 1).
Note 6. Derivative Instruments
The Company uses derivatives to partially offset its market exposure to fluctuations in certain foreign currencies and does not
enter into derivatives for speculative or trading purposes.
The notional amount of the Company's foreign currency derivatives are summarized as follows (in millions):
Cash flow hedges
Non-designated derivatives
Total
As of December 31,
2013
2012
$
$
137.6
144.4
282.0
$
$
85.8
112.8
198.6
77
Table of Contents
Cash Flow Hedges
Juniper Networks, Inc.
Notes to Consolidated Financial Statements (Continued)
The Company uses foreign currency forward or option contracts to hedge the Company's planned cost of services and operating
expenses denominated in foreign currencies. These derivatives are designated as cash flow hedges. Execution of these cash flow
hedge derivatives typically occurs every month with maturities of one year or less.
See Note 5, Fair Value Measurements, for the fair values of the Company’s derivative instruments in the Consolidated Balance
Sheets.
As of December 31, 2013, the Company recognized a loss of $1.0 million in accumulated other comprehensive income for the
effective portion of its derivative instruments and reclassified a gain of $0.7 million during the year ended December 31, 2013
from other comprehensive income to operating expense in the Consolidated Statements of Operations. As of December 31, 2012,
the Company recognized a gain of $7.2 million in accumulated other comprehensive income for the effective portion of its derivative
instruments and reclassified a loss of $7.5 million during the year ended December 31, 2012 from other comprehensive income
to operating expense in the Consolidated Statements of Operations. As of December 31, 2011, the Company recognized a loss of
$7.9 million in accumulated other comprehensive income for the effective portion of its derivative instruments and reclassified a
gain of $0.7 million during the year ended December 31, 2011 from other comprehensive income to operating expense in the
Consolidated Statements of Operations.
The ineffective portion of the Company's derivative instruments recognized in its Consolidated Statements of Operations was not
material during the years ended December 31, 2013, 2012, and 2011.
Non-Designated Derivatives
During the years ended December 31, 2013, 2012, and 2011, the Company recognized a net gain of $0.9 million, a net gain of
$1.0 million, and a gain of $1.5 million, respectively, on non-designated derivative instruments within other expense, net, in its
Consolidated Statements of Operations.
Offsetting of Derivatives
The Company presents its derivative assets and derivative liabilities on a gross basis in the Consolidated Balance Sheets. However,
under agreements containing provisions on netting with certain counterparties of foreign exchange contracts, subject to applicable
requirements, the Company is allowed to net-settle transactions on the same date in the same currency, with a single net amount
payable by one party to the other. As of December 31, 2013 and December 31, 2012, the potential effect of rights of setoff associated
with derivative instruments was not material. The Company is neither required to pledge nor entitled to receive cash collateral
related to these derivative transactions.
Note 7. Goodwill and Purchased Intangible Assets
Goodwill
The following table presents the goodwill activity allocated to the Company's reportable segments (in millions):
PSD
SSD
Total
December 31, 2011
Additions due to business combinations
Adjustments to goodwill
December 31, 2012
Reclassifications
Foreign currency translation adjustment
December 31, 2013
$
$
1,795.6
$
2,132.5
$
70.7
—
1,866.3
(249.6)
(0.1)
1,616.6
$
59.6
(0.6)
2,191.5
249.6
—
2,441.1
$
3,928.1
130.3
(0.6)
4,057.8
—
(0.1)
4,057.7
The additions to goodwill in 2012 were based on the purchase price allocations of the acquisitions completed during 2012. The
adjustments to goodwill during 2012 were related to adjustments to net tangible assets assumed from certain businesses acquired
in 2010 and 2011. The Company also recorded adjustments to net tangible assets assumed related to the acquisitions completed
in 2012.
78
Table of Contents
Juniper Networks, Inc.
Notes to Consolidated Financial Statements (Continued)
During 2013, goodwill of $179.0 million associated with security products previously reported under the PSD segment was
reclassified to the SSD segment in connection with the Company's product realignment of all security products. In addition, the
Company realigned its Contrail products from the PSD segment to the SSD segment resulting in a reclassification of goodwill of
$70.6 million. Goodwill was reclassified based on the relative fair value allocation of the reporting units affected.
There were no impairments to goodwill during the years ended December 31, 2013, 2012, and 2011.
Purchased Intangible Assets
The Company’s purchased intangible assets were as follows (in millions):
As of December 31, 2013
Intangible assets with finite lives:
Technologies and patents
Customer contracts, support agreements, and
related relationships
Total purchased intangible assets
As of December 31, 2012
Intangible assets with finite lives:
Technologies and patents
Customer contracts, support agreements, and
related relationships
Total intangible assets with finite lives
IPR&D with indefinite lives
Total purchased intangible assets
$
$
$
$
Gross
Accumulated
Amortization
Impairments and
Other Charges
Net
581.4
$
(453.4) $
(30.5) $
74.3
655.7
$
(62.7)
(516.1) $
(2.2)
(32.7) $
554.1
$
(425.0) $
(30.5) $
74.3
628.4
17.4
645.8
$
(59.2)
(484.2)
—
(484.2) $
(2.2)
(32.7)
—
(32.7) $
97.5
9.4
106.9
98.6
12.9
111.5
17.4
128.9
During 2013, research and development efforts were completed and IPR&D accounted for as an indefinite-lived asset was
reclassified as an amortizable finite-lived asset.
The following table presents the amortization of intangible assets included in the Consolidated Statements of Operations (in
millions):
Cost of revenues
Operating expenses:
Sales and marketing
General and administrative
Total operating expenses
Total
Years Ended December 31,
2013
2012
2011
27.3
$
27.6
$
3.4
1.2
4.6
31.9
$
3.5
1.2
4.7
32.3
$
21.7
4.1
1.3
5.4
27.1
$
$
In connection with the restructuring plan in 2012 discussed in Note 9, Restructuring and Other Charges, the Company assessed
the value and remaining useful life of certain intangible assets and determined intangible assets of $5.4 million were impaired and
such assets were written-down to their fair value of zero. These assets were measured at fair value primarily using discounted cash
flow projections. Additionally, the Company determined other intangible assets of $10.7 million were no longer utilized. As a
result, the Company recorded $16.1 million in charges related to these items during the year ended December 31, 2012, which
were included in cost of revenues in the Consolidated Statements of Operations. There were no impairment charges to purchased
intangible assets during the years ended December 31, 2013 and 2011.
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Juniper Networks, Inc.
Notes to Consolidated Financial Statements (Continued)
As of December 31, 2013, the estimated future amortization expense of purchased intangible assets with finite lives is as follows
(in millions):
Years Ending December 31,
2014
2015
2016
2017
2018
Thereafter
Total
Note 8. Other Financial Information
Inventories
Amount
36.2
32.6
18.5
10.5
3.7
5.4
106.9
$
$
The Company purchases and holds inventory to provide adequate component supplies over the life of the underlying products.
The majority of the Company's inventory is production components. Inventories are reported within prepaid expenses and other
current assets and other long-term assets in the Consolidated Balance Sheets and consisted of the following (in millions):
Production materials
Finished goods
Inventories
As of December 31,
2013
2012
$
$
51.3
1.4
52.7
$
$
53.1
4.1
57.2
During the year ended December 31, 2012, the Company recorded charges of $44.3 million, to cost of revenues, representing
inventory held in excess of forecasted demand, of which $36.3 million was in connection with the restructuring plan in 2012
discussed in Note 9, Restructuring and Other Charges.
Property and Equipment, Net
Property and equipment, net, consisted of the following (in millions):
Computers and equipment
Software
Leasehold improvements
Furniture and fixtures
Building and building improvements
Land and land improvements
Construction-in-process
Property and equipment, gross
Accumulated depreciation
Property and equipment, net
As of December 31,
2013
2012
794.6
108.4
202.6
42.5
242.6
238.9
79.5
1,709.1
(826.8)
882.3
$
$
711.8
106.6
206.5
28.7
206.1
208.2
112.7
1,580.6
(768.7)
811.9
$
$
Depreciation expense was $148.2 million, $154.7 million, and $142.2 million in 2013, 2012, and 2011, respectively. Property and
equipment is periodically reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. In 2011, the Company recorded a $13.5 million asset impairment charge in restructuring and
other charges in the Consolidated Statement of Operations related to an abandoned in-process internal use software project.
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Other Long-Term Assets
Juniper Networks, Inc.
Notes to Consolidated Financial Statements (Continued)
Other long-term assets consisted of the following (in millions):
Privately-held investments
Licensed software
Federal income tax receivable
Financed customer receivable
Inventory
Prepaid costs, deposits, and other
Other long-term assets
Warranties
As of December 31,
2013
2012
$
$
57.2
90.4
20.0
19.9
15.2
31.1
233.8
$
$
32.0
84.4
—
—
—
21.9
138.3
The Company accrues for warranty costs based on associated material, labor for customer support, and overhead at the time revenue
is recognized. This accrual is reported as accrued warranty within current liabilities in the Consolidated Balance Sheets. Changes
in the Company’s warranty reserve were as follows (in millions):
Beginning balance
Provisions made during the period, net
Adjustments related to pre-existing warranties
Actual costs incurred during the period
Ending balance
Deferred Revenue
As of December 31,
2013
2012
29.7
28.8
(2.1)
(28.4)
28.0
$
$
28.3
31.9
—
(30.5)
29.7
$
$
Details of the Company's deferred revenue, as reported in the Consolidated Balance Sheets, were as follows (in millions):
Deferred product revenue:
Undelivered product commitments and other product deferrals
Distributor inventory and other sell-through items
Deferred gross product revenue
Deferred cost of product revenue
Deferred product revenue, net
Deferred service revenue
Total
Reported as:
Current
Long-term
Total
As of December 31,
2013
2012
$
$
$
$
184.9
$
118.7
303.6
(58.6)
245.0
824.3
1,069.3
705.8
363.5
1,069.3
$
$
$
256.9
138.4
395.3
(99.4)
295.9
627.5
923.4
693.5
229.9
923.4
Deferred product revenue represents unrecognized revenue related to shipments to distributors that have not sold through to end-
users, undelivered product commitments, and other shipments that have not met all revenue recognition criteria. Deferred product
revenue is recorded net of the related costs of product revenue. Deferred service revenue represents billable amounts for service
contracts, which include technical support, hardware and software maintenance, professional services, and training, for which
services have not been rendered.
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Table of Contents
Other Expense, Net
Juniper Networks, Inc.
Notes to Consolidated Financial Statements (Continued)
Other expense, net consisted of the following (in millions):
Interest income
Interest expense
Other
Other expense, net
Years Ended December 31,
2013
2012
2011
$
$
$
8.7
(58.4)
9.3
(40.4) $
$
11.0
(52.9)
25.3
(16.6) $
9.7
(49.5)
(7.0)
(46.8)
Interest income primarily includes interest earned on the Company’s cash, cash equivalents, and investments. Interest expense
primarily includes interest, net of capitalized interest expense from long-term debt and customer financing arrangements. Other
typically consists of investment and foreign exchange gains and losses and other non-operational income and expense items.
