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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[X]        Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2002

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.

(408) 745-2000
(Registrant’s telephone number including area code)

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     [   ]

There were 370,283,654 shares of the Company’s Common Stock, par value $.00001, outstanding on August 9, 2002.

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TABLE OF CONTENTS

						Page No.
PART I				FINANCIAL INFORMATION
Item 1.				Financial Statements:
				Condensed Consolidated Balance Sheets as of June 30, 2002 and December 31, 2001			3
				Condensed Consolidated Statements of Operations for the Three And Six Months Ended June 30, 2002 and June 30, 2001			4
				Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2002 and June 30, 2001			5
				Notes to Condensed Consolidated Financial Statements			6
Item 2.				Management’s Discussion and Analysis of Financial Condition and Results of Operations			12
				Factors That May Affect Future Results			19
Item 3.				Quantitative and Qualitative Disclosures About Market Risk			23
PART II				OTHER INFORMATION
Item 1.				Legal Proceedings			24
Item 6.				Exhibits and Reports on Form 8-K			24
				SIGNATURES			25

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

JUNIPER NETWORKS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

				June 30,				December 31,
				2002				2001
				(unaudited)				(1)
Assets
Current assets:
	Cash and cash equivalents			$	589,826			$	606,845
	Short-term investments				374,476				382,797
	Accounts receivable, net				62,264				103,524
	Prepaid expenses and other current assets				27,549				32,882
		Total current assets,			1,054,115				1,126,048
Property and equipment, net					258,442				251,811
Long-term investments					750,277				708,232
Other long-term assets					274,274				303,497
Total assets				$	2,337,108			$	2,389,588
Liabilities and Stockholders’ Equity
Current liabilities:
	Accounts payable			$	55,534			$	76,417
	Other accrued liabilities				127,139				128,960
	Deferred revenue				32,476				36,842
		Total current liabilities			215,149				242,219
Convertible subordinated notes					1,150,000				1,150,000
Common stock and additional paid-in capital					952,778				959,684
Deferred stock compensation					(30,984	)			(63,065	)
Accumulated other comprehensive income					7,605				18,418
Retained earnings					42,560				82,332
Total stockholders’ equity					971,959				997,369
Total liabilities and stockholders’ equity				$	2,337,108			$	2,389,588

See accompanying notes.

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JUNIPER NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(unaudited)

						Three months ended								Six months ended
						June 30,								June 30,
						2002				2001				2002				2001
Net Revenues:
				Product		$	99,012			$	187,870			$	203,558			$	511,715
				Service			18,024				14,311				35,697				22,571
	Total net revenues						117,036				202,181				239,255				534,286
Cost of revenues:
				Product			36,153				67,305				75,864				163,961
				Service			12,002				13,175				22,287				30,260
	Total cost of revenues						48,155				80,480				98,151				194,221
Gross profit							68,881				121,701				141,104				340,065
Operating expenses:
	Research and development						33,770				42,077				68,839				85,068
	Sales and marketing						25,894				35,963				53,472				77,285
	General and administrative						9,104				9,439				18,653				19,907
	Amortization of goodwill						—				11,647				—				23,294
	Amortization of purchased intangibles and deferred stock compensation (1)						(6,362	)			19,470				8,913				44,406
	Restructuring charges						—				12,340				—				12,340
				Total operating expenses			62,406				130,936				149,877				262,300
Operating income (loss)							6,475				(9,235	)			(8,773	)			77,765
Interest income							15,380				25,454				32,132				52,425
Interest expense							(14,763	)			(15,538	)			(29,895	)			(30,517	)
Impairment loss on equity investments							—				(32,620	)			(30,600	)			(42,620	)
Equity in net loss of joint venture							(111	)			(1,085	)			(1,136	)			(1,085	)
Income (loss) before income taxes							6,981				(33,024	)			(38,272	)			55,968
Provision for income taxes							750				4,107				1,500				34,533
Net income (loss)						$	6,231			$	(37,131	)		$	(39,772	)		$	21,435
Net income (loss) per share:
		Basic				$	0.02			$	(0.12	)		$	(0.12	)		$	0.07
		Diluted				$	0.02			$	(0.12	)		$	(0.12	)		$	0.06
Shares used in computing net income (loss) per share:
		Basic					330,957				318,196				330,162				316,883
		Diluted					342,172				318,196				330,162				343,563
(1)  Deferred stock compensation relates to the following cost and expense categories by period:
			Cost of revenues			$	291			$	50			$	633			$	108
			Research and development				(8,031	)			18,628				3,159				42,694
			Sales and marketing				(610	)			76				1,096				166
			General and administrative				342				33				733				71
				Total		$	(8,008	)		$	18,787			$	5,621			$	43,039

See accompanying notes.

