Note 1. Basis of Presentation

The unaudited Condensed Consolidated Financial Statements of Juniper Networks, Inc. (“Juniper Networks” or the “Company”) have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information as well as the instructions to Form 10-Q and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments, including normal recurring accruals, considered necessary for a fair presentation have been included. The results of operations for the three months ended March 31, 2010, are not necessarily indicative of the results that may be expected for the year ending December 31, 2010, or any future period. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Risk Factors,” “Quantitative and Qualitative Disclosures About Market Risk,” and the Consolidated Financial Statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

As of March 31, 2010, the Company owned a 60 percent interest in a joint venture with Nokia Siemens Networks B.V. (“NSN”). Given the Company’s majority ownership interest in the joint venture, the accounts of the joint venture have been consolidated with the accounts of the Company, and a noncontrolling interest has been recorded for the noncontrolling investor’s interests in the net assets and operations of the joint venture.

Reclassifications

During the three months ended March 31, 2010, the Company reclassified certain selling and marketing costs that were previously reported as cost of service revenues as sales and marketing expense. Accordingly, $6.6 million of costs reported in the first quarter of 2009 have been reclassified from cost of service revenues to sales and marketing expense to conform to the current period’s presentation. The reclassification did not impact the Company’s previously reported net revenues, segment results, operating income, net income, or earnings per share.

Note 2. Summary of Significant Accounting Policies

Recent Accounting Policy Changes

Revenue Recognition

In October 2009, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2009-13, “Multiple-Deliverable Revenue Arrangements” (“ASU 2009-13”). ASU 2009-13 changes the requirements for establishing separate units of accounting in a multiple element arrangement and requires the allocation of arrangement consideration to each deliverable to be based on the relative selling price. Concurrently with issuing ASU 2009-13, the FASB also issued ASU No. 2009-14, “Certain Revenue Arrangements That Include Software Elements” (“ASU 2009-14”). ASU 2009-14 excludes software that is contained on a tangible product from the scope of software revenue guidance if the software component and the non-software component function together to deliver the tangible products’ essential functionality. The Company early adopted these standards on a prospective basis as of the beginning of fiscal 2010 for new and materially modified arrangements originating after December 31, 2009. As a result, net revenues for the first quarter of 2010 were approximately $25 million higher than the net revenues that would have been recorded under the previous accounting rules. The increase in revenues was due to recognition of revenue for products booked and shipped during the first quarter of 2010, that contained undelivered elements for which the Company was unable to demonstrate fair value pursuant to the previous standards. Under the new standards the Company allocates the total arrangement consideration to each separable element of an arrangement based upon the relative selling price of each element. Arrangement consideration allocated to undelivered elements is deferred until delivery.

Revenue is recognized when all of the following criteria have been met:

•

Persuasive evidence of an arrangement exists. The Company generally relies upon sales contracts, or agreements, and customer purchase orders to determine the existence of an arrangement.

•

Delivery has occurred. The Company uses shipping terms and related documents, or written evidence of customer acceptance, when applicable, to verify delivery or performance. In instances where the Company has outstanding obligations related to product delivery or the final acceptance of the product, revenue is deferred until all the delivery and acceptance criteria have been met.

•

Sales price is fixed or determinable. The Company assesses whether the sales price is fixed or determinable based on the payment terms and whether the sales price is subject to refund or adjustment.

•

Collectability is reasonably assured. The Company assesses collectability based on the creditworthiness of the customer as determined by our credit checks and the customer’s payment history. The Company records accounts receivable net of allowance for doubtful accounts, estimated customer returns and pricing credits.