For the years ended December 31, 2013, 2012 and 2011, interest expense included $45.2 million, net of $1.9 million capitalized,
$40.0 million, net of $7.1 million capitalized, and $37.7 million, net of $1.2 million capitalized, respectively, related to the
Company's outstanding long-term debt issued in March 2011 (Refer to Note 10, Long-Term Debt and Financing).
In 2013, Other was primarily comprised of net gains of $7.1 million, related to its privately-held investments and publicly-traded
equity investments. In 2012, Other included recognized gains of $45.5 million, including a $14.7 million gain from the acquisition
of its privately-held investment in Contrail, and impairment losses of $20.0 million related to its privately-held investments. In
2011, Other included certain legal expenses unrelated to current or recent operations of approximately $7.0 million.
Note 9. Restructuring and Other Charges
The following table presents restructuring and other charges included in cost of revenues and restructuring and other charges in
the Consolidated Statements of Operations under the Company's restructuring plans (in millions):
Severance
Facilities
Contract terminations and other
Total
Reported as:
Cost of revenues
Restructuring and other charges
Total
Years Ended December 31,
2013
2012
2011
22.9
10.0
14.6
47.5
8.4
39.1
47.5
$
$
$
$
36.7
5.8
57.2
99.7
52.9
46.8
99.7
$
$
$
$
15.3
0.2
15.1
30.6
—
30.6
30.6
$
$
$
$
Restructuring charges are based on the Company's restructuring plans that were committed to by management. Any changes in
the estimates of executing the approved plans are reflected in the Company's results of operations.
2013 Restructuring Plan
During 2013, the Company initiated a restructuring plan (the "2013 Restructuring Plan") to continue to improve its cost structure
and rationalize its product portfolio and rebalance its investments. The 2013 Restructuring Plan consists of workforce reductions,
contract terminations, and project cancellations. The Company recorded $18.3 million in severance costs and $10.0 million of
contract termination and project cancellation charges related to the 2013 Restructuring Plan during the year ended December 31,
2013. Under the 2013 Restructuring Plan, total costs incurred through December 31, 2013 were $28.3 million, of which $3.3
million was recorded within cost of revenues and $25.0 million was recorded within restructuring and other charges in the
Consolidated Statements of Operations. In connection with the 2013 Restructuring Plan, the Company expects to record aggregate
future charges of up to $2.0 million related to severance charges.
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2012 Restructuring Plan
Juniper Networks, Inc.
Notes to Consolidated Financial Statements (Continued)
During 2012, the Company initiated a restructuring plan (the "2012 Restructuring Plan") to bring its cost structure more in line
with its desired long-term financial and strategic model. The 2012 Restructuring Plan consists of workforce reductions, facility
consolidations or closures, and supply chain and procurement efficiencies. During the year ended December 31, 2013, the Company
continued to implement restructuring activities under the 2012 Restructuring Plan and recorded $19.3 million in charges for
severance costs, facility consolidations or closures, and contract terminations. Under the 2012 Restructuring Plan, total costs
incurred through December 31, 2013 were $112.6 million, of which $58.0 million was recorded within cost of revenues, primarily
related to certain inventory and intangible asset impairment charges, and $54.6 million was recorded within restructuring and other
charges in the Consolidated Statements of Operations. The restructuring activities related to this plan are substantially complete.
2011 Restructuring Plan
During 2011, the Company implemented a restructuring plan (the "2011 Restructuring Plan") in an effort to better align its business
operations with the current market and macroeconomic conditions. The 2011 Restructuring Plan consisted of certain workforce
reductions, facility closures and to a lesser extent, contract terminations. The Company recorded the majority of the restructuring
charges associated with the 2011 Restructuring Plan during the years ended 2012 and 2011 and recorded a severance-related
reversal of $0.1 million during 2013. As of December 31, 2013, the remaining restructuring liability under this plan relates to
facility charges, which are expected to be completed by March 2018.
Restructuring liabilities are reported within other accrued liabilities and other long-term liabilities on the Consolidated Balance
Sheets. The following table provides a summary of changes in the restructuring liability related to the Company's plans as of
December 31, 2013 (in millions):
December 31,
2012
Charges
Cash
Payments
Non-cash
Settlements and
Other
December 31,
2013
$
$
10.6
$
5.2
2.4
18.2
$
22.9
10.0
14.6
47.5
$
$
(27.8) $
(6.0)
(9.3)
(43.1) $
(0.1) $
(4.1)
(0.6)
(4.8) $
5.6
5.1
7.1
17.8
Severance
Facilities
Contract terminations and other
Total
Note 10. Long-Term Debt and Financing
Long-Term Debt
In March 2011, the Company issued $300.0 million aggregate principal amount of 3.10% senior notes due 2016 ("2016 Notes"),
$300.0 million aggregate principal amount of 4.60% senior notes due 2021 ("2021 Notes"), and $400.0 million aggregate principal
amount of 5.95% senior notes due 2041 ("2041 Notes" and, collectively the "Notes"). Interest on the Notes is payable in cash
semiannually. The Company may redeem the Notes, at any time in whole or from time to time in part, subject to a make-whole
premium, and, in the event of a change in control, the holders of the Notes may require the Company to repurchase for cash all
or part of the Notes at a purchase price equal to 101% of the aggregate principle amount, plus accrued and unpaid interest, if any.
The indenture that governs the Notes also contains various covenants, including limitations on the Company's ability to incur liens
or enter into sale-leaseback transactions over certain dollar thresholds. As of December 31, 2013, the Company was in compliance
with all of its debt covenants.
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Table of Contents
Juniper Networks, Inc.
Notes to Consolidated Financial Statements (Continued)
The following table summarizes the Company's long-term debt (in millions, except percentages):
Senior notes:
3.10% fixed-rate notes, due 2016
4.60% fixed-rate notes, due 2021
5.95% fixed-rate notes, due 2041
Total senior notes
Unaccreted discount
Total
As of December 31, 2013
Amount
Effective Interest
Rates
3.12%
4.63%
6.01%
$
$
300.0
300.0
400.0
1,000.0
(0.7)
999.3
The effective interest rates for the Notes include the interest, accretion of the discount, and amortization of issuance costs.
Customer Financing Arrangements
The Company provides distribution partners access to extended financing arrangements for certain end-user customers that require
longer payment terms than those typically provided by the Company through factoring accounts receivable to third -party financing
providers. The program does not and is not intended to affect the timing of the Company's revenue recognition. Under the financing
arrangements, proceeds from the financing provider are due to the Company 30 days from the sale of the receivable. In these
transactions with the financing provider, the Company surrenders control over the transferred assets. The factored accounts
receivable are isolated from the Company and put beyond the reach of creditors, even in the event of bankruptcy. The Company
does not maintain effective control over the transferred assets through obligations or rights to redeem, transfer, or repurchase the
receivables after they have been transferred.
Pursuant to the financing arrangements for the sale of receivables, the Company sold net receivables of $898.4 million, $677.8
million and $738.2 million during the years ended December 31, 2013, 2012, and 2011, respectively.
The Company received cash proceeds from the financing provider of $843.9 million, $679.8 million, and $686.5 million during
the years ended December 31, 2013, 2012, and 2011, respectively. As of December 31, 2013 and December 31, 2012, the amounts
owed by the financing provider were $189.8 million and $147.6 million, respectively, and were recorded in accounts receivable
on the Company’s Consolidated Balance Sheets.
In 2013, the Company provided guarantees for third-party financing arrangements extended to end-user customers, which have
terms up to four years. The Company is liable for the aggregate unpaid payments to the third-party financing company in the event
of customer default. As of December 31, 2013, the Company has not made any payments under these arrangements. Pursuant to
these arrangements, the Company has guarantees for third-party financing arrangements of $30.2 million as of December 31,
2013.
The portion of the receivable financed that has not been recognized as revenue is accounted for as a financing arrangement and
is included in other accrued liabilities and other long-term liabilities in the Consolidated Balance Sheets. As of December 31, 2013
and 2012, the estimated cash received from the financing provider not recognized as revenue from distributors was $62.3 million
and $30.7 million, respectively.
Note 11. Equity
Stock Repurchase Activities
In July 2013, the Company's Board of Directors (the “Board”) approved a stock repurchase program that authorized the Company
to repurchase up to $1.0 billion of its common stock from time to time at management's discretion. The authorization was in
addition to the $1.0 billion stock repurchase program approved by the Board and announced in June 2012 and the $1.0 billion
stock repurchase program approved by the Board in February 2010. As of December 31, 2013, there was $997.7 million of
authorized funds remaining under the Company's stock repurchase programs. In addition to repurchases under the Company’s
stock repurchase programs, the Company also repurchases common stock from its employees in connection with the net issuance
of shares to satisfy minimum tax withholding obligations for the vesting of certain stock awards.
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Table of Contents
Juniper Networks, Inc.
Notes to Consolidated Financial Statements (Continued)
The following table summarizes the Company's repurchases and retirements of its common stock under its stock repurchase
programs and repurchases associated with minimum tax withholdings (in millions, except per share amounts):
2013
Repurchases under stock repurchase programs
Repurchases for tax withholding
2012
Repurchases under stock repurchase programs
Repurchases for tax withholding
2011
Repurchases under stock repurchase programs
Repurchases for tax withholding
Shares
Repurchased
Average price
per share
Amount
Repurchased
28.9
0.4
35.8
0.2
17.5
0.2
$
$
$
$
$
$
19.76
20.23
18.05
23.40
30.93
35.98
$
$
$
$
$
$
570.6
7.2
645.6
5.0
541.2
7.4
Future share repurchases under the Company’s stock repurchase programs will be subject to a review of the circumstances at that
time and will be made from time to time in private transactions or open market purchases as permitted by securities laws and other
legal requirements. The Company's stock programs may be discontinued at any time. The Company's stock repurchase activity
subsequent to 2013 was not material.
Accumulated Other Comprehensive Income, Net of Tax
The components of accumulated other comprehensive income, net of related taxes, as of December 31, 2013 and December 31,
2012 were as follows (in millions):
Balance as of December 31, 2011
Other comprehensive gain before reclassifications
Amount reclassified from accumulated other
comprehensive income
Other comprehensive gain
Balance as of December 31, 2012
$
Unrealized
Gains (Losses)
on Available-for-
Sale Securities(1)
0.1
$
3.2
$
$
(1.2)
2.0
2.1
65.1
Unrealized
Gains (Losses)
on Cash Flow
Hedges(2)
Foreign
Currency
Translation
Adjustments
(10.9) $
7.4
(6.8) $
6.4
6.5
13.9
3.0
0.7
$
—
6.4
(0.4) $
(3.4)
Total
(17.6)
17.0
5.3
22.3
4.7
62.4
Other comprehensive gain (loss) before reclassifications
Amount reclassified from accumulated other
comprehensive income
Other comprehensive gain (loss)
Balance as of December 31, 2013
________________________________
(1) The reclassifications out of accumulated other comprehensive income during the years ended December 31, 2013 and December 31, 2012
for realized gains on available-for-sale securities of $1.0 million and $1.2 million, respectively, are included in other expense, net, in the
Consolidated Statements of Operations.