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JUNIPER NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)

					Six months ended June 30,
					2002				2001
Cash flows from operating activities:
Net income (loss)					$	(39,772	)		$	21,435
	Adjustments to reconcile net income (loss) to net cash provided by operating activities:
		Depreciation				18,461				9,956
		Amortization of goodwill				—				23,294
		Amortization of purchased intangibles, deferred stock compensation and other non-cash transactions				10,823				46,313
		Impairment loss on equity investments				30,600				42,620
		Changes in operating assets and liabilities:
			Accounts receivable, net			41,260				39,414
			Other assets			6,103				1,804
			Accounts payable and accrued liabilities			(23,258	)			48,130
			Deferred revenue			(4,366	)			(4,795	)
Net cash provided by operating activities						39,851				228,171
Cash flows from investing activities:
Purchases of property and equipment						(20,592	)			(225,731	)
Purchases of available-for-sale investments						(602,348	)			(1,009,318	)
Maturities of available-for-sale investments						558,506				933,300
Minority equity investments						(1,000	)			(9,600	)
Net cash used in investing activities						(65,434	)			(311,349	)
Cash flows from financing activities:
Proceeds from issuance of common stock						8,564				32,588
Net cash provided by financing activities						8,564				32,588
Net decrease in cash and cash equivalents						(17,019	)			(50,590	)
Cash and cash equivalents at beginning of period						606,845				563,005
Cash and cash equivalents at end of period					$	589,826			$	512,415
Supplemental disclosures of cash flow information
Cash paid for interest					$	27,313			$	27,313

See accompanying notes.

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JUNIPER NETWORKS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

Note 1. Description of Business

     Juniper Networks, Inc. (“Juniper Networks” or the “Company”) was established for the purpose of providing Internet infrastructure solutions to Internet service providers and other telecommunication service providers. Juniper Networks develops a wide range of core backbone, edge, mobile and cable Internet routing platforms.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

     The condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures, normally included in financial statements prepared in accordance with generally accepted accounting principles, have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the Company’s consolidated financial position at June 30, 2002, and its operating results for the three and six months ended June 30, 2002 and 2001 and cash flows for the six months ended June 30, 2002 and 2001. These condensed consolidated financial statements and notes should be read in conjunction with the Company’s audited consolidated financial statements and notes for the year ended December 31, 2001 included in the Company’s Annual Report on Form 10-K filed April 1, 2002 with the Securities and Exchange Commission.

     The results of operations for the three and six months ended June 30, 2002 are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year ending December 31, 2002.

Derivatives

     The Company has foreign subsidiaries that operate in various countries throughout the world. As a result, the Company is exposed to changes in foreign currency exchange rates. The Company uses foreign exchange forward contracts to partially offset its exposure to foreign exchange risk, rather than for trading purposes. As of June 30, 2002, the Company had foreign exchange forward contracts outstanding to partially offset the impact of currency fluctuations on anticipated cash flows in currencies other than the functional currency of the reporting entity, principally for the Euro and the British Pound. These foreign exchange forward contracts have original maturities of one to two months. Gains and losses on these contracts are included in other income (expenses) in the Company’s condensed consolidated statements of operations and offset foreign exchange gains or losses from the remeasurement of intercompany balances or other assets or liabilities denominated in currencies other than the functional currency of the reporting entity.

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Foreign Currency Translation

     Assets and liabilities of foreign operations are translated to US dollars using exchange rates in effect at the end of the period, and revenues and expenses are translated using average exchange rates for the period. Foreign currency translation gains and losses, which are included as a component of other comprehensive income (loss), have not been material to date.

