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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(Mark One)
[X] Annual report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 2001 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 0-26339
JUNIPER NETWORKS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 77-0422528
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(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization Identification No.)
1194 North Mathilda Avenue, Sunnyvale, California 94089
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(Address of Principal Executive Offices) (Zip Code)
(408) 745-2000
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(Registrant's Telephone Number, Including Area Code)
Securities Registered Pursuant To Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- --------------------
None None
Securities Registered Pursuant to Section 12 (g) of the Act:
Common Stock, $.00001 Par Value
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(Title of Class)
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
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K 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 the Form 10-K or any
amendment to this Form 10-K. [ ]
As of March 15, 2002, there were 331,132,540 shares of the Registrant's
Common Stock outstanding. The aggregate market value of the Common Stock held by
non-affiliates of the Registrant (based on the closing price for the Common
Stock on the Nasdaq National Market on March 15, 2002) was approximately
$3,065,328,672.
DOCUMENTS INCORPORATED BY REFERENCE
The information called for by Part III is incorporated by reference to
specified portions of the Registrant's definitive Proxy Statement to be issued
in conjunction with the Registrant's 2002 Annual Meeting of Stockholders, which
is expected to be filed not later than 120 days after the Registrant's fiscal
year ended December 31, 2001.
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JUNIPER NETWORKS, INC.
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PART I
Item 1 Business...................................................................................... 3
Item 2 Properties.................................................................................... 17
Item 3 Legal Proceedings............................................................................. 18
Item 4 Submission of Matters to a Vote of Security Holders........................................... 18
Executive Officers of the Registrant.......................................................... 18
PART II
Item 5 Market for Registrant's Common Stock and Related Stockholder Matters.......................... 19
Item 6. Selected Financial Data....................................................................... 20
Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations......... 20
Item 7A Quantitative and Qualitative Disclosures about Market Risk.................................... 20
Item 8 Financial Statements and Supplementary Data................................................... 20
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.......... 20
PART III
Item 10 Directors and Executive Officers of the Registrant............................................ 21
Item 11 Executive Compensation........................................................................ 22
Item 12 Security Ownership of Certain Beneficial Owners and Management................................ 22
Item 13 Certain Relationships and Related Transactions................................................ 22
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K............................... 22
Signatures.................................................................................... 24
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PART I
ITEM 1 BUSINESS
OVERVIEW
We are a leading provider of Internet infrastructure solutions that enable
Internet service providers and other telecommunications service providers to
meet the demands resulting from the rapid growth of the Internet. Our Internet
routers are designed and purpose-built for service provider networks and offer
our customers trusted performance, reliability, scalability, interoperability
and flexibility as well as reduced complexity and cost compared to legacy
alternatives. Unlike conventional routers, originally developed for enterprise
applications and increasingly inadequate for use in the New Public Network, our
products are specifically designed to accommodate the size and scope of the
Internet. Our products combine high performance ASIC-based packet forwarding
technology, the features of our JUNOS Internet software and an
Internet-optimized architecture into a purpose-built solution for the service
provider market.
INDUSTRY BACKGROUND
The Internet has evolved from an academic research project into a network of
hundreds of separately administered, public and private networks interconnected
using Internet Protocol (IP). IP traffic is growing exponentially, driven by
increasing numbers of new users, connected devices and Internet transactions.
The result of the widespread use of IP is a ubiquitous network that today
carries a large and growing amount of data traffic enabling millions of users to
share information and conduct electronic commerce. Industry research firms
forecast continued dramatic growth worldwide in the Internet and Internet
traffic. The importance of IP continues to increase as the number of users,
connected devices and transactions over the Internet grows.
The rapid adoption of the Internet and the tremendous growth of IP traffic
have prompted service providers to construct large scale data networks. These
networks are being optimized to transport data traffic as compared to
traditional telephone networks, which were optimized to transport voice traffic.
The architecture of these next generation networks is being driven by two key
technologies: packet/cell switching and optical networking.
ADVANTAGES OF PACKET/CELL SWITCHING. Packet/cell switching technology, which
divides data traffic into distinct units called packets or cells and routes each
packet or cell independently, provides superior use of available network
capacity compared to traditional circuit switching technology. In a circuit
switched network, each data stream, such as a voice telephone call between two
points, is provided with a dedicated channel, or circuit, for the duration of
the telephone call. This approach leads to inefficient use of network resources
because a channel is fully dedicated to each transaction, whether or not data is
actually flowing at any given moment. As a result, a circuit switched
architecture is highly inefficient for Internet applications which tend to
create large bursts of data traffic followed by long periods of silence.
Packet/cell switching architectures enable greater utilization out of a fixed
capacity circuit by combining traffic that has different capacity demands of the
circuit at different times. Packet/cell switches more efficiently fill the
available network bandwidth with packets of data from many users, thereby
reducing the wasted bandwidth due to silence from any one particular user. The
use of packet/cell switching is driving the architecture of the Internet to be
fundamentally different from traditional circuit switched voice based networks.
In packet/cell switched networks, IP has emerged as the de facto standard for
providing services to end users. Primary packet/cell switching products include
frame relay switches, ATM switches and routers.
RAPID ADVANCES IN OPTICAL NETWORKING. Optical networking technology uses
pulses of light, rather than pulses of electricity, to transmit data in a
network, and uses fiber optic connections instead of wires. Optical networking
can be used to transmit much more information over a given connection than
electrical signals can convey. Optical networking advances, such as dense
wavelength division multiplexing, or DWDM, which allows transmission of several
frequencies of light over one strand of optical fiber, have enabled still higher
data transmission rates and improved efficiency of bandwidth utilization.
Packet/cell technologies have not kept up with optical technologies. Many
service providers are installing DWDM equipment and are increasingly focusing on
combining IP and optical networking technologies. However, traditional packet
switching equipment is not capable of forwarding packets at rates sufficient to
keep pace with optical transmission
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speeds. As affordable fiber optic transmission capacity becomes widely
available, the performance and complexity of current packet/cell switching
architectures is increasingly constraining the growth of the Internet.
FUNDAMENTAL REQUIREMENTS FOR THE INTERNET
The reliability and performance of current Internet infrastructure equipment
have become and continue to be critical issues for service providers as they
support dramatic growth in IP traffic and increasingly seek to offer new revenue
generating, mission-critical and other services. The need for high reliability,
high performance, high performance under stressful conditions, scalability,
interoperability and cost effectiveness are fundamental requirements in meeting
the needs associated with the growth in IP traffic. New requirements will
continue to arise for next generation networks which will drive a set of new
requirements for Internet infrastructure equipment.
HIGH RELIABILITY. As businesses and consumers increasingly rely on the
Internet for mission-critical applications, high network reliability becomes
essential. Service providers are increasingly expected to provide a similar
degree of reliability on the Internet that users have become accustomed to on
the traditional telephone network. The "five nines" (99.999%) reliability
standard of the traditional telephone network is becoming the target to which
suppliers of next-generation Internet platforms are being compared. As service
providers begin to bundle voice and data on their networks, this high degree of
reliability is becoming even more critical.
HIGH PERFORMANCE. To handle the rapid growth in IP traffic, today's networks
increasingly require routers that can operate at higher speeds. The processing
of data packets at these high speeds requires sophisticated forwarding
technology to inspect each packet and assign it to a destination based on
priority, data type and other considerations. Since a large number of IP
packets, many of which perform critical administrative functions, are small in
size, high performance Internet routers need to achieve their specified
transmission speeds even for small packet sizes. Since smaller packets increase
packet processing demands, routing large numbers of smaller packets tends to be
more resource intensive than routing of larger packets. A wire speed router,
which achieves its specified transmission rate for any type of traffic passing
through it, can accomplish this task. Thus, provisioning of mission-critical
services increasingly requires the high performance enabled by wire speed
processing.
HIGH PERFORMANCE UNDER STRESSFUL CONDITIONS. In a large and complex network,
individual components inevitably fail. However, the failure of an individual
device or link must not compromise the network as a whole. In a typical network,
when a failure occurs, the network loses some degree of capacity and, in turn, a
greater load falls on the remaining network routers, which must provide
alternate routes. Routers must quickly adjust to the new state of the network to
maintain packet forwarding rates and avoid dropping significant numbers of
packets when active routes are lost or when large numbers of routes change.
Routing protocols are used to accomplish this convergence, a process that places
even greater stress on the router. Given the complexity of Internet
infrastructure, particularly compared to enterprise networks, the convergence
process is far more complex and places a far greater load on the routing
software, thereby requiring a much more sophisticated device.
SCALABILITY. Due to the rapid growth in Internet users and IP traffic,
service providers must continuously expand their networks, both in terms of
increased numbers of access points of presence (PoPs), and also greater capacity
per PoP. To facilitate this expansion process, Internet infrastructure equipment
must be highly scalable. Next generation routers therefore need to be
upgradeable and configurable to function within constantly changing networks
while incurring minimal downtime.
INTEROPERABILITY. Service providers do not have the time or inclination to
change their existing networks to favor introduction of new products; rather,
new products must be compatible with the existing environment. Given the open
and inter-connected nature of the Internet, the complexity of running an
Internet backbone network requires a service provider to control and police
relations with other service providers. For example, service providers must
carefully control what traffic is accepted under what conditions from other
providers. The software in each router must offer 100% compatibility with the
interior protocols and standards used within each service provider's backbone
network. The compatibility level must be maintained despite changes to software
equipment configuration and network architecture and upgrades to the various
protocol standards. Thus, routing software must be flexible and quickly
upgradeable to support any necessary revisions. This level of compatibility, in
turn, cannot impact the performance, scalability or reliability of the
equipment. Attaining this sophisticated level of interoperability is highly
challenging and requires significant testing to ensure compatibility.