—
(3.4)
(3.8) $
(2.5)
59.9
64.6
(1.0)
64.1
66.2
(1.5)
(0.8)
2.2
$
$
$
(2) The reclassifications out of accumulated other comprehensive income during the year ended December 31, 2013 for realized gains on cash
flow hedges are included within cost of revenues of $1.1 million and sales and marketing of $4.3 million and for realized losses within
research and development of $3.4 million and general and administrative of $0.5 million for which the hedged transactions relate in the
Consolidated Statements of Operations. The reclassifications out of accumulated other comprehensive income during the year ended
December 31, 2012 for realized losses on cash flow hedges are included within cost of revenues of $0.9 million, research and development
of $2.3 million, sales and marketing of $2.0 million, and general and administrative of $1.3 million for which the hedged transactions relate
in the Consolidated Statements of Operations.
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Table of Contents
Juniper Networks, Inc.
Notes to Consolidated Financial Statements (Continued)
Note 12. Employee Benefit Plans
Equity Incentive Plans
The Company’s equity incentive plans include the 2006 Equity Incentive Plan (the “2006 Plan”), the 2000 Nonstatutory Stock
Option Plan (the “2000 Plan”), the Amended and Restated 1996 Stock Plan (the “1996 Plan”), various equity incentive plans
assumed through acquisitions, and the 2008 Employee Stock Purchase Plan (the "ESPP"). Under these plans, the Company has
granted (or, in the case of acquired, plans assumed) stock options, restricted stock units ("RSUs"), restricted stock awards ("RSAs"),
and performance share awards ("PSAs").
As of December 31, 2013, a total of approximately 103.8 million shares of common stock were reserved for future issuance upon
exercise of stock options and vesting of RSUs, RSAs, and PSAs, and for the future grant of share-based compensation awards
under the Company's equity incentive plans.
The 2006 Plan was adopted and approved by the Company’s stockholders in May 2006. To date, the Company's stockholders have
approved a share reserve of 149.5 million shares of common stock plus the addition of any shares subject to options under the
2000 Plan and the 1996 Plan that were outstanding as of May 18, 2006, and that subsequently expire unexercised, up to a maximum
of an additional 75.0 million shares. As of December 31, 2013, the 2006 Plan had 43.8 million shares subject to currently outstanding
equity awards and 49.1 million shares available for future issuance. Options granted under the 2006 Plan have a maximum term
of seven years from the date of grant, and generally vest and become exercisable over a four-year period. Subject to the terms of
change of control severance agreements, and except for a limited number of shares allowed under the 2006 Plan, RSUs or PSAs
that vest solely based on continuing employment or provision of services will vest in full no earlier than three years from the grant
date, or in the event vesting is based on factors other than continued future provision of services, such awards will vest in full no
earlier than one year from the grant date.
During the year ended December 31, 2012, the Company completed the acquisitions of Mykonos and Contrail and assumed their
respective plans: Mykonos Software, Inc. 2010 Stock Plan and Contrail Systems Inc. 2012 Stock Plan. In connection with these
plans, the Company assumed stock options, RSUs, and RSAs and exchanged the assumed awards for Juniper Networks' stock
options, RSUs, and RSAs, respectively. No additional awards can be granted under these plans. The Company assumed an aggregate
of 7.0 million shares of stock options, RSUs, and RSAs in connection with the acquisitions of Mykonos and Contrail, of which
5.8 million shares were exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), in reliance
upon Section 4(2) of the Securities Act as transactions by an issuer not involving any public offering and/or the private offering
safe harbor provision of Rule 506 of Regulation D promulgated under the Securities Act. As of December 31, 2013 stock options,
RSUs, and RSAs representing approximately 4.7 million shares of common stock were outstanding under all awards assumed
through the Company's acquisitions.
The ESPP was adopted in May 2008. To date, the Company's stockholders have approved a share reserve of 19.0 million shares
of the Company's common stock for issuance under the ESPP. The ESPP permits eligible employees to acquire shares of the
Company’s common stock at a 15% discount to the offering price (as determined in the ESPP) through periodic payroll deductions
of up to 10% of base compensation, subject to individual purchase limits of 6,000 shares in any twelve-month period or $25,000
worth of stock, determined at the fair market value of the shares at the time the stock purchase option is granted, in one calendar
year. As of December 31, 2013, approximately 12.8 million shares have been issued and 6.2 million shares remain available for
future issuance under the ESPP.
Stock Option Activities
Since 2006, the Company has granted stock option awards that have a maximum contractual life of seven years from the date of
grant. Prior to 2006, stock option awards generally had a ten-year contractual life from the date of grant.
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Table of Contents
Juniper Networks, Inc.
Notes to Consolidated Financial Statements (Continued)
The following table summarizes the Company’s stock option activity and related information as of and for the three years ended
December 31, 2013 (in millions, except for per share amounts and years):
Outstanding Options
Weighted Average
Exercise Price
per Share
Weighted Average
Remaining
Contractual Term
(In Years)
Aggregate
Intrinsic
Value
Number of Shares
Balance as of December 31, 2010
49.4
$
Granted
Canceled
Exercised
Expired
Balance as of December 31, 2011
Granted
Assumed(*)
Canceled
Exercised
Expired
Balance as of December 31, 2012
Granted
Canceled
Exercised
Expired
Balance as of December 31, 2013
As of December 31, 2013:
Vested and expected-to-vest options
5.6
(1.9)
(13.9)
(0.6)
38.6
3.1
0.9
(2.8)
(3.6)
(2.1)
34.1
—
(1.3)
(5.6)
(4.1)
23.1
22.8
Exercisable options
_____________________________
(*) Stock options assumed in connection with the acquisition of Contrail.
20.5
$
$
$
$
$
21.90
37.17
26.76
21.13
34.32
23.98
22.81
0.57
26.64
11.71
26.97
24.13
—
29.56
15.58
28.35
25.15
25.24
25.40
4.1
$
744.5
3.7
$
75.3
3.1
$
52.5
2.4
$
44.6
2.4
2.0
$
$
42.0
30.0
Aggregate intrinsic value represents the difference between the Company’s closing stock price on the last trading day of the period,
which was $22.57 per share as of December 31, 2013 and the exercise price, multiplied by the number of related options. The pre-
tax intrinsic value of options exercised, representing the difference between the fair market value of the Company’s common stock
on the date of the exercise and the exercise price of each option, was $29.4 million, $27.9 million, and $249.8 million for 2013,
2012, and 2011, respectively. Total fair value of options vested during 2013, 2012, and 2011 was $45.2 million, $70.9 million,
and $80.7 million, respectively.
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Table of Contents
Juniper Networks, Inc.
Notes to Consolidated Financial Statements (Continued)
The following table summarizes additional information regarding outstanding and exercisable options as of December 31, 2013:
Range of Exercise Price
(In dollars)
$0.03 - $15.09
$16.00 - $21.12
$21.43 - $23.84
$23.89 - $24.20
$24.25 - $25.49
$25.50 - $26.90
$26.97 - $29.89
$29.93 - $38.93
$40.26 - $40.26
$44.00 - $44.00
$0.03 - $44.00
Options Outstanding
Weighted Average
Remaining
Contractual Life
(In years)
Number
Outstanding
(In millions)
Options Exercisable
Weighted Average
Exercise Price
(In dollars)
Number
Exercisable
(In millions)
Weighted Average
Exercise Price
(In dollars)
2.9
2.4
2.4
2.6
2.3
3.2
3.1
2.2
1.1
0.9
23.1
3.9
1.4
2.2
2.3
1.3
1.8
2.6
2.2
4.0
4.1
2.4
$
$
10.89
18.41
22.46
24.16
25.07
26.55
28.54
33.31
40.26
44.00
25.15
2.3
2.3
2.1
2.1
2.3
3.2
2.9
1.9
0.8
0.6
20.5
$
$
13.76
18.33
22.60
24.15
25.07
26.55
28.52
33.16
40.26
44.00
25.40
Restricted Stock Unit, Restricted Stock Award, and Performance Share Award Activities
RSUs and RSAs generally vest over a period of three to four years from the date of grant and PSAs generally vest after three years
provided that certain annual performance targets and other vesting criteria are met. Until vested, RSUs and PSAs do not have the
voting and dividend participation rights of common stock and the shares underlying the awards are not considered issued and
outstanding.
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Table of Contents
Juniper Networks, Inc.
Notes to Consolidated Financial Statements (Continued)
The following table summarizes the Company’s RSU, RSA, and PSA activity and related information as of and for the three years
ended December 31, 2013 (in millions, except per share amounts and years):
Outstanding RSUs, RSAs, and PSAs
Weighted Average
Grant-Date Fair
Value per Share
Weighted Average
Remaining
Contractual Term
(In Years)
Aggregate
Intrinsic
Value
Number of Shares
Balance as of December 31, 2010
14.2
$
RSUs granted
PSAs granted(1)
RSUs vested(6)
PSAs vested(6)
RSUs canceled
PSAs canceled
Balance as of December 31, 2011
RSUs granted
RSUs assumed(3)(4)
PSAs granted(2)
RSAs assumed(4)
RSUs vested(6)
PSAs vested(6)
RSAs vested(6)
RSUs canceled
PSAs canceled
Balance as of December 31, 2012
RSUs granted
PSAs granted(5)
RSUs vested(6)
PSAs vested(6)
RSAs vested(6)
RSUs canceled
PSAs canceled
Balance at December 31, 2013
As of December 31, 2013:
Vested and expected-to-vest RSUs, RSAs
and PSAs
7.3
4.5
(1.7)
(0.8)
(1.0)
(2.9)
19.6
9.9
0.2
2.2
5.8
(3.1)
(1.9)
(0.7)
(2.9)
(2.3)
26.8
10.3
2.2
(6.1)
(1.1)
(1.6)
(3.4)
(1.7)
25.4
$
$
$
25.94
31.75
38.64
23.26
24.76
31.57
30.72
30.27
20.79
22.21
23.07
19.59
27.04
18.21
19.59
27.77
29.71
27.76
20.32
21.27
26.15
28.52
19.59
22.99
29.10
23.44
1.7
$
522.9
1.5
$
400.5
1.7
$
565.0
1.1
$
573.5
20.8
$
23.77
1.0
$
469.2
________________________________
(1) The number of shares subject to PSAs granted represents the aggregate maximum number of shares that may be issued pursuant to the
award over its full term. The aggregate number of shares subject to these PSAs that would be issued if performance goals determined by
the Compensation Committee are achieved is estimated at 1.9 million shares. Depending on achievement of such performance goals, the
range of shares that could be issued under these awards is 0 to 4.5 million shares.
(2) The number of shares subject to PSAs granted represents the aggregate maximum number of shares that may be issued pursuant to the
award over its full term. The aggregate number of shares subject to these PSAs that would be issued if performance goals determined by
the Compensation Committee are achieved at target is 0.9 million shares. Depending on achievement of such performance goals, the range
of shares that could be issued under these awards is 0 to 2.2 million shares.
(3) RSUs assumed in connection with the acquisition of Mykonos.
(4) RSUs and RSAs assumed in connection with the acquisition of Contrail.
