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Wednesday, August 16, 2006

Juniper: When Bad News Is Good JNPR

Juniper got its Nasdaq delisting letter today. It’s the one that companies get when they are late filing their 10Q or 10K because of contemplated financial restatements due to improperly recorded options grants. The stock went up over 8% to $13.50.

Now it should be stipulated that Juniper’s stock is down by 50% this year. The stock hit $24.68 as a 12-month high.

Last Friday, the company announced that its audit committee decided that a restatement would be necessary and the stock dropped to a 52-week low. At the time, the company said that its financials back to 2003 could not be relied upon.

The run-up would seem counterintuitive. But, a few things happened that might make a small rise make sense.

Juniper has already said that Q2 revenue was up 15%. The company could not say much else because the options issue will delay the audited report.

Two things did happen. Cisco, which competes with Juniper, put out very solid numbers. Investors are inferring that that if things are good for Cisco, they may be good for most companies that provide gear for IP networks.

The second thing is that the announcement of the delisting lances a boil. The company will appeal the Nasdaq decision, and, over the three or four months that the process takes, Juniper may well get its 10Q filed. No one at the company has been taken off to jail, and, so far, there are no major SEC or US Attorney issues.

Prudential Equity Group research recently told Forbes that it views Juniper as “a premier vendor in the core router market”. So, the company seems to be holding its place at the head of the pack.

Call it a relief rally, but Juniper’s shares may have seen their bottom.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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