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COST EFFECTIVENESS. Exponential growth in IP traffic and intense price
competition in the telecommunications market is increasingly requiring service
providers to seek solutions that significantly reduce the capital expenditures
required to build and operate their networks. In addition to the basic cost of
equipment such as routers, service providers incur substantial ancillary costs
in terms of space required to deploy the equipment, power consumption and
on-going operations and maintenance. Service providers therefore want to deploy
dense and varied equipment configurations in limited amounts of rack and floor
space. Therefore, in order to continue to scale their networks toward higher
data speeds in a cost effective manner, service providers need the ability to
mix and match easily many different speed connections at appropriate densities,
without significantly increasing the consumption of space or power.
There is a clear need for next generation routers that can support high
speeds and offer new IP-based services. Network operators are eagerly seeking
new solutions that increase the level of scalability and reliability within
their networks and reduce the cost of their architectures.
THE JUNIPER NETWORKS SOLUTION
We developed, marketed and sold the first commercially available
purpose-built Internet backbone router optimized for the specific high
performance needs 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. Our products are designed to address the needs at the core and at the
edge of the network by combining the features of high-performance ASIC-based
packet forwarding technology, our JUNOS Internet software and an
Internet-optimized architecture.
Our product platforms share common software and services, and common ASIC
technology for full compatibility and scalability. Critical service provider
applications including high-speed access, peering, and hosting are served by our
platforms. Physical interfaces are interchangeable between platforms, increasing
user flexibility and allowing common sparing. Our solution provides several key
benefits to our customers: carrier class reliability, wire speed performance,
scalability, interoperability, flexibility, reduced complexity and cost
effectiveness.
JUNOS INTERNET SOFTWARE. Our Internet software, called JUNOS, is designed to
meet the IP network routing, operations and control requirements of the world's
largest service providers and is an integral embedded component of our product
family system architecture. The ability of JUNOS to manage the complex network
sharing relationships among service providers allows our products to be placed
at critical points in the core of a service provider's network. The JUNOS
Internet software allows our products to have widespread network placement due
to its interoperability with Cisco's Internetwork Operating System, or IOS,
currently the most broadly deployed routing operating system.
Unconstrained by legacy routing software, we developed JUNOS using a modular
design, in which distinct functions are implemented as separate modules with
well defined interfaces and interactions, simplifying troubleshooting and
maintenance. JUNOS operates in protected memory mode. These features keep
functionality distinct, and minimize the impact of any failure that may occur to
the specific software application in which the failure occurs. Also, we believe
JUNOS' software modularity will enable the continuous upgrade of new enhanced
capabilities, while protecting reliability and compatibility with existing
networks.
HIGH PERFORMANCE ASIC-BASED PACKET FORWARDING TECHNOLOGY. Our products
utilize high performance ASIC-based technology. The result is a platform that is
substantially faster than today's general purpose microprocessor based routers
in its ability to process and forward IP packets, allowing our products to
deliver high performance at wire speed. The ability to enhance and implement
large scale ASICs will be a long-term differentiator for us, particularly as the
sophistication required to forward traffic across higher speed networks
increases. We expect to continue to leverage our existing ASIC technology in
future products and continue to capitalize on our advanced ASIC design
capabilities.
INTERNET OPTIMIZED ARCHITECTURE. As purpose-built Internet backbone routers,
our products employ an architecture designed exclusively for the Internet. The
system architecture provides a clean separation between the routing and
packet-forwarding functions. Separating these two functions enables us to
develop independently a full-featured routing protocol and traffic engineering
functionality through our JUNOS Internet software and wire speed packet
forwarding performance through high performance ASICs. Furthermore, with the
routing and forwarding functions segregated, the products do not sacrifice
performance, even when there is a failure in the network. When a failure occurs,
JUNOS detects
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the failure and is able to quickly converge to the new state of the network
while the ASICs continue to forward packets at wire speed until they receive
updated routes from JUNOS.
THE JUNIPER NETWORKS STRATEGY
Our objective is to become the primary supplier of high performance Internet
backbone infrastructure. The key elements of our strategy are described below.
MAINTAIN AND EXTEND TECHNOLOGY LEADERSHIP. Our ASIC technology, JUNOS
Internet software and Internet-optimized architecture have been key elements to
establishing our technology leadership. We believe that these elements are
highly leverageable into future products we are currently developing. We intend
to maintain and extend our technological leadership in the Internet
infrastructure market through continued significant investment to enhance the
feature richness of our products and to develop future differentiated offerings
for service providers.
LEVERAGE EARLY LEAD AS SUPPLIER OF PURPOSE-BUILT INTERNET INFRASTRUCTURE.
From inception we have focused solely on designing and building Internet
infrastructure for service providers. We have integrated purpose-built software
and hardware into an Internet optimized architecture that specifically meets
service providers' needs and have seen significantly positive initial responses
from our existing and potential customers. We believe that many of these
customers will deploy Internet backbone infrastructure equipment from only a few
vendors. The purpose-built advantages of our products provide us with a
time-to-market lead, which is a critical advantage in gaining rapid penetration
as one of these selected vendors. Once our products are widely deployed in a
service provider's network as the primary or even secondary Internet backbone
infrastructure equipment, we believe we create a significant barrier to entry to
potential competitors who do not currently offer commercially-viable next
generation routing solutions.
WORK VERY CLOSELY WITH KEY CUSTOMERS. In developing our products, including
our JUNOS Internet software, we worked very closely with customers to design and
build a product specifically to meet their complex needs. Since JUNOS has been
available and used by our customers for over three years, we understand clearly
the challenges facing these carriers, enabling us to subsequently design
additional features and capabilities into both our software and hardware. We
believe our close relationships with, and constant feedback from, our customers
have been key elements in our design wins and rapid deployment to date. We plan
to continue to work very closely with our key customers to implement
enhancements to current products as well as to design future products that
specifically meet their evolving needs. We are also actively involved with these
customers in developing key standards, such as MPLS, and are an active
participant in standards organizations such as the Internet Engineering Task
Force and the Optical Internetworking Forum.
INCREASE PENETRATION AT MAJOR SERVICE PROVIDERS. Our initial focus has been
to penetrate several of the largest service providers, where operators have the
technical sophistication, resources and desire to test and evaluate our solution
against potential alternatives. We believe that there is a significant
opportunity to further penetrate these large and complex networks given the
advantages of our products. As the growth of the Internet requires these major
service providers to continue to build their networks and replace outdated
equipment, we will pursue further opportunities to capture greater market share
within these large accounts.
LEVERAGE EARLY SUCCESSES TO PENETRATE NEW CUSTOMERS RAPIDLY. We believe that
the Internet infrastructure equipment buying patterns of the medium and
smaller-sized service providers typically lag behind those of the larger service
providers. Since the network challenges that the large service providers face
today are likely to be the problems encountered by smaller service providers in
the near future, we believe smaller service providers are likely to deploy
equipment similar to larger service providers. Furthermore, smaller service
providers often lack the technical resources to thoroughly test different
vendors' products. Therefore, they typically piggyback on larger service
providers' evaluation efforts by purchasing the same platforms deployed by the
larger service providers. Since we have begun to sell to several of the largest
service providers, we intend to leverage this success by allocating our
marketing efforts towards a greater number of medium and smaller-sized service
providers.
ENABLE NEW IP-BASED SERVICES. Our platform enables service providers to
build networks cost effectively and to offer new differentiated services for
their customers more efficiently than conventional products. While we believe
that current service providers are likely to be the largest and most successful
IP network operators in the near term, many new service providers are likely to
emerge oriented around the delivery of IP-based services. These services, which
include web hosting, outsourced Internet and intranet services, VPNs, outsourced
enterprise applications and voice-over IP, are cost-
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effectively enabled by our Internet infrastructure platform. Although the market
for our products today is driven primarily by the need for traditional Internet
network capacity, as other IP-based services and applications continue to grow
in importance, the total potential market for our products will continue to grow
commensurately.
TECHNOLOGY
Our core technology consists of our Internet backbone router architecture,
JUNOS Internet software and ASIC hardware expertise. Our general-purpose
architecture was initially embodied in the M40, but also is designed to serve as
the platform for our future generations of products. To date, we have developed,
manufactured and shipped five products based on our M-Series Internet routers --
the M5, M10, M20, M40 and M160.
PRODUCT ARCHITECTURE
The architecture of our products is exemplified by the M40. The M40
architecture delivers the forwarding rates and network control necessary to
scale Internet backbones rapidly and reliably. The M40 system includes a Routing
Engine, or RE, and a Packet Forwarding Engine, or PFE. The clean separation of
the routing and forwarding functions ensures that the two functions do not
compete for the same resources.
THE ROUTING ENGINE. The RE consists of the JUNOS Internet software operating
on an Intel-based platform. The JUNOS Internet software features Internet-scale
protocol support, with flexible policy software that enables maximum control
over the acceptance, modification and advertisement of route prefixes. In
addition, the JUNOS Internet software offers a range of configuration management
tools that simplify the configuration process and help protect against operator
error. The RE conducts the processing intensive activity of maintaining the
routing table, from which the forwarding table residing in the PFE is derived.
The RE is connected to the PFE through a dedicated 100 Mbps link. After
constructing or updating the forwarding table, the RE downloads a copy of the
table to the PFE. Updates to the forwarding table are done atomically in small
incremental steps so that packet forwarding is not interrupted by routing
changes.
THE PACKET FORWARDING ENGINE. The M40 delivers wire speed packet forwarding
using our ASIC designs. All links between ASICs are oversized, dedicated
channels, and the PFE architecture is free from the bottlenecks faced by
traditional crossbar switches, which use intelligent agent software to perform
both routing and forwarding functions over multiple connections to either parts
of the network. Bottlenecks can occur in a crossbar switch because the routing
and forwarding functions are not separated. The heart of the PFE is the Internet
Processor ASIC.