For fiscal 2010 and future periods, pursuant to the guidance of ASU 2009-13, when a sales arrangement contains multiple elements and software and non-software components function together to deliver the tangible products’ essential functionality, the Company allocates revenue to each element based on a selling price hierarchy. The selling price for a deliverable is based on its vendor-specific objective evidence (“VSOE”) if available, third party evidence (“TPE”) if VSOE is not available, or estimated selling price (“ESP”) if neither VSOE nor TPE is available. The Company then recognizes revenue on each deliverable in accordance with its policies for product and service revenue recognition. VSOE of fair value is based on the price charged when the element is sold separately. In determining VSOE, the Company requires that a substantial majority of the selling prices fall within a reasonable range based on historical discounting trends for specific products and services. TPE of selling price is established by evaluating largely interchangeable competitor products or services in stand-alone sales to similarly situated customers. However, as the Company’s products contain a significant element of proprietary technology and its solutions offer substantially different features and functionality, the comparable pricing of products with similar functionality typically cannot be obtained. Additionally, as the Company is unable to reliably determine what competitors products’ selling prices are on a stand-alone basis, the Company is not typically able to determine TPE. The best estimate of selling price is established considering multiple factors including, but not limited to pricing practices in different geographies and through different sales channels, gross margin objectives, internal costs, competitor pricing strategies, and industry technology lifecycles.

In multiple element arrangements where more-than-incidental software deliverables are included, revenue is allocated to each separate unit of accounting for each of the non-software deliverables and to the software deliverables as a group using the relative selling prices of each of the deliverables in the arrangement based on the aforementioned selling price hierarchy. If the arrangement contains more than one software deliverable, the arrangement consideration allocated to the software deliverables as a group is then allocated to each software deliverable using the guidance for recognizing software revenue, as amended.

The Company limits the amount of revenue recognition for delivered elements to the amount that is not contingent on the future delivery of products or services, future performance obligation, or subject to customer-specific return or refund privileges. The Company evaluates each deliverable in an arrangement to determine whether they represent separate units of accounting. A deliverable constitutes a separate unit of accounting when it has stand-alone value and there are no customer-negotiated refunds or return rights for the delivered elements. If the arrangement includes a customer-negotiated refund or return right relative to the delivered item, and the delivery and performance of the undelivered item is considered probable and substantially in the Company’s control, the delivered element constitutes a separate unit of accounting. In circumstances when the aforementioned criteria are not met, the deliverable is combined with the undelivered elements, and the allocation of the arrangement consideration and revenue recognition is determined for the combined unit as a single unit. Allocation of the consideration is determined at arrangement inception on the basis of each unit’s relative selling price. The new standards do not generally change the units of accounting for the Company’s revenue transactions. The Company cannot reasonably estimate the effect of adopting these standards on future financial periods as the impact will vary depending on the nature and volume of new or materially modified deals in any given period.

For transactions entered into prior to the first quarter of 2010, revenues for arrangements with multiple elements, such as sales of products that include services, are allocated to each element using the residual method based on the VSOE of fair value of the undelivered items pursuant to Accounting Standards Codification (“ASC”) Topic 985-605, Software – Revenue Recognition. Under the residual method, the amount of revenue allocated to delivered elements equals the total arrangement consideration less the aggregate fair value of any undelivered elements. If VSOE of fair value of one or more undelivered items does not exist, revenue is deferred and recognized at the earlier of: (i) delivery of those elements or (ii) when fair value can be established unless maintenance is the only undelivered element, in which case, the entire arrangement fee is recognized ratably over the contractual support period.

The Company accounts for multiple agreements with a single customer as one arrangement if the contractual terms and/or substance of those agreements indicate that they may be so closely related that they are, in effect, parts of a single arrangement. The Company’s ability to recognize revenue in the future may be affected if actual selling prices are significantly less than fair value. In addition, the Company’s ability to recognize revenue in the future could be impacted by conditions imposed by its customers.