(5) The number of shares subject to PSAs granted represents the aggregate maximum number of shares that may be issued pursuant to the
award over its full term. The aggregate number of shares subject to these PSAs that would be issued if performance goals determined by
the Compensation Committee are achieved at target is 1.1 million shares. Depending on achievement of such performance goals, the range
of shares that could be issued under these awards is 0 to 2.2 million shares.
89
Table of Contents
Juniper Networks, Inc.
Notes to Consolidated Financial Statements (Continued)
(6) Total fair value of RSUs, RSAs, and PSAs vested during 2013, 2012, and 2011 was $221.5 million, $132.0 million, and $57.7 million,
respectively.
Shares Available for Grant
The following table presents the stock activity and the total number of shares available for grant under the 2006 Plan as of
December 31, 2013 (in millions):
Number of Shares
57.3
(26.1)
12.6
1.2
4.1
49.1
Balance as of December 31, 2012
RSUs and PSAs granted (1)
RSUs and PSAs canceled (1)
Options canceled (2)
Options expired (2)
Balance as of December 31, 2013
________________________________
(1) RSUs and PSAs with a per share or unit purchase price lower than 100% of the fair market value of the Company's common stock on the
day of the grant under the 2006 Plan are counted against shares authorized under the plan as two and one-tenth shares of common stock
for each share subject to such award. The number of shares subject to PSAs granted represents the maximum number of shares that may
be issued pursuant to the award over its full term.
Includes canceled or expired options under the 1996 Plan and the 2000 Plan that expired after May 18, 2006, which become available for
grant under the 2006 Plan according to its terms.
(2)
Employee Stock Purchase Plan
The Company's ESPP is implemented in a series of offering periods, each six months in duration, or a shorter period as determined
by the Board. Employees purchased approximately 3.3 million, 3.5 million, and 2.4 million shares of common stock through the
ESPP at an average exercise price of $16.53, $16.26, and $21.53 per share during 2013, 2012, and 2011, respectively.
Valuation Assumptions
The weighted-average assumptions used and the resulting estimates of fair value for stock options and ESPP were as follows:
Years Ended December 31,
Stock Options:
Volatility
Risk-free interest rate
Expected life (years)
Dividend yield
Weighted-average fair value per share
ESPP:
Volatility
Risk-free interest rate
Expected life (years)
Dividend yield
Weighted-average fair value per share
2013
—
—
0 years
—
—
36%
0.1%
0.5
—
$5.54
2012
45%
0.7%
4.2
—
$8.47
47%
0.1%
0.5
—
$5.53
2011
43%
1.5%
4.1
—
$13.17
41%
0.2%
0.5
—
$7.48
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Juniper Networks, Inc.
Notes to Consolidated Financial Statements (Continued)
Share-Based Compensation Expense
Share-based compensation expense associated with stock options, RSUs, RSAs, PSAs, and ESPP was recorded in the following
cost and expense categories in the Company's Consolidated Statements of Operations (in millions):
Cost of revenues - Product
Cost of revenues - Service
Research and development
Sales and marketing
General and administrative
Total
Years Ended December 31,
2013
2012
2011
$
$
4.7
15.4
127.6
70.9
26.0
244.6
$
$
4.6
17.0
109.1
81.6
31.1
243.4
$
$
The following table summarizes share-based compensation expense by award type (in millions):
Stock options
RSUs, RSAs, and PSAs
ESPP
Total
Years Ended December 31,
2013
2012
2011
$
$
31.5
196.8
16.3
244.6
$
$
58.9
163.7
20.8
243.4
$
$
4.6
15.7
97.7
70.9
33.3
222.2
76.2
127.5
18.5
222.2
The following table presents unrecognized compensation cost, adjusted for estimated forfeitures, recognized over a weighted-
average period related to unvested stock options, RSUs, RSAs, and PSAs as of December 31, 2013 (in millions, except years):
Stock options
RSUs, RSAs, and PSAs
401(k) Plan
Unrecognized
Compensation Cost
33.6
$
279.1
$
Weighted Average
Period
(In Years)
1.8
1.8
The Company maintains a savings and retirement plan qualified under Section 401(k) of the Internal Revenue Code of 1986, as
amended (the "IRC"). Employees meeting the eligibility requirements, as defined under the IRC, may contribute up to the statutory
limits each year. The Company currently matches 30% of all eligible employee contributions which vest immediately. The
Company’s matching contributions to the plan totaled $20.7 million, $20.2 million, and $16.3 million during the years ended
December 31, 2013, 2012, and 2011, respectively.
Deferred Compensation Plan
The Company’s non-qualified deferred compensation (“NQDC”) plan is an unfunded and unsecured deferred compensation
arrangement. Under the NQDC plan, officers and other senior employees may elect to defer a portion of their compensation and
contribute such amounts to one or more investment funds. The NQDC plan assets are included within short-term investments and
offsetting obligations are included within accrued compensation in the Consolidated Balance Sheets. The investments are
considered trading securities and are reported at fair value. The realized and unrealized holding gains and losses related to these
investments are recorded in other expense, net, and the offsetting compensation expense is recorded as operating expenses in the
Consolidated Statements of Operations. The deferred compensation liability under the NQDC plan was approximately $15.4
million and $12.6 million as of December 31, 2013 and December 31, 2012, respectively.
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Note 13. Segments
Juniper Networks, Inc.
Notes to Consolidated Financial Statements (Continued)
The Company’s chief operating decision maker (“CODM”) allocates resources and assesses performance based on financial
information of the Company’s divisions. During 2013, the Company consolidated operational oversight and management of all
security products within the SSD segment. As a result of this product realignment, security products previously reported in the
PSD segment (including the Branch SRX, Branch Firewall, and J Series product families) are now reported in the SSD segment.
In addition, the Company realigned its Contrail products from the PSD segment to the SSD segment. The Company reclassified
the segment data for the prior years to conform to the current year presentation.
The Company’s PSD segment primarily offers scalable routing and switching products that are used in service provider, enterprise,
and public sector networks to control and direct network traffic from data centers, core, edge, aggregation, campus, Wide Area
Networks ("WANs"), and customer premise equipment level. The Company's PSD segment consists of routing and switching
products and services. Routing products and services include the ACX, E, M, MX, PTX, and T Series product families. Switching
products and services primarily consist of the EX Series and wireless local area network solutions, as well as the QFabric™ system.
The Company's SSD segment offers solutions that meet a broad array of our customers’ priorities, from protecting the users,
applications and data on the network to providing network services across a distributed infrastructure. The SSD segment primarily
consists of security, software, management, virtualization, routing products and services. Security includes firewalls (both JUNOS-
based SRX and Screen OS-based firewalls), Firefly, virtual private network systems and appliances, secure socket layer virtual
private network appliances, intrusion detection and prevention appliances, wide area network optimization platforms, Junos Pulse,
and J Series. Software and services for the mobile and wireline network edge include traffic flow monitoring, dynamic application
and subscriber awareness, and next generation network addressing. Management and virtualization products include Junosphere,
Junos SDK, JunosV App Engine and the network management platform, Junos Space. In fiscal 2013, the Company announced
the availability of Juniper Networks Contrail, a standards-based and highly scalable network virtualization and intelligence solution
for software-defined networks for enterprises and service providers.
The CODM does not allocate to the Company's business segments certain operating expenses managed separately at the corporate
level. Direct costs and operating expenses, such as standard cost of goods sold, research and development, and product marketing
expenses, are generally applied to each segment. Indirect costs, such as manufacturing overhead and other cost of revenues, are
allocated based on factors including headcount, usage, and revenue. Segment contribution margin provides supplemental data on
operational performance and is comprised of these direct costs and operating expenses, as well as these indirect costs. Corporate
unallocated expenses include: sales, marketing, general and administrative costs, share-based compensation, amortization of
purchased intangible assets, restructuring and other charges, gains or losses on equity investments, other expense, net, income
taxes, and certain other charges. Segment contribution margin excludes these corporate unallocated expenses.
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Table of Contents
Juniper Networks, Inc.
Notes to Consolidated Financial Statements (Continued)
The following table summarizes financial information for each segment used by the CODM (in millions):
Years Ended December 31,
2013
2012
2011
PSD product revenues:
Routing
Switching
Total PSD product revenues
PSD service revenues
Total PSD revenues
SSD product revenues:
Security
Routing
Total SSD product revenues
SSD service revenues
Total SSD revenues
Total net revenues
Segment contribution margin:
PSD
SSD
$
2,243.6
$
1,946.8
$
638.0
2,881.6
796.6
3,678.2
564.3
74.0
638.3
352.6
990.9
554.8
2,501.6
769.2
3,270.8
669.9
90.6
760.5
334.1
1,094.6
$
$
4,669.1
$
4,365.4
$
1,621.0
$
1,276.4
$
398.4
2,019.4
(1,123.5)
(31.9)
(244.6)
(5.1)
(47.5)
(0.9)
—
473.6
1,750.0
(1,068.7)
(32.3)
(243.4)
(1.1)
(99.7)
(2.0)
5.3
565.9
(40.4)
525.5
$
308.1
(16.6)
291.5
$
2,166.1
495.8
2,661.9
645.0
3,306.9
698.3
118.1
816.4
325.4
1,141.8
4,448.7
1,426.8
504.4
1,931.2
(1,013.9)
(27.1)
(222.2)
(9.3)
(30.6)
(9.6)
—
618.5
(46.8)
571.7
Total segment contribution margin
Corporate unallocated expenses (1)
Amortization of purchased intangible assets (2)
Share-based compensation expense
Share-based payroll tax expense
Restructuring and other charges (3)
Acquisition-related charges (4)
Other unallocated expense
Total operating income
Other expense, net
Income before income taxes and noncontrolling interest
$
________________________________
(1) Amount includes unallocated costs for global functions such as sales, marketing, and general and administrative.
(2) Amount includes amortization expense of purchased intangible assets reported in cost of revenues and operating expenses.
(3) Amount includes restructuring and other charges reported in cost of revenues and operating expenses.
(4) Amount includes acquisition-related costs reported in cost of revenues and operating expenses.
Depreciation expense allocated to the PSD segment was $117.3 million, $116.9 million, and $104.9 million for the years ended
December 31, 2013, 2012, and 2011, respectively. The depreciation expense allocated to the SSD segment was $30.9 million,
$37.8 million, and $37.3 million for the years ended December 31, 2013, 2012, and 2011, respectively.
93
Table of Contents
Juniper Networks, Inc.
Notes to Consolidated Financial Statements (Continued)
The Company attributes revenues to geographic region based on the customer’s ship-to location. The following table presents net
revenues by geographic region (in millions):
Americas:
United States
Other
Total Americas
Europe, Middle East, and Africa
Asia Pacific
Total
Years Ended December 31,
2013
2012
2011
$
$
2,381.5
232.0
2,613.5
1,256.9
798.7
4,669.1
$
$
2,067.5
218.4
2,285.9
1,266.3
813.2
4,365.4
$
$
2,015.8
222.2
2,238.0
1,339.8
870.9
4,448.7
During the years ended December 31, 2013 and 2011, no customer accounted for greater than 10% of the Company's net revenues.