All lookup rates reflect longest-match route table lookups for all packets
and all lookups are performed in hardware. There is no caching mechanism, which
is a mechanism by which critical information, such as destinations for traffic,
is stored in rapidly accessible memory to make the process of looking up traffic
destinations faster. In addition there is no risk of cache misses in the system
which can result in slower storage access and thus considerably slower traffic
delivery. In addition, the forwarding table can be updated without affecting
forwarding rates. The Internet Processor is programmable to support up to four
different forwarding tables (layer 2 and/or layer 3) simultaneously. Supported
forwarding protocols currently include unicast and multicast IPv4 and MPLS.
Finally, the Internet Processor maintains its performance regardless of length
of lookups or table size.
The PFE also features a shared memory system with single-stage buffering, so
packets are written to and read from memory only once. Single-stage buffering
greatly reduces the complexities and throughput delays associated with
multistage buffering systems. The pooled memory is distributed across the
Flexible PIC Concentrator, or FPC, cards, allowing memory to scale as interfaces
are added. The Internet Processor also features prefix accounting mechanisms
that operate at rates in excess of 20 Mpps.
JUNOS INTERNET SOFTWARE; TRAFFIC ENGINEERING AND CONTROL
JUNOS Internet software offers a full suite of Internet-scale,
Internet-tested routing protocols. Protocols and software tools, which are used
to control and direct network traffic, are critical to an Internet backbone
routing solution. Software control is made more important by the fact that the
size and complexity of backbone networks are increasing at a time when service
providers are looking to differentiate themselves through value-added service
offerings.
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JUNOS Internet software features implementations of all major Internet
protocols, including BGP4, DVMRP, PIM, IS-IS, Open Shortest Path First. IS-IS
and Open Shortest Path First are algorithms broadly used in enterprise networks
and by service providers to determine and update the running state of the
network and available destinations in the network. These implementations were
developed in-house by our design team which has extensive experience in
addressing the scaling issues of rapidly growing service providers.
JUNOS Internet software also provides a new level of traffic engineering
capabilities with its implementation of MPLS. Developed in conjunction with the
Internet Engineering Task Force, our MPLS capability offers enhanced visibility
into traffic patterns and the ability to control the path traffic takes through
the network. Path selection enables service providers to engineer traffic for
efficient use of network capacity and avoidance of congestion. We expect MPLS
and its traffic engineering capabilities to become a crucial tool for service
providers as they scale their networks.
JUNOS Internet software features a modular design, with separate programs
running in protected memory space in conjunction with an independent operating
system. Unlike monolithic, unprotected operating system designs, which are prone
to system wide failure, the protected, modular approach improves reliability by
ensuring that modifications made to one module have no unwanted side-effects on
other sections of the software. In addition, having clean software interfaces
between modules facilitates software development and maintenance, enabling
faster response to customer needs and delivery of new features.
JUNOS Internet software has been extensively tested in multiple service
provider networks to ensure compatibility with Cisco's IOS. Since each major
service provider's network is different, this extensive testing is necessary to
ensure seamless introduction into existing service provider environments.
CUSTOMERS
Our customers include end users, value added resellers and an original
equipment manufacturer. We recognize revenue from the shipment of products at
the time of shipment unless we have future obligations for network
interoperability or if we have to obtain customer acceptance. In those cases, we
defer recognition of the revenue and related costs until we have met our
obligations.
WorldCom, Ericsson, and Qwest accounted for approximately 14%, 13% and 11%,
respectively, of our recognized revenues for the year ended December 31, 2001.
SALES AND MARKETING
We sell and market our products primarily through our direct sales
organization, value-added resellers and an original equipment manufacturer.
DIRECT SALES. Our North American direct sales organization is divided into
regional operations with our direct sales efforts focused on the largest service
providers. The direct sales account managers cover the market on an assigned
account basis and work as a team with account oriented systems engineers. They
are directed by a regional operations manager who reports to the North American
Vice President of Sales. We also have technical engineers that consult with and
provide our customers with guidance and assistance on the evolution of their
networks as it relates to the deployment of our products. These consulting
engineers also help in defining the features that are required for our products
to be successful in specific applications. A key feature of our sales effort is
the relationship we establish at various levels in our customers' organization.
Our sales team maintains contact with key individuals who have service planning
and infrastructure buildout responsibility.
VALUE ADDED RESELLERS. We have complemented our direct sales effort in the
United States through the addition of several highly focused value added
resellers. Our arrangements with value added resellers typically have been
non-exclusive and provide the value added reseller with discounts based upon the
volume of their orders.
ORIGINAL EQUIPMENT MANUFACTURER PARTNER. We have established a strategic
distribution relationship with Ericsson. We believe that Ericsson has
significant customer relationships in place and offers products which complement
ours. Our agreement with Ericsson allows it to distribute our products on a
worldwide, non-exclusive basis with discounts based upon the volume of orders it
receives. Ericsson provides the first level of support to its customers.
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INTERNATIONAL RESELLERS. We have established, in addition to Ericsson,
strategic value added reseller relationships with Nortel and Alcatel to sell and
service our products on a worldwide non-exclusive basis. To further our
international sales objectives, we also have established a number of country
specific value added resellers. These resellers have expertise in deploying
complex Internet infrastructure equipment in their respective markets and
provide the first level of support required by our international customers.
As of December 31, 2001, we employed 360 people in our sales and marketing
organizations.
CUSTOMER SERVICE AND SUPPORT
We believe that a broad range of support services is essential to the
successful installation and ongoing support of our products and we have hired
support engineers with proven Internet experience to provide those services. We
offer the following services: 24 hours a day, seven days a week technical
assistance (on-line, telephone and on-site), professional services, educational
services, logistics services and web-based information.
We offer a variety of flexible and comprehensive support programs, including
basic hardware and software warranty services, next day onsite parts and labor,
24 hours a day, seven days a week same day parts and labor and on-site resident
engineers. We deliver these services directly to major end users and also
utilize a multi-tiered support model, leveraging the capabilities of our
partners and third party organizations. We also train our partners in the
delivery of education and support services.
Customer service and support provide front line product support and is the
problem resolution interface to our partners and direct end users. If customer
service and support are unable to resolve an issue themselves, they duplicate
the problem scenario and provide the failure information, such as logs, dumps,
traces and system configuration to appropriate subject matter experts in our
engineering department.
Based on the severity of the problem and the impact to our customers'
network, there are strict escalation guidelines to ensure that the appropriate
technical resources and management attention is brought to bear on the problem
in a timeframe commensurate with problem priority. The overall goal is to fix
the problem, at the appropriate level, in the right timeframe in order to ensure
our customers' satisfaction.
As of December 31, 2001, we employed 143 people in our customer service and
support organization, with the majority located in our Sunnyvale, California
corporate headquarters.
RESEARCH AND DEVELOPMENT
We have assembled a team of skilled engineers with extensive experience in
the fields of high end computing, network system design, Internet routing
protocols and embedded software. These individuals have been drawn from leading
computer data networking and telecommunications companies. In addition to
building complex hardware and software systems, the engineering team has
experience in delivering very large, highly integrated ASICs and extremely
scalable Internet software.
Our research and development department is organized into teams that work in
parallel on several projects in a manner similar to the development of
successive generations of complex microprocessors. As a result, we will seek to
offer our customers next generation products as they are needed.
We believe that strong product development capabilities are essential to our
strategy of enhancing our core technology, developing additional applications,
incorporating that technology and maintaining the competitiveness of our product
and service offerings. We are leveraging our first generation ASICs, developing
additional network interfaces targeted to our customer applications and
continuing to develop next generation technology to support the anticipated
growth in network bandwidth requirements. We continue to expand the
functionality of our JUNOS Internet software to improve performance and
scalability, and to provide an enhanced user interface.
Our research and development 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 undertaking all product
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development projects. This process involves all functional groups and all levels
within our company. Following an assessment of market demand, our research and
development 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.
As of December 31, 2001, we employed 474 people in our research and
development organization.
Our research and development expenses totaled $155.5 million for the year
ended December 31, 2001, $87.8 million for the year ended December 31, 2000 and
$41.5 million for the year ended December 31, 1999.
MANUFACTURING
Our manufacturing operation is entirely outsourced. We have developed
manufacturing relationships with Solectron and Celestica, under which we have
subcontracted our manufacturing activity. This subcontracting activity extends
from prototypes to full production and includes activities such as material
procurement, final assembly, test, control and shipment to our customers. We
design, specify and monitor all of the tests that are required to meet internal
and external quality standards. These arrangements provide us with the following
benefits:
- we operate without dedicating any space to manufacturing operations;
- we conserve the working capital that would be required for funding
inventory;
- we can adjust manufacturing volumes quickly to meet changes in demand;
and
- we can quickly deliver products to customers with turnkey manufacturing
and drop shipment capabilities.
Our ASICs are manufactured by IBM who is responsible for all aspects of the
production of the ASICs using our proprietary designs.
COMPETITION
Competition in the Internet infrastructure market is intense. The market
historically has been dominated by Cisco Systems, Inc., with other companies
such as Nortel Networks and Lucent Technologies Inc. providing products to a
smaller segment of the market. In addition, a number of public and private
companies have announced plans for new products to address the same problems
which our products address.