For sales to direct end-users, value-added resellers, and original equipment manufacturer (“OEM”) partners, the Company recognizes product revenue upon transfer of title and risk of loss, which is generally upon shipment. It is the Company’s practice to identify an end-user prior to shipment to a value-added reseller or to an OEM partner. For the Company’s end-users and value-added resellers, there are no significant obligations for future performance such as rights of return or pricing credits. A portion of the Company’s sales is made through distributors under agreements allowing for pricing credits or rights of return. Product revenue on sales made through these distributors is recognized upon sell-through as reported by the distributors to the Company. Deferred revenue on shipments to distributors reflects the effects of distributor pricing credits and the amount of gross margin expected to be realized upon sell-through. Deferred revenue is recorded net of the related product costs of revenue.

The Company records reductions to revenue for estimated product returns and pricing adjustments, such as rebates and price protection, in the same period that the related revenue is recorded. The amount of these reductions is based on historical sales returns and price protection credits, specific criteria included in rebate agreements, and other factors known at the time. Should actual product returns or pricing adjustments differ from estimates, additional reductions to revenue may be required. In addition, the Company reports revenues net of sales taxes. Service revenues include revenue from maintenance, training, and professional services. Maintenance is offered under renewable contracts. Revenue from maintenance service contracts is deferred and is recognized ratably over the contractual support period, which is generally one to three years. Revenue from training and professional services is recognized as the services are completed or ratably over the contractual period, which is generally one year or less.

The Company sells certain interests in accounts receivable on a non-recourse basis as part of a customer financing arrangement primarily with one major financing company. Cash received under this arrangement in advance of revenue recognition is recorded as short-term debt.

Recent Accounting Pronouncements

In January 2010, the FASB issued ASU No. 2010-06, Topic 820 — Improving Disclosures about Fair Value Measurements (“ASU 2010-06”), which provides additional fair value measurement disclosures and clarifies certain existing disclosure requirements. Except for the requirement to disclose purchases, sales, issuances, and settlements of Level 3 measurements on a gross basis, the disclosure and clarification requirements are effective for interim and annual reporting periods beginning after December 15, 2009. The requirement to separately disclose purchases, sales, issuances, and settlements of recurring Level 3 measurements on a gross basis is effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. ASU 2010-06 relates to disclosure requirements only and as such does not impact the Company’s consolidated results of operations or financial condition.

In December 2009, the FASB issued ASU No. 2009-17, Topic 810 — Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities (“ASU 2009-17”), which incorporated the revised accounting guidance of variable interest entities into FASB ASC Topic 810, Consolidation. Initially issued by the FASB in June 2009, the revised guidance eliminates the qualifying special-purpose entities (“QSPE”) concept, amends the provisions on determining whether an entity is a variable interest entity and would require consolidation, and requires additional disclosures. This guidance is effective for a company’s first annual reporting period that begins after November 15, 2009, interim periods within the first annual reporting period, and for interim and annual reporting periods thereafter. The Company’s adoption of ASU 2009-17 during the first quarter of 2010 did not impact its consolidated results of operations or financial condition.

In December 2009, the FASB issued ASU No. 2009-16, Accounting for Transfers of Financial Assets (“ASU 2009-16”), which incorporated the revised accounting guidance for the transfers of financial assets into FASB ASC Topic 860, Transfers and Servicing. Initially issued by the FASB in June 2009, the revised guidance eliminates the concept of QSPE, removes the scope exception for QSPE when applying the accounting guidance related to variable interest entities, changes the requirements for derecognizing financial assets, and requires additional disclosures. This accounting guidance is effective for a company’s first annual and interim reporting periods that begin after November 15, 2009. This accounting guidance is applied to transfers of financial assets occurring on or after the effective date. The Company’s adoption of ASU 2009-16 during the first quarter of 2010 did not impact its consolidated results of operations or financial condition.

Note 3. Net Income (Loss) per Share

Basic net income (loss) per share and diluted net loss per share are computed by dividing net income (loss) available to common stockholders by the weighted-average number of common shares outstanding for that period. Diluted net income per share is computed giving effect to all dilutive potential shares that were outstanding during the period. Dilutive potential common shares consist of common shares issuable upon exercise of stock options, vesting of restricted stock units (“RSUs”), and performance share awards (“PSAs”).