During the year ended December 31, 2012, Verizon accounted for 10.3% of the Company's net revenues across both of its segments.
The following table presents geographic information for property and equipment, net (in millions):
United States
International
Property and equipment, net
As of December 31,
2013
2012
$
$
801.3
81.0
882.3
$
$
725.5
86.4
811.9
The Company tracks assets by physical location. The majority of the Company’s assets, excluding cash and cash equivalents and
investments, as of December 31, 2013 and December 31, 2012, were attributable to U.S. operations. Although management reviews
asset information on a corporate level and allocates depreciation expense by segment, the CODM does not review asset information
on a segment basis.
Note 14. Income Taxes
The components of income before the provision for income taxes and noncontrolling interest are summarized as follows (in
millions):
Domestic
Foreign
Total income before provision for income taxes and
noncontrolling interest
Years Ended December 31,
2013
2012
2011
$
$
$
248.7
276.8
$
114.1
177.4
525.5
$
291.5
$
218.4
353.3
571.7
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Table of Contents
Juniper Networks, Inc.
Notes to Consolidated Financial Statements (Continued)
The provision for income taxes is summarized as follows (in millions):
Current provision:
Federal
States
Foreign
Total current provision
Deferred provision (benefit):
Federal
States
Foreign
Total deferred provision (benefit)
Income tax benefits attributable to employee stock plan activity
Total provision for income taxes
Years Ended December 31,
2013
2012
2011
$
$
(12.9) $
(5.0)
32.5
14.6
51.2
(2.7)
22.6
71.1
—
85.7
$
94.3
8.4
37.1
139.8
(28.8)
(1.5)
3.5
(26.8)
(8.0)
105.0
$
$
19.5
0.9
47.8
68.2
23.0
0.6
(3.6)
20.0
58.5
146.7
The provision for income taxes differs from the amount computed by applying the federal statutory rate to income before provision
for income taxes as follows (in millions):
Expected provision at 35% rate
State taxes (benefit), net of federal benefit
Foreign income at different tax rates
Research and development credits
Share-based compensation
Settlement with tax authorities
Domestic production activities
Equity investment gain on acquisition
Other
Total provision for income taxes
Years Ended December 31,
2013
2012
2011
184.0
(3.6)
(37.7)
(32.5)
25.6
(28.3)
(26.3)
—
4.5
85.7
$
$
102.0
2.0
(11.6)
(0.5)
22.4
—
—
(5.3)
(4.0)
105.0
$
$
200.1
2.0
(50.4)
(21.3)
16.7
—
—
—
(0.4)
146.7
$
$
In 2013, the Company recorded $64.2 million of net income tax benefit related to items unique to the year. These amounts included
$19.7 million for a multi-year claim related to the U.S. production activities deduction, $28.3 million for a tax settlement with the
Internal Revenue Service (“IRS”), and $16.2 million of U.S. federal R&D tax credit resulting from the American Taxpayer Relief
Act of 2012 signed on January 2, 2013, which retroactively reinstated the U.S. federal R&D tax credit from January 1, 2012 to
December 31, 2013.
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Table of Contents
Juniper Networks, Inc.
Notes to Consolidated Financial Statements (Continued)
Deferred income taxes reflect the net tax effects of tax carry-forward items and temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax assets and liabilities are as follows (in millions):
Deferred tax assets:
Net operating loss carry-forwards
Foreign tax credit carry-forwards
Research and other credit carry-forwards
Deferred revenue
Stock-based compensation
Reserves and accruals not currently deductible
Other
Total deferred tax assets
Valuation allowance
Deferred tax assets, net of valuation allowance
Deferred tax liabilities:
Property and equipment basis differences
Purchased intangibles
Unremitted foreign earnings
Deferred compensation and other
Other
Total deferred tax liabilities
Net deferred tax assets
As of December 31,
2013
2012
1.1
63.4
106.6
71.0
86.1
153.9
13.7
495.8
(155.7)
340.1
(3.1)
(10.1)
(258.9)
(38.7)
(0.4)
(311.2)
28.9
$
$
10.0
58.0
95.3
98.6
97.5
175.2
13.6
548.2
(141.0)
407.2
(1.0)
(40.8)
(229.1)
—
(1.2)
(272.1)
135.1
$
$
The breakdown between current and long-term deferred tax assets and deferred tax liabilities are as follows (in millions):
Current deferred tax assets
Current deferred tax liabilities
Long-term deferred tax assets
Long-term deferred tax liabilities
Total net deferred tax assets
As of December 31,
2013
2012
79.8
$
—
2.4
(53.3)
28.9
$
172.6
—
—
(37.5)
135.1
$
$
As of December 31, 2013, and 2012, the Company had a valuation allowance on its U.S. domestic deferred tax assets of
approximately $155.7 million and $141.0 million, respectively. The balance at December 31, 2013 consisted of approximately
$109.2 million and $9.7 million against the Company's California and Massachusetts deferred tax assets, respectively, which the
Company believes are not more likely than not to be utilized in future years. The remaining deferred tax assets on which the
Company recorded a valuation allowance are approximately $36.8 million related to losses that are capital in nature and may carry
forward to offset future capital gains only. The valuation allowance increased $14.7 million in 2013 related to the increase in the
California research and development credit and decreased $4.2 million in 2012 related to the utilization of losses that are capital
in nature.
As of December 31, 2013, the Company had federal and California net operating loss carry-forwards of approximately $1.2 million
and $40.6 million, respectively. The Company also had California tax credit carry-forwards of approximately $208.1 million.
Approximately $20.1 million of the benefit from the California tax credit carry-forwards will be credited to additional paid-in
capital when realized on the Company's income tax returns. Unused net operating loss carry-forwards will expire at various dates
beginning in the year 2014. The California tax credit carry-forwards will carry forward indefinitely.
The Company provides U.S. income taxes on the earnings of foreign subsidiaries unless the subsidiaries' earnings are considered
indefinitely reinvested outside of the United States. The Company has made no provision for U.S. income taxes on approximately
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Table of Contents
Juniper Networks, Inc.
Notes to Consolidated Financial Statements (Continued)
$1.5 billion of cumulative undistributed earnings of certain foreign subsidiaries through December 31, 2013. These earnings are
considered indefinitely invested in operations outside of the U.S., as the Company intends to utilize these amounts to fund future
expansion of its international operations. If these earnings were distributed to the United States in the form of dividends or otherwise,
or if the shares of the relevant foreign subsidiaries were sold or otherwise transferred, the Company would be subject to additional
U.S. income taxes (subject to an adjustment for foreign tax credits) and foreign withholding taxes. Determination of the amount
of unrecognized deferred income tax liability related to these earnings is not practicable.
As of December 31, 2013, 2012, and 2011 the total amount of gross unrecognized tax benefits was $137.6 million, $136.1 million,
and $132.2 million, respectively. As of December 31, 2013, approximately $128.8 million of the $137.6 million gross unrecognized
tax benefits, if recognized, would affect the effective tax rate.
A reconciliation of the beginning and ending amount of the Company's total gross unrecognized tax benefits was as follows (in
millions):
Balance at beginning of year
Tax positions related to current year:
Additions
Tax positions related to prior years:
Additions
Reductions
Settlements
Lapses in statutes of limitations
Balance at end of year
Years Ended December 31,
2013
2012
2011
$
136.1
$
132.2
$
116.4
15.8
22.6
(2.2)
(31.1)
(3.6)
137.6
$
8.8
0.9
—
(1.2)
(4.6)
136.1
$
17.6
6.4
—
(5.4)
(2.8)
132.2
$
As of December 31, 2013, 2012, and 2011 the Company had accrued interest and penalties related to unrecognized tax benefits
of $18.4 million, $16.7 million, and $17.3 million, respectively, within other long-term liabilities in the Consolidated Balance
Sheets. The Company recognized an expense for net interest and penalties of $0.6 million and a benefit of $0.6 million and $1.6
million in its Consolidated Statements of Operations during the years ended December 31, 2013, 2012, and 2011, respectively.
The Company engages in continuous discussions and negotiations with tax authorities regarding tax matters in various jurisdictions.
There is a greater than remote likelihood that the balance of the gross unrecognized tax benefits will decrease by approximately
$1.6 million within the next twelve months due to lapses of applicable statutes of limitation and the completion of tax review
cycles in various tax jurisdictions.
In 2013, the Company executed a closing agreement with the Appeals Division of the IRS related to its intercompany R&D cost
sharing arrangement for the license of intangibles acquired in 2004, 2005, and 2006. The Company reached a final resolution with
the IRS on all proposed adjustments for all tax years through 2006, which resulted in a settlement of approximately $19.6 million,
including interest.
During the fourth quarter of 2011, the Company resolved an audit by a state tax authority for the years from 2002 through 2004.
As a result of the settlement, the Company recorded a tax benefit or approximately $7.0 million including interest and penalties.
The Company conducts business globally and, as a result, Juniper Networks or one or more of its subsidiaries files income tax
returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business the Company
is subject to examination by taxing authorities throughout the world, including such major jurisdictions as the Netherlands, U.K.,
France, Germany, Japan, China, Australia, India, and the U.S. With few exceptions, the Company is no longer subject to U.S. federal,
state and local, and non-U.S. income tax examinations for years before 2004.
The Company is currently under examination by the IRS for the 2007 through 2009 tax years. The Company is also subject to
separate ongoing examinations by the India tax authorities for the 2004 tax year, 2004 through 2008 tax years, and the 2008 through
2010 tax years. The Company is not aware of any other examinations by tax authorities in any other major jurisdictions in which
it files income tax returns as of December 31, 2013.
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Table of Contents
Juniper Networks, Inc.
Notes to Consolidated Financial Statements (Continued)
In 2008, the Company received a proposed adjustment from the India tax authorities related to the 2004 tax year. In 2009, the
India tax authorities commenced a separate investigation of our 2004 through 2008 tax returns and are disputing the Company's
determination of taxable income due to the cost basis of certain fixed assets. The Company accrued $4.6 million in penalties and
interest in 2009 related to this matter. The Company understands that in accordance with the administrative and judicial process
in India, the Company may be required to make payments that are substantially higher than the amount accrued in order to ultimately
settle this issue. The Company strongly believes that any assessment it may receive in excess of the amount accrued would be
inconsistent with applicable India tax laws and intends to defend this position vigorously.
The Company is pursuing all available administrative remedies relative to these matters. The Company believes that it has
adequately provided for any reasonably foreseeable outcomes related to these proposed adjustments and the ultimate resolution
of these matters is unlikely to have a material effect on its consolidated financial condition or results of operations; however there
is still a possibility that an adverse outcome of these matters could have a material effect on its consolidated financial condition
and results of operations.