Cisco traditionally has been the dominant supplier of solutions to this
market. We believe this is the result of its early leadership position in the
enterprise router market. As the Internet has grown rapidly, Cisco has leveraged
this position and has developed a broad product line of routers which support
all major local area and wide area interfaces. We believe that our ability to
compete with Cisco depends upon our ability to demonstrate that our products are
superior in meeting the needs of service providers and are extremely compatible
with Cisco's current and future products. Although we believe that we are
currently among the top providers of Internet infrastructure solutions
worldwide, we cannot assure you that we will be able to compete successfully
with Cisco, currently the leading provider in this market.
We expect that, over time, large companies with significant resources,
technical expertise, market experience, customer relationships and broad product
lines, such as Lucent and Nortel, will introduce new products which are designed
to compete more effectively in this market. 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 assure you that we will be
successful.
Many of our current and potential competitors, such as Cisco, Lucent and
Nortel, have significantly broader product lines than we do and may bundle their
products with other networking products in a manner that may discourage
customers from purchasing our products. Also, many of our current and potential
competitors have greater name recognition and more extensive customer bases that
could be leveraged. Increased competition could result in price
10
reduction, fewer customer orders, reduced gross margins and loss of market
share, any of which could seriously harm our operating results.
There are also many small public and private companies which claim to have
products with greater capabilities than our products. Consolidation in this
industry has begun, with one or more of these smaller private companies being
acquired by large, established suppliers of Internet infrastructure products,
and we believe it 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.
Several companies also provide solutions which can substitute for some uses
of routers. For example, high bandwidth asynchronous transfer mode (ATM)
switches, are used in the core of certain major backbone service providers. ATM
switches can carry a variety of traffic types, including voice, video and data,
using fixed, 53 byte cells. Companies that use ATM switches are enhancing their
products with new software technologies such as multi-protocol label switching,
or MPLS, which can potentially simplify the task of mixing routers and switches
in the same network. These substitutes can reduce the need for large numbers of
routers.
INTELLECTUAL PROPERTY
Our success and ability to compete are substantially dependent upon our
internally developed technology and knowhow. Our engineering teams have
significant expertise in ASIC design and we own all rights to the design of the
ASICs which form the core of our products. Our JUNOS Internet software was
developed internally and is protected by United States and other copyright laws.
While we rely on patent, copyright, trade secret and trademark law 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.
Our success will depend upon our ability to obtain necessary intellectual
property rights and protect our intellectual property rights. While we have
filed patent applications, we cannot be certain that these applications will
issue into patents, that we will be able to obtain the necessary intellectual
property rights or that other parties will not contest our intellectual property
rights.
EMPLOYEES
As of December 31, 2001, we had 1,227 full-time employees, 474 of whom were
engaged in research and development, 360 in sales and marketing, 143 in customer
support and 250 in finance, administration, IT and operations. None of our
employees are represented by a labor union. We have not experienced any work
stoppages and we consider our relations with our employees to be good.
Our future performance depends in significant part upon the continued
service of our key technical, sales and senior management personnel, none of
whom is bound by an employment agreement requiring service for any defined
period of time. The loss of the services of one or more of our key employees
could have a material adverse effect on our business, financial condition and
results of operations. Our future success also depends on our continuing ability
to attract, train and retain highly qualified technical, sales and managerial
personnel. Competition for such personnel is intense, and there can be no
assurance that we can retain our key personnel in the future.
RISK FACTORS
WE FACE INTENSE COMPETITION THAT COULD REDUCE OUR MARKET SHARE OR SLOW THE RATE
OF INCREASE IN MARKET SHARE.
Competition in the Internet infrastructure market is intense. This market
has historically been dominated by Cisco with other companies such as Nortel
Networks and Lucent Technologies providing products to a smaller segment of the
market. In addition, a number of other small public and private companies have
announced plans for new products to address the same problems which our products
address. If we are unable to compete successfully against existing and
11
future competitors from a product offering standpoint or from potential price
competition, including arising from excess inventory of products held by our
competitors or by third parties, we could be required to reduce prices,
resulting in reduced gross margins and loss of market share, each of which could
materially and adversely affect our business, operating results and financial
condition.
OUR SUCCESS DEPENDS ON OUR ABILITY TO DEVELOP PRODUCTS AND PRODUCT ENHANCEMENTS
THAT WILL ACHIEVE MARKET ACCEPTANCE.
We cannot ensure that we will be able to develop new products or product
enhancements in a timely manner or at all. Any failure to develop new products
or product enhancements could substantially decrease market acceptance and sales
of our present and future products which would significantly harm the business
and financial results. Even if we are able to develop and commercially introduce
new products and enhancements, there can be no assurance that new products or
enhancements will achieve widespread market acceptance. Any failure of our
future products to achieve market acceptance could adversely affect the business
and financial results.
A DECREASE IN OUR REVENUES OR A FAILURE TO INCREASE OUR REVENUES WOULD AFFECT
OUR PROFITABILITY.
Although our net revenues have grown from $102.6 million for the year ended
December 31, 1999 to $887.0 million for the year ended December 31, 2001, the
economic slowdown in general and in the telecommunications industry
specifically, makes increasing our revenues difficult and uncertain and a
greater likelihood of decreasing revenues. We have large fixed expenses and
expect to continue to incur significant and increasing engineering and product
development expenses and as net revenues could either decrease or fail to
increase there can be no assurances that we will maintain profitability.
THE FINANCIAL CONDITION OF SOME OF OUR CUSTOMERS LIMITS OUR VISIBILITY MAKING
FORECASTING DIFFICULT.
We have experienced and expect, in the foreseeable future, to continue to
experience limited visibility as to our customers' spending plans and capital
budgets. This limited visibility complicates the forecasting process.
Additionally, many customers funded their network infrastructure purchases
through a variety of debt and similar instruments and now many of these same
customers face significant debt loads, which reduce their ability to make future
purchases and in some cases to pay for the purchases made to date. This has
contributed, and we expect it to continue to contribute, to the uncertainty of
the amounts and timing of capital expenditures further limiting visibility and
complicating the forecasting process. In some cases, these customers have filed
for bankruptcy as a result of their debt burdens. Although the expectation of
these customers is that they will emerge from the bankruptcy proceedings in the
future, a bankruptcy proceeding can be a slow and cumbersome process further
limiting the visibility and complicating the forecasting process as to these
customers.
ECONOMIC CONDITIONS COMBINED WITH OUR LIMITED OPERATING HISTORY MAKES
FORECASTING DIFFICULT.
The current economic conditions generally, and in the telecommunication
industry specifically, combined with our own limited operating history makes it
difficult to accurately forecast revenues and there is limited meaningful
historical financial data upon which to base planned operating expenses. In
addition, our operating expenses are largely based on anticipated revenue trends
and a high percentage of our expenses are, and will continue to be, fixed in the
short-term. If we do not achieve our expected revenues, our operating results
will be below our expectations and those of investors and market analysts, which
could cause the price of our common stock to decline.
In addition, timing of deployment of our products can vary widely and
depends on various factors. Customers with large networks, particularly PTTs,
usually expand their networks slowly on a periodic basis. We cannot predict
these sales and development cycles. These long cycles, as well as our
expectation that customers will tend to sporadically place large orders with
short lead times, may cause our revenues and operating results to vary
significantly and unexpectedly from quarter to quarter.
IF WE FAIL TO ACCURATELY PREDICT OUR MANUFACTURING REQUIREMENTS, WE COULD INCUR
ADDITIONAL COSTS OR EXPERIENCE MANUFACTURING DELAYS.
12
We provide forecasts of our demand to our contract manufacturers prior to
scheduled delivery of products to our customers. If we overestimate our
requirements, the contract manufacturer may assess carrying charges on the
excess material and those charges could negatively impact our gross margins. If
we underestimate our requirements, the contract manufacturer may have an
inadequate inventory, which could interrupt manufacturing of our products and
result in delays in shipments and revenues. In addition, lead times for
materials and components we order vary significantly and depend on factors such
as the specific supplier, contract terms and demand for each component at a
given time. We also may experience shortages of certain components from time to
time, which also could delay the manufacturing of our products.
ALTHOUGH OUR CUSTOMER BASE HAS INCREASED SUBSTANTIALLY, THERE IS STILL A LIMITED
NUMBER OF CUSTOMERS WHICH COMPRISE A SIGNIFICANT PORTION OF OUR REVENUES AND ANY
DECREASE IN REVENUE FROM THESE CUSTOMERS COULD HAVE AN ADVERSE EFFECT.
We expect that a large portion of our net revenues will continue to depend
on sales to a limited number of customers. Any downturn in the business of these
customers or potential new customers could significantly decrease sales to such
customers which could adversely affect our net revenues and results of
operations.
IF WE FAIL TO MANAGE EXPANSION EFFECTIVELY WE COULD SERIOUSLY HARM OUR BUSINESS,
FINANCIAL CONDITION AND PROSPECTS.
Our ability to successfully implement our business plan, develop and offer
our products and manage expansion under rapidly changing market conditions
requires a comprehensive and effective planning and management process. We
continue to increase the scope of our operations domestically and
internationally and have grown headcount substantially. The growth in business,
headcount and relationships with customers and other third parties has placed
and will continue to place a significant strain on our management systems and
resources. We will need to continue to improve our operational, managerial and
financial controls, reporting systems and procedures, and will need to continue
to expand, train and manage our work force worldwide.
THE LONG SALES AND IMPLEMENTATION CYCLES FOR OUR PRODUCTS, AS WELL AS OUR
EXPECTATION THAT CUSTOMERS WILL SPORADICALLY PLACE LARGE ORDERS WITH SHORT LEAD
TIMES MAY CAUSE REVENUES AND OPERATING RESULTS TO VARY SIGNIFICANTLY FROM
QUARTER TO QUARTER.