Note. 3. Comprehensive Income (Loss)

     Comprehensive income (loss) is as follows (in thousands):

Note. 4 Goodwill and Purchased Intangible Assets

     Under the terms of the Pacific Broadband acquisition, which took place in December 2001, there was an earn-out provision, payable in shares of the Company’s common stock, wherein the former stockholders and employee option holders of Pacific Broadband could receive additional consideration of up to $59.0 million, upon achieving certain product development milestones and revenue targets during 2002. During the quarter ended March 31, 2002, two of the development milestones were achieved and as a result the Company issued an additional 399,000 shares of common stock. During the quarter ended June 30, 2002 an additional milestone was achieved and as a result the Company issued an additional 520,000 shares of common stock. The milestones achieved to date have a value of $10.8 million, all of which was recorded as additional goodwill.

     Juniper Networks adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (SFAS 142) on January 1, 2002. SFAS 142 requires goodwill to be tested for impairment at least annually, and written down when impaired, rather than amortized, as previous accounting standards required. Furthermore, SFAS 142 requires purchased intangible assets other than goodwill to be amortized over their useful lives unless these lives are determined to be indefinite. In accordance with SFAS 142, the Company ceased amortizing goodwill totaling $222 million as of January 1, 2002. Purchased intangible assets are carried at cost less accumulated amortization. Amortization is computed over the estimated useful lives of the respective assets, generally three years. The following table presents the impact of SFAS 142 on net income (loss) and net income (loss) per share had it been in effect for the three and six months ended June 30, 2001 (in thousands, except per-share amounts):

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     The Company is required to perform goodwill impairment tests on an annual basis and between annual tests in certain circumstances. The Company performed an impairment analysis as of January 1, 2002 and determined that there was no impairment of the goodwill as of that time. There can be no assurance that future goodwill impairment tests will not result in a charge to earnings.

     The following table presents details of the Company’s total purchased intangible assets (in thousands):

     The following table presents details of the amortization expense of purchased intangible assets as reported in the Condensed Consolidated Statement of Operations (in thousands):

     The estimated future amortization expense of purchased intangibles assets as of June 30, 2002 is as follows (in thousands):

Note 5. Minority Equity Investments

     Juniper Networks has certain minority equity investments in privately held companies. These investments are included in other long-term assets in the condensed consolidated balance sheets and are generally carried at cost as Juniper Networks owns less than 20% of the voting equity and does not have the ability to exercise significant influence over these companies. As of June 30, 2002 and December 31, 2001, the carrying values of the Company’s minority equity investments were $19.7 million and $49.3 million, respectively, which are included in other long-term assets, with one investment making up a significant portion of the totals. These investments are inherently high risk as the market for technologies or products manufactured by these companies are usually early stage at the time of the investment by Juniper Networks and such markets may never be significant. Juniper Networks could lose its entire investment in certain or all of these companies. Juniper Networks monitors these investments for impairment and makes appropriate reductions in carrying values when necessary. Juniper Networks considers financial, operational and economic data when assessing possible impairment issues. During the six months ended June 30, 2002, Juniper Networks wrote-down these investments by $30.6 million, all of which was recorded during the quarter ended March 31, 2002. During the three and six months ended June 30, 2001 similar impairment write-downs of $32.6 million and 42.6 million, respectively, were recorded.

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Note 6. Significant Customers and International Sales

     In the quarters ended June 30, 2002 and 2001, two customers individually accounted for more than 10% of net revenues. For the six months ended June 30, 2002 and 2001, two customers and one customer, respectively, accounted for more than 10% of net revenues. In the quarters ended June 30, 2002 and 2001, international sales accounted for a total of 46% and 28%, respectively, of net revenues. For the six months ended June 30, 2002 and 2001, international sales accounted for a total of 39% and 33%, respectively of net revenues.

Note 7. Net Income (Loss) Per Share

     The following table presents the calculation of basic and diluted net income (loss) per share (in thousands, except per share data):

     For the three months ended June 30, 2001 and the six months ended June 30, 2002, 18,559 and 12,340 common stock equivalents were excluded from the determination of diluted net loss per share, as the Company was in a loss position. In all periods, stock options with exercise prices in excess of the average stock price during the period have been excluded from the above calculations, as their effects would be anti-dilutive. The 4.75% Convertible Subordinated Notes, which were issued in March 2000, are anti-dilutive in all periods and, therefore, not included in the calculations above.