Note 15. Net Income per Share
The Company computed basic and diluted net income per share attributable to Juniper Networks common stockholders as follows
(in millions, except per share amounts):
Years Ended December 31,
2013
2012
2011
Numerator:
Net income attributable to Juniper Networks
$
439.8
$
186.5
$
425.1
Denominator:
Weighted-average shares used to compute basic net income per share
Dilutive effect of employee stock awards
Weighted-average shares used to compute diluted net income
per share
Net income per share attributable to Juniper Networks common
stockholders:
501.8
8.5
510.3
520.9
5.3
526.2
Basic
Diluted
$
$
0.88
0.86
$
$
0.36
0.35
$
$
529.8
11.6
541.4
0.80
0.79
Basic net income per share is computed using net income available to common stockholders and the weighted-average number
of common shares outstanding for the period. Diluted net income per share is computed using net income available to common
stockholders and the weighted-average number of common shares outstanding plus potentially dilutive common shares outstanding
during the period. Dilutive potential common shares consist of common shares issuable upon exercise of stock options, issuances
of ESPP, and vesting of RSUs, RSAs, and PSAs. The Company includes the common shares underlying PSAs in the calculation
of diluted net income per share when they become contingently issuable and excludes such shares when they are not contingently
issuable.
Potentially dilutive common shares of approximately 13.2 million, 32.3 million, and 17.4 million shares for the years ended
December 31, 2013, 2012, and 2011, respectively, were excluded from the computation of diluted net income because their effect
would be anti-dilutive.
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Juniper Networks, Inc.
Notes to Consolidated Financial Statements (Continued)
Note 16. Commitments and Contingencies
Operating Leases
The following table summarizes the Company’s future minimum payments under non-cancelable operating leases for each of the
next five years and thereafter as of December 31, 2013 (in millions):
Years Ending December 31,
2014
2015
2016
2017
2018
Thereafter
Total
Amount
$
49.4
38.4
31.1
26.8
22.6
56.9
$
225.2
The Company leases its facilities and certain equipment under non-cancelable operating leases that expire at various dates through
November 30, 2022. Certain leases require the Company to pay variable costs such as taxes, maintenance, and insurance and
include renewal options and escalation clauses. Rent expense for 2013, 2012, and 2011 was approximately $52.8 million, $63.2
million, and $65.7 million, respectively.
Purchase Commitments with Contract Manufacturers and Suppliers
In order to reduce manufacturing lead times and ensure adequate component supply, the Company enters into agreements with
contract manufacturers and certain suppliers to procure inventory based on the Company's requirements. A significant portion of
the Company's purchase commitments arising from these agreements consists of firm and non-cancelable commitments. These
purchase commitments totaled $491.4 million as of December 31, 2013.
The Company establishes a liability in connection with purchase commitments related to quantities in excess of its demand forecasts
or obsolete materials charges for components purchased by the contract manufacturers based on the Company’s demand forecast
or customer orders. As of December 31, 2013, the Company had accrued $22.9 million based on its estimate of such charges.
Long-Term Debt and Interest Payment on Long-Term Debt
As of December 31, 2013, the Company held long-term debt consisting of senior notes with a carrying value of $999.3 million.
Of these Notes, $300.0 million will mature in 2016 and bears interest at a fixed rate of 3.10%, $300.0 million will mature in 2021
and bears interest at a fixed rate of 4.60%, and $400.0 million will mature in 2041 and bears interest at a fixed rate of 5.95%.
Interest on the Notes is payable semiannually. See Note 10, Long-Term Debt and Financing, for further discussion of the Company's
long-term debt.
Other Contractual Obligations
As of December 31, 2013, other contractual obligations primarily consisted of $89.5 million in indemnity-related and service
related escrows, as required in connection with certain asset purchases and acquisitions completed between 2005 and 2013, campus
build-out obligations of $13.1 million, and $10.3 million of agreements that are firm, non-cancelable and specify terms, including:
fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of payment.
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Guarantees
Juniper Networks, Inc.
Notes to Consolidated Financial Statements (Continued)
The Company enters into agreements with customers that contain indemnification provisions relating to potential situations where
claims could be alleged that the Company’s products infringe the intellectual property rights of a third-party. The Company also
has financial guarantees consisting of guarantees of product and service performance, guarantees related to third-party customer-
financing arrangements, custom and duty guarantees, and standby letters of credit for certain lease facilities. As of December 31,
2013 and December 31, 2012, the Company had $40.1 million and $12.6 million, respectively, in financing arrangements, bank
guarantees, and standby letters of credit related to these financial guarantees, of which $30.2 million in financing guarantees was
recorded in other accrued liabilities and other long-term liabilities in the Consolidated Balance Sheets as of December 31, 2013.
See Note 10, Long-Term Debt and Financing, for further discussion of the Company's third-party customer financing arrangements
that contain guarantee provisions.
Legal Proceedings
The Company is involved in disputes, litigation, and other legal actions, including, but not limited to, the matters described below.
The Company is aggressively defending its current litigation matters, and while there can be no assurances and the outcome of
these matters is currently not determinable, the Company currently believes that there are no existing claims or proceedings that
are likely to have a material adverse effect on its financial position. There are many uncertainties associated with any litigation
and these actions or other third-party claims against the Company may cause the Company to incur costly litigation and/or substantial
settlement charges. In addition, the resolution of any intellectual property litigation may require the Company to make royalty
payments, which could adversely affect gross margins in future periods. If any of those events were to occur, the Company's
business, financial condition, results of operations, and cash flows could be adversely affected. The actual liability in any such
matters may be materially different from the Company's estimates, if any, which could result in the need to adjust the liability and
record additional expenses. Unless otherwise noted below, during the period presented, we have not recorded any accrual for loss
contingencies associated with such legal proceedings; determined that an unfavorable outcome is probable or reasonably possible;
or determined that the amount or range of any possible loss is reasonably estimable.
2013 Federal Securities Class Action
On August 12, 2013, a purported securities class action lawsuit, captioned Warren Avery v. Juniper Networks, Inc., et al., Case
No. 13-cv-3733-WHO, was filed in the United States District Court for the Northern District of California naming the Company
and certain of its officers and directors as defendants. The complaint alleged that the defendants made false and misleading
statements regarding the Company's revenues, business practices, and internal controls. The complaint purported to assert claims
for violations of Sections 10 (b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 on behalf of those who
purchased Juniper Networks' securities between April 24, 2012 and August 8, 2013, inclusive. Plaintiff sought an unspecified
amount of monetary damages on behalf of the purported class. On November 12, 2013, the court issued an order appointing Warren
Avery as lead plaintiff. On January 9, 2014, lead plaintiff filed a notice of voluntary dismissal of the action without prejudice. On
January, 23, 2014, the court entered an order of dismissal without prejudice.
2013 Shareholder Derivative Lawsuit
On August 28, 2013, a purported shareholder derivative action captioned Washtenaw County Employees’ Retirement System v.
Kriens, et al., Case No. 1-13-CV-252083, was filed in the Superior Court of the State of California, County of Santa Clara, naming
certain of the Company's officers and directors as defendants. On October 17, 2013, the action was removed to the United States
District Court for the Northern District of California, and is now Case No. 13-cv-04829-WHO. The Company is named only as a
nominal defendant in the action. The complaint alleges that the defendants failed to implement adequate internal controls and
compliance programs to prevent violations of the Foreign Corrupt Practices Act. The complaint purports to assert claims against
the defendants for breach of fiduciary duties, abuse of control, and waste of corporate assets. The complaint seeks, among other
relief, damages in an unspecified amount, restitution, and attorneys' fees and costs. On January 22, 2014, the Company filed a
motion to dismiss the action. A hearing on the motion is scheduled for April 23, 2014.
Investigations
The U.S. Securities and Exchange Commission and the U.S. Department of Justice are conducting investigations into possible
violations by the Company of the U.S. Foreign Corrupt Practices Act. The Company is cooperating with these agencies regarding
these matters. The Company is unable to predict the duration, scope or outcome of these investigations.
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Juniper Networks, Inc.
Notes to Consolidated Financial Statements (Continued)
Note 17. Selected Quarterly Financial Data (Unaudited)
The tables below set forth selected unaudited financial data for each quarter of the two years ended December 31, 2013 (in millions,
except per share amounts):
Year Ended December 31, 2013
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Net revenues:
Product
Service
Total net revenues
Cost of revenues:
Product
Service
Total cost of revenues (2)
Gross margin
Operating expenses:
Research and development(1)
Sales and marketing(4)
General and administrative(4)
Restructuring and other charges(2)
Total operating expenses
Operating income
Other expense, net
Income before income taxes
Income tax (benefit) provision
Net income
Net income per share:(3)
Basic
Diluted
$
781.8
$
863.8
$
900.8
$
277.4
1,059.2
286.9
1,150.7
284.8
1,185.6
973.5
300.1
1,273.6
278.2
110.2
388.4
670.8
262.2
256.1
58.5
7.0
583.8
87.0
(10.1)
76.9
(14.1)
91.0
0.18
0.18
$
$
$
321.3
108.9
430.2
720.5
257.7
267.1
49.2
8.0
582.0
138.5
(12.6)
125.9
28.0
97.9
0.19
0.19
$
$
$
325.5
113.6
439.1
746.5
264.6
269.5
61.4
6.0
601.5
145.0
(7.5)
137.5
38.4
99.1
0.20
0.19
$
$
$
351.6
118.4
470.0
803.6
258.7
283.2
48.2
18.1
608.2
195.4
(10.2)
185.2
33.4
151.8
0.30
0.30
$
$
$
_______________________________
(1)
In the second quarter of 2013, the Company extended the useful lives of certain computers and equipment based on actual historical
usage, which demonstrated longer useful lives, as well as the planned use of these assets. The change was accounted for as a change in
estimate and applied prospectively. This change in accounting estimate decreased depreciation expense within research and development
expense by approximately $11.0 million or $0.01 per diluted share for the second quarter of 2013, $9.4 million or $0.01 for the third quarter
of 2013, and $7.9 million or $0.01 for the fourth quarter of 2013.
In the third quarter of 2013, the Company implemented the 2013 Restructuring Plan for workforce reductions, contract terminations, and
project cancellations and recorded restructuring charges of $7.4 million and $3.7 million to operating expenses and cost of revenues,
respectively. In the fourth quarter of 2013, the Company continued to implement restructuring activities under the 2013 Restructuring Plan
and primarily recorded charges to operating expenses of $17.6 million.
(2)
(3) Net income per share is computed independently. Therefore, the sum of the quarterly net income per share may not equal the total computed
for the year or any cumulative interim period.
(4) Certain amounts in the prior quarters' Condensed Consolidated Statements of Operations have been reclassified to conform to the current
year presentation.
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Juniper Networks, Inc.