A customer's decision to purchase our products involves a significant
commitment of its resources and a lengthy evaluation and product qualification
process. As a result, our sales cycle may be lengthy. Throughout the sales
cycle, we often spend considerable time educating and providing information to
prospective customers regarding the use and benefits of the products. Even after
making the decision to purchase, our customers tend to deploy the 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 software
configuration necessary to deploy the products. Customers with large networks
usually expand their networks in large increments on a periodic basis.
Accordingly, we expect to receive purchase orders for significant dollar amounts
on an irregular basis. Because of our limited operating history, we cannot
predict these sales and development cycles. These long cycles, as well as our
expectation that customers will tend to sporadically place large orders with
short lead times, may cause our revenues and operating results to vary
significantly and unexpectedly from quarter to quarter.
WE ARE DEPENDENT ON SOLE SOURCE AND LIMITED SOURCE SUPPLIERS FOR SEVERAL KEY
COMPONENTS.
Electronic component shortages are always possible and the predictability of
the availability of such components is limited. We currently purchase several
key components, including ASICs, from a single source. We may not be able to
develop an alternate or second source in a timely manner, which could hurt our
ability to deliver product to customers. If we are unable to buy these
components on a timely basis, we may not be able to deliver product to our
customers, which would seriously impact present and future sales which would, in
turn, adversely affect our business.
WE CURRENTLY DEPEND ON CONTRACT MANUFACTURERS WITH WHOM WE DO NOT HAVE LONG-TERM
SUPPLY CONTRACTS, AND IF WE UNEXPECTEDLY HAVE TO QUALIFY A NEW CONTRACT
MANUFACTURER WE MAY LOSE REVENUE AND DAMAGE OUR CUSTOMER RELATIONSHIPS.
13
We depend on third party contract manufacturers (each of whom is a third
party manufacturer for numerous companies) to manufacture our products. We do
not have a long-term supply contract with these manufacturers and if we should
fail to effectively manage our contract manufacturer relationships or if one or
more of them should experiences delays, disruptions or quality control problems
in our manufacturing operations, our ability to ship products to our customers
could be delayed which could adversely affect our business and financial
results.
WE DEPEND ON KEY PERSONNEL TO MANAGE OUR BUSINESS EFFECTIVELY IN A RAPIDLY
CHANGING MARKET AND IF WE ARE UNABLE TO HIRE ADDITIONAL PERSONNEL, OUR ABILITY
TO SELL PRODUCTS COULD BE HARMED.
Our future success depends upon the continued services of our executive
officers and other key engineering, sales, marketing and support personnel. None
of the officers or key employees is bound by an employment agreement for any
specific term.
We also will need to continue to hire engineering and other personnel in the
future, and we believe our success depends, in large part, upon our ability to
attract and retain these key employees. Competition for these persons is
intense, especially in the San Francisco Bay area. The loss of the services of
any of our key employees, the inability to attract or retain qualified personnel
in the future or delays in hiring required personnel, particularly engineers,
could delay the development and introduction of our products.
In addition, we believe that our future success is dependent upon
establishing successful relationships with a variety of distribution partners.
We have entered into agreements with several value added resellers, some of whom
also sell products that compete with our products. We cannot be certain that we
will be able to reach agreement with additional resellers on a timely basis or
at all, or that they will devote adequate resources to selling our products.
THE UNPREDICTABILITY OF OUR QUARTERLY RESULTS MAY ADVERSELY AFFECT THE TRADING
PRICE OF OUR COMMON STOCK.
Our revenues and operating results will vary significantly from quarter to
quarter due to a number of factors, including many which are outside of our
control and any of which may cause our stock price to fluctuate.
The factors that may impact the unpredictability of our quarterly results
include the long sales and implementation cycle and the reduced visibility into
customers' spending plans and associated revenues. As a result, we believe that
quarter-to-quarter comparisons of operating results are not a good indication of
future performance. It is likely that in some future quarters, operating results
may be below the expectations of public market analysts and investors in which
case the price of our common stock may fall. Our operating expenses are largely
based on anticipated revenue trends and a high percentage of our expenses are,
and will continue to be, fixed in the short term. As a result, a delay in
generating or recognizing revenue for the reasons set forth above, or for any
other reason, could cause significant variations in our operating results from
quarter to quarter and could result in substantial operating losses.
IF OUR PRODUCTS DO NOT INTEROPERATE WITH OUR CUSTOMERS' NETWORKS, INSTALLATIONS
WILL BE DELAYED OR CANCELLED AND COULD RESULT IN SUBSTANTIAL PRODUCT RETURNS
WHICH COULD HARM OUR BUSINESS.
Our products are designed to interface with our customers' existing
networks, each of which has different specifications and utilizes multiple
protocol standards. 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 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 used in our customers'
networks, we must modify our JUNOS Internet software to fix or overcome these
errors so that our products will interoperate and scale with the existing
software and hardware. If our products do not interoperate with those of our
customers' networks, installations could be delayed, orders for our products
could be cancelled or our products could be returned. This would also seriously
harm our reputation, which could seriously harm our business and prospects.
Because our products are complex and are deployed in complex environments, they
may have errors or defects that we find only after full deployment, which could
seriously harm our business.
14
Our products are highly complex and designed to be deployed in very large
and complex networks. Although we have thoroughly tested our products, because
of the nature of the product, it can only be fully tested when deployed in very
large networks with high amounts of traffic. To date, our products have been
deployed only on a limited basis. Consequently, our customers may discover
errors or defects in the hardware or the software after it has been fully
deployed. If we are unable to fix errors or other problems that may be
identified in full deployment, we could experience, among other things, loss of
or delay in revenues and loss of market share, loss of customers, diversion of
development resources and increased service and warranty costs.
CUSTOMER PRODUCT LIABILITY CLAIMS BASED ON ERRORS IN OUR SOFTWARE OR MISTAKES IN
PERFORMING OUR SERVICES COULD RESULT IN COSTLY LITIGATION AGAINST US.
We may be subject to claims based on errors in our software or mistakes in
performing our services, including claims relating to damages to our customers'
internal systems. Our contracts with our customers generally contain provisions
designed to limit our exposure to potential product liability claims, such as
disclaimers of warranties and limitations on liability for special,
consequential and incidental damages. We believe our product liability insurance
is adequate to cover potential product liability claims. However, a product
liability claim, whether successful or not, could seriously impact our capital
reserves, harm our reputation, and direct the attention of key personnel away
from our business, any of which could harm our business.
PROBLEMS ARISING FROM USE OF OUR PRODUCTS IN CONJUNCTION WITH OTHER VENDORS'
PRODUCTS COULD DISRUPT OUR BUSINESS AND HARM OUR FINANCIAL CONDITION.
Service providers typically use our products in conjunction with products
from other vendors. As a result, when problems occur, it may be difficult to
identify the source of the problem. These problems may cause us to incur
significant warranty and repair costs, divert the attention of our engineering
personnel from our product development efforts and cause significant customer
relations problems.
OUR PRODUCTS ARE NEW AND FACE RAPID TECHNOLOGICAL CHANGES AND EVOLVING STANDARDS
AND IF WE DO NOT RESPOND IN A TIMELY MANNER, OUR BUSINESS COULD BE HARMED.
The Internet infrastructure market is characterized by rapid technological
change, frequent new product introductions, changes in customer requirements and
evolving industry standards. In developing our products, we have made, and will
continue to make, assumptions with respect to which standards will be adopted by
our customers and competitors. If the standards adopted are different from those
which we have chosen to support, market acceptance of our products may be
significantly reduced or delayed and our business will be seriously harmed. In
addition, the introduction of products embodying new technologies and the
emergence of new industry standards could render our existing products obsolete.
In addition, in order to introduce products embodying new technologies and
new industry standards, we must be able to gain access to the latest
technologies of our suppliers such as IBM. Any failure to gain access to the
latest technologies could harm our business and operating results.
OUR FAILURE TO ESTABLISH AND MAINTAIN KEY CUSTOMER RELATIONSHIPS MAY RESULT IN
DELAYS IN INTRODUCING NEW PRODUCTS OR CAUSE CUSTOMERS TO FOREGO PURCHASING OUR
PRODUCTS.
Our future success will also depend upon our ability to develop and manage
key customer relationships in order to introduce a variety of new products and
product enhancements that address the increasingly sophisticated needs of our
customers. Our failure to establish and maintain these customer relationships
may adversely affect our ability to develop new products and product
enhancements. In addition, we may experience delays in releasing new products
and product enhancements in the future. Material delays in introducing new
products and enhancements or our inability to introduce competitive new products
may cause customers to forego purchases of our products and purchase those of
our competitors, which could seriously harm our business.
OUR BUSINESS WILL BE ADVERSELY AFFECTED IF WE ARE UNABLE TO PROTECT OUR
INTELLECTUAL PROPERTY RIGHTS FROM THIRD-PARTY CHALLENGES.
15
We rely on a combination of patent, copyright, trademark and trade secret
laws and restrictions on disclosure to protect our intellectual property rights.
We also enter into confidentiality or license agreements with our employees,
consultants and corporate partners, and control access to and distribution of
our software, documentation and other proprietary information. Despite our
efforts to protect our proprietary rights, unauthorized parties may attempt to
copy or otherwise obtain and use our products or technology. Monitoring
unauthorized use of our products is difficult and we cannot be certain that the
steps we have taken will prevent unauthorized use of our technology,
particularly in foreign countries where the laws may not protect our proprietary
rights as fully as in the United States.
NECESSARY LICENSES OF THIRD-PARTY TECHNOLOGY MAY NOT BE AVAILABLE TO US OR MAY
BE VERY EXPENSIVE.
From time to time we may be required to license technology from third
parties to develop new products or product enhancements. We cannot assure you
that third party licenses will be available to us on commercially reasonable
terms, if at all. The inability to obtain any third-party license required to
develop new products and product enhancements could require us to obtain
substitute technology of lower quality or performance standards or at greater
cost either of which could seriously harm our business, financial condition and
results of operations.