Note 8. Restructuring Charges

     On June 8, 2001, Juniper Networks announced a restructuring program in an effort to better align its business operations with the current market and service provider industry conditions. The restructuring program included a worldwide workforce reduction, consolidation of excess facilities and restructuring of certain business functions.

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     The costs associated with the restructuring program totaled $12.3 million and were recorded during the three months ended June 30, 2001 as operating expenses.

     The following table summarizes the activity related to the restructuring charges (in thousands):

     Amounts related to the net lease expense due to the consolidation of facilities will be paid over the respective lease terms through fiscal 2009. The Company’s estimated costs to exit these facilities are based on available commercial rates. The actual loss incurred in exiting these facilities could be different from the Company’s estimates.

Note 9. Joint Venture

     During the quarter ended June 30, 2001, Juniper Networks and Ericsson AB, through their respective subsidiaries, entered into a joint venture agreement to develop and market products for the wireless mobile Internet infrastructure market, and Juniper Networks began recording its 40% share of the joint venture’s losses using the equity method. Such losses are recorded as a single line item in the other income (expense) section of the condensed consolidated statements of operations. To date, Juniper Networks has funded the joint venture in the amount of $5.2 million. In addition to this joint venture, Ericsson is also a significant reseller of Juniper Networks representing greater than 10% of the Company’s revenues for each of the periods presented in the accompanying condensed consolidated statements of operations.

Note 10. Legal Proceedings

     The Company is subject to legal claims and litigation arising in the ordinary course of business, including the matters described below. The outcome of these matters is currently not determinable. However, the Company does not expect that such legal claims and litigation will ultimately have a material adverse effect on the Company’s consolidated financial position or results of operations.

     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

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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.

     During the quarter ended March 31, 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. In April 2002, the judge granted the defendants’ motion to consolidate all of these purported federal class actions into one. In May 2002, the court appointed the lead plaintiffs and approved their selection of lead counsel. An amended complaint was filed in July 2002. 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 action vigorously.

Note 11. Subsequent Event

     On July 1, 2002, Juniper Networks completed its acquisition of Unisphere Networks Inc., a subsidiary of Siemens Corporation. Juniper Networks exchanged approximately $375 million of cash and 36.5 million shares of Juniper Networks common stock for all the outstanding stock of Unisphere Networks Inc. The acquisition will be accounted for under the purchase method of accounting in accordance with Statement of Financial Accounting Standard (SFAS) No. 141, “Business Combinations” (SFAS 141).

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     This report for Juniper Networks contains forward-looking statements made within the meaning of the securities laws. These statements are not guarantees of future performance and are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed or forecasted. Readers should not place undue reliance on forward-looking statements, which reflect only the opinion of Juniper Networks as of the date hereof.

     The following information should be read in conjunction with the Company’s Annual Report on Form 10-K filed on April 1, 2002 with the Securities and Exchange Commission and “Factors That May Affect Future Results” herein.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

     Juniper Networks is a leading provider of Internet infrastructure solutions that enable Internet service providers and other telecommunications service providers (“Service Providers”), to meet the demands resulting from the 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, and reduced complexity and cost compared to legacy alternatives. We currently sell our products to major Service Providers primarily through our direct sales force in North America, and primarily through value added resellers internationally.

     The SEC recently advised companies to review their critical accounting policies and practices in the context of their financial statements and Management’s Discussion and Analysis of such financial statements in an effort to ensure that important information is communicated to facilitate an investor’s understanding of a company’s results of operations (FR60 “Cautionary Advice Regarding Disclosure About Critical Accounting Policies"). Our most important accounting policies often require us to make judgments or otherwise involve estimating uncertain matters that could have a material affect on our reported results of operations. These policies include those that could impact revenue such as the revenue recognition policy; those that could impact gross margins such as valuation of exposures associated with our contract manufacturing operations and estimating future warranty costs; and those that could impact the balance sheet such as valuation of non-marketable equity securities. Below we discuss these policies further, as well as the estimates and judgments involved. We have other equally important accounting policies and practices; however, once adopted these policies either generally do not require us to make significant estimates or judgments or otherwise only require implementation of the adopted policy, not a judgment as to policy itself.