Notes to Consolidated Financial Statements (Continued)
Year Ended December 31, 2012
First Quarter
Second Quarter
Third Quarter(1)
Fourth Quarter
Net revenues:
Product
Service
Total net revenues
Cost of revenues:
Product
Service
Total cost of revenues(2)
Gross margin
Operating expenses:
Research and development
Sales and marketing(4)
General and administrative(4)
Restructuring and other charges(2)
Total operating expenses
Operating income
Other (expense) income, net
Income before income taxes
Income tax provision
Net income
Net income per share(3)
Basic
Diluted
$
771.9
$
804.7
$
838.2
$
260.6
1,032.5
269.1
1,073.8
280.1
1,118.3
847.3
293.5
1,140.8
280.6
117.8
398.4
634.1
269.6
258.6
56.2
2.0
586.4
47.7
(24.4)
23.3
7.0
16.3
0.03
0.03
$
$
$
292.6
113.3
405.9
667.9
268.7
260.4
48.9
3.2
581.2
86.7
2.8
89.5
31.8
57.7
0.11
0.11
$
$
$
334.7
109.8
444.5
673.8
288.2
261.8
50.0
31.0
631.0
42.8
(4.0)
38.8
22.0
16.8
0.03
0.03
$
$
$
296.1
111.7
407.8
733.0
275.1
264.7
51.7
10.6
602.1
130.9
9.0
139.9
44.2
95.7
0.19
0.19
$
$
$
_______________________________
(1) During the third quarter of 2012, the Company recorded net out of period adjustments reducing income before income taxes and noncontrolling
interest by $8.2 million. These net adjustments resulted in increased research and development expense by $18.6 million related to prototype
development costs, partially offset by increased net revenues of $6.2 million related to the reversal of certain revenue obligations and reduced
cost of revenues by $4.2 million related to inventory purchases. The Company assessed the materiality of these adjustments, using relevant
quantitative and qualitative factors, and determined that these adjustments, both individually and in the aggregate, were not material to any
previously reported period.
In the third quarter of 2012, the Company implemented the 2012 Restructuring Plan for workforce reductions, facility consolidations or
closures, and supply chain and procurement efficiencies and recorded restructuring charges of $29.5 million. In connection with its
restructuring activities, the Company also recorded certain inventory and intangible asset impairment charges totaling $52.4 million to cost
of revenues. In the fourth quarter of 2012, the Company continued to implement restructuring activities under the 2012 Restructuring Plan.
(3) Net income per share is computed independently. Therefore, the sum of the quarterly net income per share may not equal the total computed
(2)
for the year or any cumulative interim period.
(4) Certain amounts in the prior quarters' Condensed Consolidated Statements of Operations have been reclassified to conform to the current
year presentation.
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Note 18. Subsequent Events
Integrated Operating Plan
In February 2014, the Company announced an integrated operating plan ("IOP") focused on innovation that matters most to service
providers and enterprises where demand for High-IQ Networks and best-in-class cloud environments are driving growth. Through
the execution of the IOP the Company will coalesce its engineering talent, go-to-market teams and R&D around this strategy
resulting in streamlined operations and business portfolio and operational efficiencies.
The Company expects to initiate a substantial cost reduction plan in connection with the IOP accomplished through various
restructuring activities. The Company is not able to make a reasonable estimate of future restructuring costs associated with the
IOP.
As part of the IOP, the Company announced a commitment to return a minimum of $3.0 billion to shareholders over the next three
years through a combination of share repurchases and dividends. As part of this plan, the Board of Directors has authorized $2.0
billion in share repurchases to be executed through the end of the first quarter of 2015, including $1.2 billion through an accelerated
share repurchase program to be entered into during the first quarter of 2014. The Company will also initiate a quarterly cash
dividend of $0.10 per share of common stock beginning in the third quarter of 2014. These activities will be funded by a combination
of existing cash balances and debt offerings.
Business Combination
Subsequent to December 31, 2013, the Company acquired WANDL, Inc. (“WANDL”), a provider of software solutions for advanced
planning, management, design and optimization of next-generation multi-layer networks for cash and stock consideration of
approximately $30.0 million. This acquisition provides the Company with technology and experience in traffic engineering, multi-
layer optimization and path computation, to help service provider customers optimize the performance and cost of their networks.
The initial purchase accounting for this transaction was not yet complete at the filing of this Report.
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ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
(a) Management's Annual Report on Internal Control Over Financial Reporting: See "Management's Annual Report on Internal
Control over Financial Reporting" under Item 8 of Part II of this Report, which is incorporated herein by reference.
(b) For the “Report of Independent Registered Public Accounting Firm,” see the report under Item 8 of Part II of this Report,
which is incorporated herein by reference.
Evaluation of Disclosure Controls and Procedures
Attached, as exhibits to this Report are certifications of our principal executive officer and principal financial officer, which are
required in accordance with Rule 13a-14 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). This “Controls
and Procedures” section includes information concerning the controls and related evaluations referred to in the certifications and
it should be read in conjunction with the certifications for a more complete understanding of the topics presented.
We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive
officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures,
as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon that evaluation, our principal executive officer
and principal financial officer concluded that, as of the end of the period covered in this report, our disclosure controls and
procedures were effective to ensure that information required to be disclosed by us in reports that we file or submit under the
Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange
Commission rules and forms and is accumulated and communicated to our management, including our principal executive officer
and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the fourth quarter of 2013 that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. Other Information
Not applicable.
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ITEM 10. Directors, Executive Officers and Corporate Governance
PART III
For information with respect to our Executive Officers, see Part I, Item 1 of this Annual Report on Form 10-K, under “Executive
Officers of the Registrant.”
Information concerning our directors, including director nominations, and our audit committee and audit committee financial
expert, appearing in our definitive Proxy Statement to be filed with the SEC in connection with the 2014 Annual Meeting of
Stockholders (the “Proxy Statement”) under “Corporate Governance Principles and Board Matters,” “Director Compensation”
and “Election of Directors” is incorporated herein by reference.
Information concerning Section 16(a) beneficial ownership reporting compliance appearing in the Proxy Statement under
“Section 16(a) Beneficial Ownership Reporting Compliance,” is incorporated herein by reference.
Information concerning our Worldwide Code of Business Conduct and Ethics that applies to our principal executive officer and
all other employees appearing in the Proxy Statement under “Corporate Governance Principles and Board Matters,” is incorporated
herein by reference.
ITEM 11. Executive Compensation
Information concerning executive compensation appearing in the Proxy Statement under “Executive Compensation” is
incorporated herein by reference.
Information concerning compensation committee interlocks and insider participation appearing in the Proxy Statement under
“Compensation Committee Interlocks and Insider Participation” is incorporated herein by reference.
Information concerning the compensation committee report appearing in the Proxy Statement under “Compensation Committee
Report” is incorporated herein by reference.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information concerning the security ownership of certain beneficial owners and management appearing in the Proxy Statement,
under “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters,” is incorporated
herein by reference.
Information concerning our equity compensation plan information appearing in the Proxy Statement, under “Equity Compensation
Plan Information,” is incorporated herein by reference.
ITEM 13. Certain Relationships and Related Transactions, and Director Independence
The information appearing in the Proxy Statement under the heading “Certain Relationships and Related Transactions” is
incorporated herein by reference.
The information appearing in the Proxy Statement under the heading “Board Independence” is incorporated herein by reference.
ITEM 14. Principal Accounting Fees and Services
Information concerning principal accountant fees and services and the audit committee's preapproval policies and procedures
appearing in the Proxy Statement under the headings “Principal Accountant Fees and Services” is incorporated herein by reference.
105
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PART IV
ITEM 15.
Exhibits, Financial Statement Schedules
(a) The following documents are filed as part of this Report:
1. Consolidated Financial Statements
See Index to Consolidated Financial Statements at Item 8 herein.
2. Financial Statement Schedules
The following financial statement schedule is included as part of this Report:
Schedule
Schedule II - Valuation and Qualifying Account
Page
109
All other schedules have been omitted as the required information is not applicable or the information is presented in the
Consolidated Financial Statements or notes thereto under Item 8 herein.
3. Exhibits
See Exhibit Index in this Report.
(b) Exhibits
See Exhibit Index in this Report.
(c) None
Juniper, Juniper Networks, Junos, Mykonos, and QFabric are registered trademarks of Juniper Networks, Inc. in the United
States and other countries.
106
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
Juniper Networks, Inc.
February 25, 2014 By:
/s/ Robyn M. Denholm
Robyn M. Denholm
Executive Vice President and Chief Financial and
Operations Officer
(Duly Authorized Officer and Principal
Financial Officer)
February 25, 2014 By:
/s/ Terrance F. Spidell
Terrance F. Spidell
Vice President, Corporate Controller and Chief
Accounting Officer
(Duly Authorized Officer and Principal Accounting
Officer)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints
Mitchell L. Gaynor and Robyn M. Denholm, and each of them individually, as his or her attorney-in-fact, each with full power
of substitution, for him or her in any and all capacities to sign any and all amendments to this Annual Report on Form 10-K, and
to file the same with, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said attorney-in-fact, or his or her substitute, may do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Shaygan Kheradpir
Shaygan Kheradpir
/s/ Robyn M. Denholm
Robyn M. Denholm
/s/ Terrance F. Spidell
Terrance F. Spidell
/s/ Scott Kriens
Scott Kriens
/s/ Pradeep Sindhu
Pradeep Sindhu
Chief Executive Officer and Director
(Principal Executive Officer)
Executive Vice President and Chief Financial
and Operations Officer
(Principal Financial Officer)
February 25, 2014
February 25, 2014
Vice President, Corporate Controller and Chief
Accounting Officer
(Principal Accounting Officer)
February 25, 2014
Chairman of the Board
February 25, 2014
Vice Chairman of the Board and Chief
February 25, 2014
Technical Officer
/s/ Robert M. Calderoni
Director
February 25, 2014
Robert M. Calderoni
107
Table of Contents
Signature
Title
Date
/s/ Mary B. Cranston
Mary B. Cranston
/s/ Mercedes Johnson
Mercedes Johnson
/s/ Michael Lawrie
Michael Lawrie
Director
Director
Director
February 25, 2014
February 25, 2014
February 25, 2014
/s/ William F. Meehan
Director
February 25, 2014
William F. Meehan
/s/ David Schlotterbeck
Director
February 25, 2014
David Schlotterbeck
/s/ William R. Stensrud
Director
February 25, 2014
William R. Stensrud
/s/ Kevin R. Johnson
Kevin R. Johnson
Director
February 25, 2014
108
Table of Contents
Juniper Networks, Inc.
Schedule II - Valuation and Qualifying Account
Years Ended December 31, 2013, 2012, and 2011
(In millions)
Allowance for Doubtful Accounts
2013
2012
2011
Sales Return Reserve
2013
2012
2011
Balance at
Beginning of
Year
Charged to
(Reversed from)
Costs and
Expenses
Write-offs,
Net of
Recoveries
Balance at
End of
Year
$
$
$
9.5
9.5
10.1
$
$
$
(3.8) $
$
0.1
(0.2) $
(0.3) $
(0.1) $
(0.4) $
5.4
9.5
9.5
Additions
Balance at
Beginning of
Year
Charged as a
Reduction in
Revenues
$
$
$
52.7
52.0
52.8
$
$
$
35.0
40.0
44.9
Charged to
Other Accounts
61.5
$
48.6
$
64.6
$
$
$
$
Used
(100.2) $
(87.9) $
(110.3) $
Balance at
End of
Year
49.0
52.7
52.0
109
Table of Contents
Exhibit No.
3.1
3.2
4.1
4.8
4.9
4.10
4.11
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
Exhibit Index
Exhibit
Filing
Exhibit No.
File No.
File Date
Incorporated by Reference
Restated Certificate of Incorporation of Juniper Networks, Inc.*
Amended and Restated Bylaws of Juniper Networks, Inc.