WE COULD BECOME SUBJECT TO LITIGATION REGARDING INTELLECTUAL PROPERTY RIGHTS
WHICH COULD SERIOUSLY HARM OUR BUSINESS.
In recent years, there has been significant litigation in the United States
involving patents and other intellectual property rights. Although we are not
involved in any intellectual property litigation, we may be a party to
litigation in the future to protect our intellectual property or as a result of
an alleged infringement of others' intellectual property. Claims for alleged
infringement and any resulting lawsuit, if successful, could subject us to
significant liability for damages and invalidation of our proprietary rights.
These lawsuits, regardless of their success, would likely be time-consuming and
expensive to resolve and would divert management time and attention. Any
potential intellectual property litigation could also force us to do one or more
of the following:
- stop selling, incorporating or using our products that use the
challenged intellectual property;
- obtain from the owner of the infringed intellectual property right a
license to sell or use the relevant technology, which license may not be
available on reasonable terms, or at all; or
- redesign those products that use such technology.
If we are forced to take any of the foregoing actions, our business may be
seriously harmed. Although we carry general liability insurance, our insurance
may not cover potential claims of this type or may not be adequate to indemnify
us for all liability that may be imposed.
IF WE BECOME SUBJECT TO UNFAIR HIRING CLAIMS WE COULD INCUR SUBSTANTIAL COSTS IN
DEFENDING OURSELVES.
Companies in our industry whose employees accept positions with competitors
frequently claim that their competitors have engaged in unfair hiring practices.
We have received claims of this kind in the past and we cannot assure you that
we will not receive claims of this kind in the future as we seek to hire
qualified personnel or that those claims will not result in material litigation.
We could incur substantial costs in defending ourselves against these claims,
regardless of their merits.
ANY ACQUISITIONS WE MAKE COULD DISRUPT OUR BUSINESS AND HARM OUR FINANCIAL
CONDITION.
We intend to make investments in complementary companies, products or
technologies. In the event of any such investments or acquisitions, we could
issue stock that would dilute our current stockholders' percentage ownership,
incur debt, assume liabilities, incur amortization expenses related to goodwill
and other intangible assets, or incur large and immediate write-offs.
These acquisitions also involve numerous risks, including problems combining
the purchased operations, technologies or products, unanticipated costs,
diversion of management's attention from our core business, adverse effects on
existing business relationships with suppliers and customers, risks associated
with entering markets in which we have no or
16
limited prior experience, and potential loss of key employees, particularly
those of the acquired organizations. We cannot assure you that we will be able
to successfully integrate any businesses, products, technologies or personnel
that we might acquire in the future.
WE FACE RISKS ASSOCIATED WITH OUR INTERNATIONAL OPERATIONS THAT COULD HARM OUR
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
We market, sell and service our products in the United States and
internationally. We have established offices throughout Europe and in the Asia
Pacific region. We will continue to expand our international operations and
enter new international markets. This expansion will require significant
management attention and financial resources to develop successfully direct and
indirect international sales and support channels. We may not be able to
maintain or increase international market demand for our products.
International operations are subject to inherent risks, including greater
difficulty in accounts receivable collection and longer collection periods,
difficulties and costs of staffing and managing foreign operations, the impact
of recessions in economies outside the United States, unexpected changes in
regulatory requirements, certification requirements, reduced protection for
intellectual property rights in some countries, potentially adverse tax
consequences, and political and economic instability.
Our international revenues were $279.4 million for the year ended December
31, 2001 and are denominated in U.S. dollars. Consequently, we do not currently
engage in currency hedging activities. However, a portion of our international
revenues may be denominated in foreign currencies in the future.
RISKS RELATED TO THE 4.75% SUBORDINATED CONVERTIBLE NOTES DUE MARCH 15, 2007
In March 2000 we completed an offering (the "Debt Offering") of 1.1 billion
in 4.75% Subordinated Convertible Notes Due March 15, 2007 (the "Convertible
Notes"). In connection with the Convertible Notes, we are subject to certain
risks in addition to those described above. Those additional risks include the
following.
SUBSTANTIAL LEVERAGE AND DEBT SERVICE OBLIGATIONS MAY ADVERSELY AFFECT OUR CASH
FLOW.
As a result of the Debt Offering we have a substantial amount of outstanding
indebtedness. As a result of this indebtedness, our principal and interest
payment obligations have increased substantially. There is the possibility that
we may be unable to generate cash sufficient to pay the principal of, interest
on and other amounts due with respect to the Convertible Notes when due. We may
also add additional equipment loans and lease lines to finance capital
expenditures and may obtain additional long-term debt, working capital lines of
credit and lease lines.
OUR SUBSTANTIAL LEVERAGE COULD HAVE SIGNIFICANT NEGATIVE CONSEQUENCES,
INCLUDING:
- increasing our vulnerability to general adverse economic and industry
conditions;
- limiting our ability to obtain additional financing;
- requiring the dedication of a substantial portion of our expected cash
flow from operations to service our indebtedness, thereby reducing the
amount of our expected cash flow available for other purposes, including
capital expenditures;
- limiting our flexibility in planning for, or reacting to, changes in our
business and the industry in which we compete; and
- placing us at a possible competitive disadvantage relative to less
leveraged competitors and competitors that have better access to capital
resources.
ITEM 2 PROPERTIES
17
We lease approximately 144,000 and 122,000 square feet in two buildings
located in Sunnyvale, California. We have entered into a lease for a third
building of approximately 122,000 square feet also in Sunnyvale, California. The
lease on the office space for 144,000 square feet commenced on July 1, 2000 and
it will expire on June 30, 2012, with certain options for extension and
expansion and the lease for the 122,000 square feet commenced February 1, 2001
and expires February 14, 2013. In addition, in January 2001 we acquired
approximately 80 acres of land in Sunnyvale, California for the location of a
future corporate campus. In addition to smaller sales offices, we have regional
offices in the following locations:
NORTH AMERICA EMEA APAC
------------- ---- ----
Sunnyvale, California Leatherhead, England Hong Kong
Denver, Colorado Amsterdam, The Netherlands Tokyo, Japan
Herndon, Virginia Dublin, Ireland Beijing, China
Waltham, Massachusetts Paris, France Sydney, Australia
The commercial real estate market in the San Francisco Bay area is volatile
and unpredictable in terms of available space, rental fees, occupancy rates and
preferred locations. We cannot be certain that additional space will be
available when we require it, or that it will be affordable or in a preferred
location. See Note 5 of the Notes to the Consolidated Financial Statements in
Exhibit 13.1 hereto.
ITEM 3 LEGAL PROCEEDINGS
In December 2001, a class action complaint was filed in the United States
District Court for the Southern District of New York against the Goldman Sachs
Group, Inc., Credit Suisse First Boston Corporation, Fleetboston Robertson
Stephens, Inc., Royal Bank of Canada (Dain Rauscher Wessels), SG Cowen
Securities Corporation, UBS Warburg LLC (Warburg Dillon Read LLC), Chase
(Hambrecht & Quist LLC), J.P. Morgan Chase & Co., Lehman Brothers, Inc., Salomon
Smith Barney, Inc., Merrill Lynch, Pierce, Fenner & Smith, Incorporated, the
Company and certain of the Company's officers. This action was brought on behalf
of purchasers of the Company's common stock in the Company's initial public
offering in June 1999 and its secondary offering in September 1999.
Specifically, among other things, this complaint alleged that the prospectus
pursuant to which shares of common stock were sold in the Company's initial
public offering and its subsequent secondary offering contained certain false
and misleading statements or omissions regarding the practices of the Company's
underwriters with respect to their allocation of shares of common stock in these
offerings and their receipt of commissions from customers related to such
allocations. The Company believes the claim is without merit and intends to
defend the action vigorously.
Beginning on February 13, 2002, a number of purported shareholder class
action lawsuits were filed in the United States District Court for the Northern
District of California against the Company and certain of its officers and
former officers. The lawsuits are essentially identical and purport to bring
suit on behalf of those who purchased the Company's publicly traded securities
between April 12, 2001 and June 7, 2001. The plaintiffs allege that the
defendants made false and misleading statements, assert claims for violations of
the federal securities laws and seek unspecified compensatory damages and other
relief. The Company believes the claims are without merit and intends to defend
the actions vigorously.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security-holders during the fourth
quarter of the fiscal year covered by this report.
18
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDERS MATTERS
Our common stock has been quoted on the Nasdaq National Market under the
symbol "JNPR" since June 25, 1999. Prior to that time, there was no public
market for the common stock. All stock information has been adjusted to reflect
the three-for-one split, effected in the form of a stock dividend to each
stockholder of record as of December 31, 1999 and a two-for-one split, effected
in the form of a stock dividend to each stockholder of record as of May 15,
2000. Juniper Networks has never paid cash dividends on its common stock and has
no present plans to do so. There were approximately 1,519 stockholders of record
at March 15, 2002. The following table sets forth the high and low closing bid
prices as reported on Nasdaq:
Q1 Q2 Q3 Q4
------- ------- ------- -------
2000
High................ $153.50 $147.94 $230.50 $243.00
Low................. $ 51.29 $ 74.00 $127.00 $ 93.94
2001
High................ $136.62 $65.58 $31.76 $27.01
Low................. $ 37.96 $28.30 $ 9.70 $ 9.29
On December 14, 2001, the Company issued an aggregate of 4,616,216 shares of
common stock to the stockholders of Pacific Broadband Communications Inc.
("PBC") in connection with the merger of PBC with and into the Company. The
issuance was exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933.