The following table presents the calculation of basic and diluted net income (loss) per share attributable to Juniper Networks (in millions, except per share amounts):

		Three Months Ended March 31,
		2010				2009
Numerator:
Net income (loss) attributable to Juniper Networks		$	163.1			$	(4.5	)
Denominator:
Weighted-average shares used to compute basic net income (loss) per share			521.1				524.4
Effective of dilutive securities:
Employee stock awards			15.6				—
Weighted-average shares used to compute diluted net income (loss) per share			536.7				524.4
Net income (loss) per share attributable to Juniper Networks common stockholders:
Basic		$	0.31			$	(0.01	)
Diluted		$	0.30			$	(0.01	)

Employee stock awards covering approximately 19.6 million shares of the Company’s common stock were not included in the computation of diluted earnings per share for the quarter ended March 31, 2010, because their effect would have been anti-dilutive. As a result of the net loss for the quarter ended March 31, 2009, approximately 69.4 million common stock equivalents were excluded in the computation of diluted net loss per share because their effect would have been anti-dilutive.

Note 4. Cash, Cash Equivalents, and Investments

Cash and Cash Equivalents

The following table summarizes the Company’s cash and cash equivalents (in millions):

		As of
		March 31,				December 31,
		2010				2009
Cash and cash equivalents:
Cash:
Demand deposits		$	428.2			$	427.2
Time deposits			225.5				127.9
Total cash			653.7				555.1
Cash equivalents:
U.S. government securities			127.7				—
Commercial paper			23.5				17.0
Money market funds			919.0				1,032.6
Total cash equivalents			1,070.2				1,049.6
Total cash and cash equivalents		$	1,723.9			$	1,604.7

Investments in Available-for-Sale and Trading Securities

The following table summarizes the Company’s unrealized gains and losses, and fair value of investments designated as trading or available-for-sale, as of March 31, 2010, and December 31, 2009 (in millions):

						Gross				Gross
		Amortized				Unrealized				Unrealized				Estimated Fair
		Cost				Gains				Losses				Value
As of March 31, 2010:
Fixed income securities:
U.S. government securities		$	231.2			$	0.2			$	(0.1	)		$	231.3
Government-sponsored enterprise obligations			223.3				0.5				(0.1	)			223.7
Foreign government debt securities			80.9				0.4				—				81.3
Commercial paper			79.2				—				—				79.2
Corporate debt securities			414.2				2.0				(0.2	)			416.0
Total fixed income securities			1,028.8				3.1				(0.4	)			1,031.5
Publicly-traded equity securities			11.6				0.1				—				11.7
Total		$	1,040.4			$	3.2			$	(0.4	)		$	1,043.2
Reported as:
Short-term investments		$	591.5			$	1.4			$	(0.2	)		$	592.7
Long-term investments			448.9				1.8				(0.2	)			450.5
Total		$	1,040.4			$	3.2			$	(0.4	)		$	1,043.2

						Gross				Gross
		Amortized				Unrealized				Unrealized				Estimated Fair
		Cost				Gains				Losses				Value
As of December 31, 2009:
Fixed income securities:
U.S. government securities		$	245.0			$	0.1			$	—			$	245.1
Government-sponsored enterprise obligations			212.0				0.6				(0.3	)			212.3
Foreign government debt securities			96.4				0.3				(0.1	)			96.6
Corporate debt securities			488.2				2.0				(0.3	)			489.9
Total fixed income securities			1,041.6				3.0				(0.7	)			1,043.9
Publicly-traded equity securities			10.1				—				—				10.1
Total		$	1,051.7			$	3.0			$	(0.7	)		$	1,054.0
Reported as:
Short-term investments		$	569.5			$	1.0			$	—			$	570.5
Long-term investments			482.2				2.0				(0.7	)			483.5
Total		$	1,051.7			$	3.0			$	(0.7	)		$	1,054.0