Results of Operations

Net Revenues

     The net revenues for the three and six months ended June 30, 2002 and 2001 were as follows (in thousands):

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     Net product revenue for the three and six months ended June 30, 2002 decreased 47% and 60%, respectively. The decrease in net product revenue for the three months ended June 30, 2002, was primarily the result of mix change from higher priced core Internet routers to lower priced Internet routers as we increased sales into the edge, mobile, and cable markets compared to the period a year ago. The decrease in net product revenue for the six months ended June 30, 2002, was primarily the result of decreased unit sales of Internet routers due to the unfavorable economic conditions and capital spending environment as well as the mix change mentioned above compared to the period a year ago.

     Service revenue consists of support and maintenance contracts, professional services, and training courses. Net service revenue for the three and six months ended June 30, 2002 increased 26% and 58%, respectively. The increases in net service revenue were primarily the result of increases in support and maintenance revenue related to a higher installed base of our Internet routers.

     A limited number of customers have historically accounted for a substantial portion of our net revenues. Two customers individually accounted for greater than 10% of our net revenues for the quarter ended June 30, 2002 and two customers accounted for greater than 10% of our net revenues for the quarter ended June 30, 2001. We expect that a significant portion of our future net revenues will continue to come from sales of our products and services to a relatively small number of customers because our direct sales and marketing efforts are focused primarily on the world’s leading Service Providers and our distribution partners. International sales accounted for approximately 46% of our net revenues for the quarter ended June 30, 2002 as compared with 28% of our net revenues for the quarter ended June 30, 2001. We are seeking to continue to diversify our customer base, but cannot be certain that our efforts in this regard will be successful.

     The economic downturn, beginning in 2001 and continuing through today, adversely impacted our product demand and made it increasingly difficult to accurately forecast our future revenues and manufacturing requirements, as evidenced by declining quarterly revenues and a contract manufacturing charge taken in the third quarter of 2001. The market for Internet backbone routers is still evolving and that fact, combined with the economic downturn, has made visibility into and prediction of the volume and timing of orders uncertain and difficult. A customer’s decision to purchase our products typically involves a significant commitment of its resources and a lengthy evaluation and product qualification process which involves technical evaluation, integration, testing, network planning and implementation and typically takes several months. Even after making the decision to purchase our products, customers tend to deploy the products slowly and deliberately. Timing of deployment can vary widely. Customers with large networks usually expand their networks on a periodic basis. Accordingly, we expect to receive purchase orders on an irregular basis as customers try to make their purchases of our products coincide as closely in time to when the customers can offer corresponding

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services to their end customers. Because of the current economic conditions and capital spending environment, we cannot predict these sales and development cycles, which may cause future revenues and operating results to vary significantly and unexpectedly from quarter to quarter. Historically, selling prices in the Internet infrastructure equipment market have been relatively stable. However, over the past twelve months, as customers have been able to take advantage of the existing capacity in their networks and the shorter lead times for equipment, we have seen more negotiating pressure, including downward pressure on pricing. In addition, we have seen increased sales of lower priced edge Internet routers compared to core Internet routers.

     We generally recognize product revenue at the time of shipment, assuming that collectibility is reasonably assured, unless we have future obligations for such things as network interoperability or customer acceptance, in which case revenue and related costs are deferred until those obligations are met. We make assessments and judgments regarding the satisfaction of these obligations relating to network interoperability and customer acceptance, which impact when revenue is recognized. Additionally, the assessment of collectibility at the onset of an arrangement impacts when revenue is recognized. Revenue from service obligations is deferred and recognized on a straight-line basis over the contractual period, generally one year. Amounts billed in excess of revenue recognized are included as deferred revenue in the accompanying consolidated balance sheets. Our assessment of collectibility is particularly critical in determining whether revenue should be recognized in the current market environment. If collectibility is not reasonably assured, revenue is recognized when the fee is collected.

     At June 30, 2002, a total of $32.5 million of revenue was deferred, which consists of both deferred product revenue and deferred service revenue. We currently expect to recognize the majority of these amounts as revenues within the next 12 months.

Cost of Revenues

     The following table shows the cost of revenues and the gross margins for the three and six months ended June 30, 2002 and 2001 (in thousands, except percentages):