19
ITEM 6 SELECTED FINANCIAL DATA
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2001 2000 1999 1998 1997
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net revenues ............................. $ 887,022 $ 673,501 $ 102,606 $ 3,807 $ --
Operating income (loss) .................. 40,863 194,089 (14,620) (32,270) (11,598)
Net income (loss) ........................ $ (13,417) $ 147,916 $ (9,034) $ (30,971) $ (10,363)
========= ========= ========= ========= =========
Net income (loss) per share:
Basic .................................... $ (0.04) $ 0.49 $ (0.05) $ (0.40) $ (0.20)
========= ========= ========= ========= =========
Diluted .................................. $ (0.04) $ 0.43 $ (0.05) $ (0.40) $ (0.20)
========= ========= ========= ========= =========
Shares used in computing net income (loss)
per share (1):
Basic .................................... 319,378 304,381 189,322 77,742 51,546
========= ========= ========= ========= =========
Diluted .................................. 319,378 347,858 189,322 77,742 51,546
========= ========= ========= ========= =========
AS OF DECEMBER 31,
--------------------------------------------------------------------------
2001 2000 1999 1998 1997
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term
investments ........................... $ 989,642 $1,144,743 $ 345,958 $ 20,098 $ 46,227
Working capital ......................... 883,829 1,132,139 322,170 14,432 44,691
Total assets ............................ 2,389,588 2,103,129 513,378 36,671 50,210
Total long-term liabilities ............. 1,150,000 1,156,719 -- 5,204 2,083
Total stockholders' equity .............. 997,369 730,002 457,715 17,065 46,048
- ----------
(1) See Note 12 of Notes to Consolidated Financial Statements in Exhibit 13.1
hereto for an explanation of the determination of the shares used to compute
net loss per share.
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
For the information required by this Item, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the 2001 Annual
Report to Stockholders in Exhibit 13.1 hereto.
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
For the information required by this Item, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the 2001 Annual
Report to Stockholders in Exhibit 13.1 hereto.
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
For the information required by this Item, see the Consolidated Financial
Statements and Notes thereto in the 2001 Annual Report to Stockholders in
Exhibit 13.1 hereto.
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Not Applicable.
20
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Our directors and executive officers and their ages, as of December 31, 2001,
are as follows:
NAME AGE POSITION
- ---- --- --------
Scott Kriens........................... 44 President, Chief Executive Officer and Chairman of
the Board
Pradeep Sindhu......................... 49 Chief Technical Officer and Vice Chairman of the
Board
Marcel Gani............................ 49 Chief Financial Officer
Peter L. Wexler........................ 46 Vice President Wireless Business
William R. Hearst III.................. 58 Director
Vinod Khosla........................... 47 Director
C. Richard Kramlich.................... 66 Director
Stratton Sclavos....................... 40 Director
William R. Stensrud.................... 52 Director
SCOTT KRIENS has served as President, Chief Executive Officer and Chairman
of the board of directors of Juniper Networks since October 1996. From April
1986 to January 1996, Mr. Kriens served as Vice President of Sales and Vice
President of Operations at StrataCom, Inc., a telecommunications equipment
company, which he co-founded in 1986. Mr. Kriens received a B.A. in Economics
from California State University, Hayward. Mr. Kriens also serves on the boards
of directors of Equinix, Inc. and Verisign, Inc.
PRADEEP SINDHU co-founded Juniper Networks in February 1996 and served as
Chief Executive Officer and Chairman of the board of directors until September
1996. Since then, Dr. Sindhu has served as Vice Chairman of the board of
directors and Chief Technical Officer of Juniper Networks. From September 1984
to February 1991, Dr. Sindhu worked as a Member of the Research Staff, and 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, Xerox
Corporation, Palo Alto Research Center, a technology research center. Dr. Sindhu
holds a B.S.E.E. from the Indian Institute of Technology in Kanpur, an M.S.E.E.
from the University of Hawaii and a Masters in Computer Science and Ph.D. in
Computer Science from Carnegie-Mellon University.
MARCEL GANI joined Juniper Networks as Chief Financial Officer in February
1997. From January 1996 to January 1997, Mr. Gani served as Vice President and
Chief Financial Officer of NVIDIA Corporation, a 3D graphic processor company.
Mr. Gani also held the positions of Vice President and Chief Financial Officer
at Grand Junction Networks, a data networking company acquired by Cisco Systems,
Inc., from March 1995 to January 1996, and at Primary Access Corporation, a data
networking company acquired by 3Com Corporation, from March 1993 to March 1995.
Mr. Gani holds an M.B.A. from the University of Michigan. Mr. Gani also serves
on the board of directors of AirFiber, Inc.
PETER L. WEXLER joined Juniper Networks as Vice President of Engineering in
January 1997. From April 1995 to January 1997, Mr. Wexler served as Vice
President of Engineering at Bay Networks, a data networking company. From April
1993 to April 1995, Mr. Wexler served as Director of High-End Platform
Development at Wellfleet Communications, a predecessor to Bay Networks and a
manufacturer of high-performance routers. He holds a B.S.E. from State
University of New York at Stony Brook, an M.S.E. from the University of Illinois
and an M.B.A. from Boston University.
WILLIAM R. HEARST III is a partner with Kleiner Perkins Caufield & Byers, a
venture capital firm located in Menlo Park, California. He has served on the
Board of Directors of Juniper Networks since February 1996. From May 1995 to
August 1996, he was the Chief Executive Officer of At Home Corporation, a high
speed Internet access and consumer online services company. Mr. Hearst was
editor and publisher of the San Francisco Examiner from 1984 until 1995. Mr.
Hearst serves on the boards of directors of The Hearst Corporation and
Hearst-Argyle Television. He also serves on the boards of Oblix, Inc.,
AllBusiness, Zing, OnFiber and Applied Minds. He is a Fellow of the American
Association for the Advancement of Science and a trustee of Carnegie
Institution, the Hearst Foundation, Mathematical Sciences Research Institute,
the California Academy of Sciences and Grace Cathedral of San Francisco. Mr.
Hearst received an AB degree in Mathematics in 1972 from Harvard University.
VINOD KHOSLA has been a General Partner with the venture capital firm of
Kleiner Perkins Caufield & Byers since February 1986. He has served on the
Board of Directors of Juniper Networks since February 1996. Mr. Khosla was a
co-founder of Daisy Systems Corporation, an electronic design automation
company, and the founding Chief Executive Officer of Sun Microsystems, Inc., a
computer and data networking company. Mr. Khosla also serves on the boards of
directors of Asera, Redback Networks, Inc., QWEST Communications International,
Inc., Centrata, Nanotectonica, Zambeel, Zaplet and Zepton Networks. Mr. Khosla
holds a B.S.E.E. from the Indian Institute of Technology in New Delhi, an M.S.E.
from Carnegie-Mellon University, and an M.B.A. from the Stanford Graduate School
of Business.
C. RICHARD KRAMLICH is the co-founder and has been a General Partner of New
Enterprise Associates, L.P., a venture capital fund, since 1978. He has served
on the Board of Directors of Juniper Networks since February 1996. He also
serves on the boards of directors of Zhone Technologies, Force 10 Networks,
Financial Engines, Zambeel, Foveon and Silicon Graphics, Inc. Mr. Kramlich
holds a B.S. in History from Northwestern University and an M.B.A. from Harvard
Business School.
STRATTON SCLAVOS has been President and Chief Executive Officer of VeriSign
21
Inc. since July 1995. He has served on the Board of Directors of Juniper
Networks since May 2000. From October 1993 to June 1995, he was Vice President,
Worldwide Marketing and Sales of Taligent, Inc., a software development company
that was a joint venture among Apple Computer, Inc., IBM and Hewlett-Packard.
Prior to that time, he served in various sales, business development and
marketing capacities for GO Corporation, MIPS Computer Systems, Inc. and
Megatest Corporation. Mr. Sclavos also serves on the boards of directors of
Keynote Systems, Inc. and Marimba, Inc. Mr. Sclavos received his B.S. in
Electrical and Computer Engineering from the University of California at Davis
in 1981.
WILLIAM R. STENSRUD has been a General Partner with the venture capital firm
of Enterprise Partners since January 1997. He has served on the Board of
Directors of Juniper Networks since October 1996. Mr. Stensrud was an
independent investor and turnaround executive from March 1996 to January 1997.
During this period, Mr. Stensrud served as President of Paradyne Corporation and
as a director of Paradyne Corporation, GlobeSpan Corporation and Paradyne
Partners LLP, all data networking companies. From January 1992 to July 1995,
Mr. Stensrud served as President and Chief Executive Officer of Primary Access
Corporation, a data networking company acquired by 3Com Corporation. From 1986
to 1992, Mr. Stensrud served as the Marketing Vice President of StrataCom, Inc.,
a telecommunications equipment company, which Mr. Stensrud co-founded. Mr.
Stensrud also serves on the boards of directors of Paradyne Corporation,
Airfiber, Alvesta, Calient Networks, Ensemble Communications, Inc., LongBoard,
Inc., Solus Micro Technologies, Novera Optics. He holds a B.S. degree in
Electrical Engineering and Computer Science from Massachusetts Institute of
Technology.
Juniper Networks believes that during 2001, all filings with the SEC by its
officers, directors and 10% stockholders complied with requirements for
reporting ownership and changes in ownership of Juniper Networks common stock
under Section 16(a) of the Securities Exchange Act of 1934, as amended; however,
the Company determined that Mr. Wexler inadvertently failed to report the sale
of shares of the Company's Common Stock on his Form 4 for the month of April
2001. Mr. Wexler subsequently filed a Form 4 reporting such sale.
ITEM 11 EXECUTIVE COMPENSATION
The information required by this Item 11 is incorporated by reference to our
Definitive Proxy Statement with respect to our 2002 Annual Meeting of
Stockholders to be filed with the Securities and Exchange Commission not later
than 120 days after the end of the fiscal year.