Indenture, dated March 3, 2011, by and between Juniper
Networks, Inc. and The Bank of New York Mellon Trust
Company, N.A., as trustee
First Supplemental Indenture, dated March 3, 2011, by and
between Juniper Networks, Inc. and The Bank of New York
Mellon Trust Company, N.A., as trustee
Form of Note for Juniper Networks, Inc.'s 3.100% Senior Notes
due 2016 (incorporated by reference to Exhibit 4.8 hereto)
Form of Note for Juniper Networks, Inc.'s 4.600% Senior Notes
due 2021 (incorporated by reference to Exhibit 4.8 hereto)
Form of Note for Juniper Networks, Inc.'s 5.950% Senior Notes
due 2041 (incorporated by reference to Exhibit 4.8 hereto)
Form of Indemnification Agreement entered into by the Registrant
with each of its directors, officers and certain employees
Amended and Restated 1996 Stock Plan++
Form of Stock Option Agreement for the Juniper Networks, Inc.
Amended and Restated 1996 Stock Plan++
Form of Notice of Grant and Restricted Stock Unit Agreement for
the Juniper Networks, Inc. Amended and Restated 1996 Stock
Plan++
8-K
8-K
3.2
4.1
001-34501
12/31/2013
001-34501
3/4/2011
10-Q
4.8
001-34501
3/4/2011
10-Q
4.9
001-34501
3/4/2011
10-Q
4.10
001-34501
3/4/2011
10-Q
4.11
001-34501
3/4/2011
10-Q 10.1
000-26339
11/14/2003
8-K
10.1
000-26339
11/9/2005
10-Q 10.16
000-26339
11/2/2004
8-K
10.2
000-26339
11/9/2005
Juniper Networks 2000 Nonstatutory Stock Option Plan++
S-8
10.1
333-92086
7/9/2002
Form of Option Agreement for the Juniper Networks 2000
Nonstatutory Stock Option Plan++
Juniper Networks, Inc. 2006 Equity Incentive Plan, as amended
February 14, 2014*++
Form of Stock Option Agreement for the Juniper Networks, Inc.
2006 Equity Incentive Plan++
Form of Non-Employee Director Stock Option Agreement for the
Juniper Networks, Inc. 2006 Equity Incentive Plan++
Form of Notice of Grant and Restricted Stock Unit Agreement for
the Juniper Networks, Inc. 2006 Equity Incentive Plan++
Form of Notice of Grant and Performance Share Agreement for
the Juniper Networks, Inc. 2006 Equity Incentive Plan++
Form of India Stock Option Agreement under the Juniper
Networks, Inc. 2006 Equity Incentive Plan++
Form of India Restricted Stock Unit Agreement under the Juniper
Networks, Inc. 2006 Equity Incentive Plan++
Unisphere Networks, Inc. Second Amended and Restated 1999
Stock Incentive Plan++
NetScreen Technologies, Inc. 1997 Equity Incentive Plan++
NetScreen Technologies, Inc. 2001 Equity Incentive Plan++
NetScreen Technologies, Inc. 2002 Stock Option Plan++
Neoteris 2001 Stock Plan++
Kagoor Networks, Inc. 2003 General Stock Option Plan++
Kagoor Networks, Inc. 2003 Israel Stock Option Plan++
Redline Networks 2000 Stock Plan++
Peribit Networks 2000 Stock Plan++
Amended and Restated Juniper Networks 1999
Employee Stock Purchase Plan++
110
10-K 10.6
000-26339
3/4/2005
8-K
10.2
000-26339
5/24/2006
8-K
10.3
000-26339
5/24/2006
10-K 10.20
000-26339
2/29/2008
10-K 10.21
000-26339
2/29/2008
10-Q 10.2
000-26339
5/9/2008
10-Q 10.3
000-26339
5/9/2008
S-8
10.1
333-92090
7/9/2002
S-1+ 10.2
S-1+ 10.3
S-8
4.7
S-8+ 4.1
S-8
4.1
S-8
S-8
S-8
99.1
4.2
4.1
333-71048
10/5/2001
333-71048
12/10/2001
333-114688
4/21/2004
333-110709
11/24/2003
333-124572
5/3/2005
333-124572
5/3/2005
333-124610
5/4/2005
333-126404
7/6/2005
10-Q 10.2
000-26339
8/9/2007
Table of Contents
Exhibit No.
10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31
10.32
10.33
10.34
10.35
10.36
10.37
10.38
Exhibit
Juniper Networks, Inc. 2008 Employee Stock Purchase Plan, as
amended++
Sub-plan to the Juniper Networks, Inc. 2008 Employee Stock
Purchase Plan For Employees Located in the European Economic
Area
Incorporated by Reference
Filing
8-K
Exhibit No.
10.2
File No.
001-34501
File Date
5/24/2012
10-K 10.25
000-26339
3/2/2009
Juniper Networks, Inc. Deferred Compensation Plan++
S-8
4.4
333-151669
6/16/2008
Form of Executive Officer Change of Control Agreement, as
amended++
Form of Executive Officer Severance Agreement, as amended++
Option Amendment Agreement by and between the Registrant and
Kim Perdikou++
Severance Agreement by and between the Registrant and Robyn
M. Denholm++
Offer Letter by and between Juniper Networks, Inc. and John
Morris++
Employment Agreement by and between Juniper Networks, Inc.
and Kevin Johnson++
Offer Letter by and between Juniper Networks, Inc. and Michael
J. Rose++
Tolling Agreement by and between Juniper Networks, Inc. and
Scott Kriens++
Agreement for ASIC Design and Purchase of Products between
IBM Microelectronics and the Registrant dated August 26, 1997
Lease between Mathilda Associates LLC and the Registrant dated
June 18, 1999
Lease between Mathilda Associates LLC and the Registrant dated
February 1, 2000
Lease between Mathilda Associates II LLC and the Registrant
dated August 15, 2000
10-K 10.27
000-26339
3/2/2009
10-Q 10.4
99.2
8-K
000-26339
11/10/2008
000-26339
5/2/2007
10-K 10.33
000-26339
3/2/2009
10-Q 10.1
000-26339
11/10/2008
10-Q 10.2
000-26339
11/10/2008
10-K 10.38
000-26339
3/2/2009
10-Q 10.3
000-26339
11/10/2008
S-1
10.8
333-76681
6/18/1999
S-1
10.10
333-76681
6/23/1999
10-K 10.9
000-26339
3/27/2001
10-Q 10.15
000-26339
11/2/2004
10.39
First Amendment to Lease between Sunnyvale Office Park, L.P.
10-K 10.47
000-34501
2/26/2010
and the Registrant dated January 24, 2002
10.40
First Amendment to Lease between Sunnyvale Office Park, L.P.
10-K 10.48
000-34501
2/26/2010
and the Registrant dated February 28, 2000
10.41
First Amendment to Lease between Sunnyvale Office Park, L.P.
10-K 10.49
000-34501
2/26/2010
and the Registrant dated October 14, 2009
10.42
Second Amendment to Lease between Sunnyvale Office Park,
10-K 10.50
000-34501
2/26/2010
L.P. and the Registrant dated October 14, 2009
10.43
Amendment No. 2 to Lease between Sunnyvale Office Park, L.P.
10-K 10.51
000-34501
2/26/2010
and the Registrant dated October 14, 2009
10.44
10.45
10.46
10.47
10.48
10.49
10.50
Ankeena Networks, Inc. 2008 Stock Plan++
Altor Networks, Inc. 2007 Stock Plan and 2009 Israeli Equity
Incentive Sub Plan++
S-8
S-8
4.3
10.1
333-166248
4/23/2010
333-171299
12/21/2010
Australian Addendum to the Juniper Networks, Inc. 2006 Equity
Incentive Plan, as amended++
Australian Addendum to the Juniper Networks, Inc. 2008
Employee Stock Purchase Plan, as amended++
Employee Agreement between Juniper Networks, Inc. and Robert
Muglia++
Description of 2012 Annual Incentive Plan++
Form of Severance Agreement for Certain Officers first used in
April 2012++
10-Q
10.2
000-34501
11/5/2010
10-Q
10.3
000-34501
11/5/2010
10-Q
8-K
10.3
001-34501
Item 5.02
001-34501
11/4/2011
2/21/2012
10-Q
10.2
001-34501
5/9/2012
111
Table of Contents
Exhibit No.
10.51
10.52
10.53
10.54
10.55
10.56
10.57
10.58
10.59
10.60
12.1
21.1
23.1
24.1
31.1
Exhibit
Filing
Exhibit No.
File No.
File Date
Incorporated by Reference
Form of Change of Control Agreement for Certain Officers first
used in April 2012++
Juniper Networks, Inc. Performance Bonus Plan++
Employment Agreement by and between Juniper Networks, Inc.
and Rami Rahim++
Consulting Agreement by and between Juniper Networks, Inc. and
Stefan Dyckerhoff++
Service Agreement by and between Juniper Networks, Inc. and
Stefan Dyckerhoff++
Amended and Restated Contrail Systems Inc. 2012 Stock Plan
dated December 2, 2012++
Employment Offer Letter between Juniper Networks, Inc. and
Shaygan Kheradpir++
Amended and Restated Severance Agreement between Juniper
Networks, Inc., and Robyn Denholm++
WANDL, Inc. 2013 Restricted Stock Unit Plan++
Form of Change of Control Agreement for Certain Officers first
used in November 2013++
Computation of Ratio of Earnings to Fixed Charges*
Subsidiaries of the Company*
Consent of Independent Registered Public Accounting Firm*
Power of Attorney (included on the signature page to the Report)
Certification of Chief Executive Officer pursuant to Rule 13a-14
(a) of the Securities Exchange Act of 1934*
10-Q
8-K
10.3
10.56
001-34501
001-34501
5/9/2012
5/23/2011
10-Q
10.1
001-34501
11/8/2012
10-Q
10.2
001-34501
11/8/2012
10-K
10.55
001-34501
2/26/2013
10-K
10.56
001-34501
2/26/2013
8-K
10.1
001-34501
11/13/2013
8-K
S-8
10-Q
4.4
10.2
001-34501
333-193906
001-34501
7/25/2013
2/12/2014
11/8/2013
31.2
Certification of Chief Financial Officer pursuant to Rule 13a-14
(a) of the Securities Exchange Act of 1934*
32.1
Certification of the Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002**
32.2
Certification of the Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002**
101
The following materials from Juniper Networks Inc.'s Annual
Report on Form 10-K for the year ended December 31, 2013,
formatted in XBRL (Extensible Business Reporting Language):
(i) the Consolidated Statements of Operations, (ii) Consolidated
Statements of Comprehensive Income, (iii) Consolidated Balance
Sheets, (iv) the Consolidated Statements of Cash Flows, and (v)
Consolidated Statements of Changes in Stockholders' Equity, and
(iv) Notes to Consolidated Financial Statements, tagged as blocks
of text
XBRL Instance Document
101.INS
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
*
Filed herewith
**
+
Furnished herewith
Filed by NetScreen Technologies, Inc.
++
Indicates management contract or compensatory plan, contract or arrangement.
112