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item 12 is incorporated by reference to our
Definitive Proxy Statement with respect to our 2002 Annual Meeting of
Stockholders to be filed with the Securities and Exchange Commission not later
than 120 days after the end of the fiscal year.
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item 13 is incorporated by reference to our
Definitive Proxy Statement with respect to our 2002 Annual Meeting of
Stockholders to be filed with the Securities and Exchange Commission not later
than 120 days after the end of the fiscal year.
PART IV
ITEM 14 EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
A) FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
1. FINANCIAL STATEMENTS
Consolidated Balance Sheets -- As of December 31, 2001 and 2000
Consolidated Statements of Operations -- For the Three Years Ended
December 31, 2001
Consolidated Statement of Stockholders' Equity -- For the Three Years
Ended December 31, 2001
Consolidated Statements of Cash Flows -- For the Three Years Ended
December 31, 2001
Notes to Consolidated Financial Statements
Report of Independent Auditors
2. CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
The following financial statement schedule of Juniper Networks is filed as
part of this Report and should be read in conjunction with the Financial
Statements of Juniper Networks.
PAGE
Schedule II: Valuation and Qualifying Accounts and Reserves 24
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
22
B) EXHIBITS
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT
-------------- -----------------------
2.1 Agreement and Plan of Reorganization dated as of November 11,
2001 between the Registrant and Pacific Broadband Communications
Inc.
3.1 Juniper Networks, Inc. Amended and Restated Certificate of
Incorporation (incorporated by reference to exhibit 3.1 to the
Registrant's annual report on Form 10-K for the fiscal year
ended December 31, 2000)
3.2 Amended and Restated Bylaws of Juniper Networks, Inc.
(incorporated by reference to exhibit 3.2 to the Registrant's
annual report on Form 10-K for the fiscal year ended December
31, 2000)
4.1 Form of Indenture by and between the Registrant and Norwest Bank
Minnesota, N.A. (incorporated herein by reference to Exhibit 4.3
to the Registrant's registration statement on Form S-1 No.
333-96171)
10.1 Form of Indemnification Agreement entered into by the
Registrant with each of its directors, officers and certain
employees (incorporated herein by reference to Exhibit 10.1 to
the Registrant's registration statement on Form S-1 No.
333-76681)
10.2 Amended and Restated 1996 Stock Plan (incorporated herein by
reference to Exhibit 10.2 to the Registrant's registration
statement on Form S-8 No. 333-57860)
10.3 1999 Employee Stock Purchase Plan (incorporated herein by
reference to Exhibit 10.3 to the Registrant's registration
statement on Form S-8 No. 333-57864)
10.4 2000 Nonstatutory Stock Option Plan (incorporated herein by
reference to Exhibit 4.1 to the Registrant's registration
statement on Form S-8 No. 333-57862)
10.5 Change of Control Agreement between Scott Kriens and the
Registrant dated October 1, 1996 (incorporated herein by
reference to Exhibit 10.6 to the Registrant's registration
statement on Form S-1 No. 333-76681)
10.6 Change of Control Agreement between Marcel Gani and the
Registrant dated February 18, 1997 (incorporated herein by
reference to Exhibit 10.7 to the Registrant's registration
statement on Form S-1 No. 333-76681)
10.7 Agreement for ASIC Design and Purchase of Products between IBM
Microelectronics and the Registrant dated August 26, 1997 and
Amendments One and Two to the agreement dated January 5, 1998
and March 2, 1998, respectively (incorporated herein by
reference to Exhibit 10.8, 10.8.1 and 10.8.2, respectively, to
the Registrant's registration statement on Form S-1 No.
333-76681)
10.8 Lease between Mathilda Associates LLC and the Registrant dated
June 18, 1999 (incorporated herein by reference to Exhibit 10.10
to the Registrant's registration statement on Form S-1 No.
333-76681)
10.9 Lease between Mathilda Associates LLC and the Registrant dated
February 28, 2000 (incorporated herein by reference to Exhibit
10.9 to the Registrant's annual report on Form 10-K for the
fiscal year ended December 31, 2000)
13.1 2001 Annual Report to Stockholders (deemed to be filed to the
extent that information is specifically incorporated by
reference)
21.1 Subsidiaries of the Company
23.1 Consent of Ernst & Young LLP, Independent Auditors
24.1 Power of Attorney (see page 24)
C) REPORTS ON FORM 8-K
None.
23
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, on this 29th day of
March, 2002.
JUNIPER NETWORKS, INC.
By: /s/ Marcel Gani
--------------------------------------
Marcel Gani
Chief Financial Officer
(Duly Authorized Officer and Principal
Financial and Accounting Officer)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Lisa C. Berry and Marcel Gani, and each of
them individually, as his attorney-in-fact, each with full power of
substitution, for him in any and all capacities to sign any and all amendments
to this 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 in the capacities and on
the date indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Scott Kriens President, Chief Executive Officer and March 29, 2002
- -------------------------------------------- Chairman of the Board (Principal
Scott Kriens Executive Officer)
/s/ Marcel Gani Chief Financial Officer (Principal March 29, 2002
- -------------------------------------------- Financial and Accounting Officer)
Marcel Gani
/s/ Pradeep Sindhu Chief Technical Officer and Vice Chairman March 29, 2002
- -------------------------------------------- of Board
Pradeep Sindhu
/s/ William R. Hearst III Director March 29, 2002
- --------------------------------------------
William R. Hearst III
/s/ Vinod Khosla Director March 29, 2002
- --------------------------------------------
Vinod Khosla
/s/ C. Richard Kramlich Director March 29, 2002
- --------------------------------------------
C. Richard Kramlich
/s/ Stratton Sclavos Director March 29, 2002
- --------------------------------------------
Stratton Sclavos
/s/ William Stensrud Director March 29, 2002
- --------------------------------------------
William Stensrud
24
JUNIPER NETWORKS, INC.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(IN THOUSANDS)
BALANCE AT CHARGED TO
BEGINNING COSTS AND BALANCE AT
DESCRIPTION OF YEAR EXPENSES DEDUCTIONS END OF YEAR
- ----------- ---------- ---------- ---------- -----------
Year ended December 31, 2001
Allowance for doubtful accounts ... $3,727 $7,200 $(1,936) $8,991
Year ended December 31, 2000
Allowance for doubtful accounts ... $ 632 $3,095 $-- $3,727
Year ended December 31, 1999
Allowance for doubtful accounts ... $-- $ 632 $-- $ 632
25
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- ----------------------
2.1 Agreement and Plan of Reorganization dated as of November 11,
2001 between the Registrant and Pacific Broadband Communications
Inc.
3.1 Juniper Network, Inc. Amended and Restated Certificate of
Incorporation (incorporated by reference to exhibit 3.1 to the
Registrant's annual report on Form 10-K for the fiscal year
ended December 31, 2000)
3.2 Amended and Restated Bylaws of Juniper Networks, Inc.
(incorporated by reference to exhibit 3.2 to the Registrant's
annual report on Form 10-K for the fiscal year ended December
31, 2000)
4.1 Form of Indenture by and between the Registrant and Norwest Bank
Minnesota, N.A. (incorporated herein by reference to Exhibit 4.3
to the Registrant's registration statement on Form S-1 No.
333-96171)
10.1 Form of Indemnification Agreement entered into by the Registrant
with each of its directors, officers and certain employees
(incorporated herein by reference to Exhibit 10.1 to the
Registrant's registration statement on Form S-1 No. 333-76681)
10.2 Amended and Restated 1996 Stock Plan (incorporated herein by
reference to Exhibit 10.2 to the Registrant's registration
statement on Form S-8 No. 333-57860)
10.3 1999 Employee Stock Purchase Plan (incorporated herein by
reference to Exhibit 10.3 to the Registrant's registration
statement on Form S-8 No. 333-57864)
10.4 2000 Nonstatutory Stock Option Plan (incorporated herein by
reference to Exhibit 4.1 to the Registrant's registration
statement on Form S-8 No. 333-57862)
10.5 Change of Control Agreement between Scott Kriens and the
Registrant dated October 1, 1996 (incorporated herein by
reference to Exhibit 10.6 to the Registrant's registration
statement on Form S-1 No. 333-76681)
10.6 Change of Control Agreement between Marcel Gani and the
Registrant dated February 18, 1997 (incorporated herein by
reference to Exhibit 10.7 to the Registrant's registration
statement on Form S-1 No. 333-76681)
10.7 Agreement for ASIC Design and Purchase of Products between IBM
Microelectronics and the Registrant dated August 26, 1997 and
Amendments One and Two to the agreement dated January 5, 1998
and March 2, 1998, respectively (incorporated herein by
reference to Exhibit 10.8, 10.8.1 and 10.8.2, respectively, to
the Registrant's registration statement on Form S-1 No.
333-76681)
10.8 Lease between Mathilda Associates LLC and the Registrant dated
June 18, 1999 (incorporated herein by reference to Exhibit 10.10
to the Registrant's registration statement on Form S-1 No.
333-76681)
10.9 Lease between Mathilda Associates LLC and the Registrant dated
February 28, 2000 (incorporated herein by reference to Exhibit
10.9 to the Registrant's annual report on Form 10-K for the
fiscal year ended December 31, 2000)
13.1 2001 Annual Report to Stockholders (deemed to be filed to the
extent that information is specifically incorporated by
reference)
21.1 Subsidiaries of the Company
23.1 Consent of Ernst & Young LLP, Independent Auditors
24.1 Power of Attorney (see page 24)