The Company had 54 and 52 investments that were in an unrealized loss position as of March 31, 2010, and December 31, 2009, respectively. The gross unrealized losses related to these investments were due to changes in interest rates. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost of the investment. For fixed income securities that have unrealized losses, the Company has determined that (i) it does not have the intent to sell any of these investments, and (ii) it is not more likely than not that it will be required to sell any of these investments before recovery of the entire amortized cost basis. The Company did not consider these investments to be other-than-temporarily impaired as of March 31, 2010, and December 31, 2009, respectively. The Company reviews its investments to identify and evaluate investments that have an indication of possible impairment. The Company aggregates its investments by category and length of time the securities have been in a continuous unrealized loss position to facilitate its evaluation.

Privately-Held Equity Investments

The Company’s minority equity investments in privately-held companies are carried at cost, as the Company does not have a controlling interest and does not have the ability to exercise significant influence over these companies. The Company adjusts its privately-held equity investments for any impairment if the fair value exceeds the carrying value of the respective assets.

As of March 31, 2010, and December 31, 2009, the carrying values of the Company’s minority equity investments in privately-held companies of $18.6 million and $13.9 million, respectively, were included in other long-term assets in the condensed consolidated balance sheets. During the three months ended March 31, 2010, and 2009, the Company invested $4.8 million and nil in privately held companies, respectively. The Company recognized other-than-temporary impairment loss of nil and $1.7 million for the three months ended March 31, 2010, and 2009, respectively, in connection with its minority equity investments in privately-held companies. In addition, during the three months ended March 31, 2009, the Company had a minority equity investment in a privately-held company that was acquired by a publicly-traded company for which the Company received a cash payment of $1.0 million and $1.0 million in common stock of the acquiring company, which is classified as an available-for-sale investment.

Restricted Cash

Restricted cash consists of escrow accounts required by certain acquisitions completed in 2005, the India Gratuity Trust, which covers statutory severance obligations in the event of termination of the Company’s India employees who have provided five or more years of continuous service, and the Directors & Officers (“D&O”) indemnification trust. Additionally, during the three months ended March 31, 2010, the Company increased its restricted cash by $1.6 million for the Israel Retirement Trust, which was established in the first quarter of 2010 to satisfy statutory severance obligations in the event of termination of the Company’s Israeli employees. During the three months ended March 31, 2009, the Company had immaterial restricted cash distributions.

The following table summarizes the Company’s restricted cash as reported in the condensed consolidated balance sheets (in millions):

		As of
		March 31,				December 31,
		2010				2009
Restricted cash:
Demand deposits		$	4.8			$	3.8
Total restricted cash			4.8				3.8
Restricted investments:
U.S. government securities			0.6				19.8
Money market funds			50.0				30.1
Total restricted investments			50.6				49.9
Total restricted cash and investments		$	55.4			$	53.7

As of March 31, 2010, and December 31, 2009, the unrealized gains and losses related to restricted investments were immaterial.

Note 5. Fair Value Measurements

The Company determines the fair values of its financial instruments based on a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Fair value is defined as the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value assumes that the transaction to sell the asset or transfer the liability occurs in the principal or most advantageous market for the asset or liability and establishes that the fair value of an asset or liability shall be determined based on the assumptions that market participants would use in pricing the asset or liability. The classification of a financial asset or liability within the hierarchy is based upon the lowest level input that is significant to the fair value measurement. The fair value hierarchy prioritizes the inputs into three levels that may be used to measure fair value:

Level 1 – Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. These inputs are valued using market based approaches.

Level 3 – Inputs are unobservable inputs based on the Company’s assumptions. These inputs, if any, are valued using internal financial models.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table provides a summary of assets measured at fair value on a recurring basis (in millions):

		Fair Value Measurements at March 31, 2010 Using
						Significant				Significant
		Quoted Prices in				Other				Other
		Active Markets				Observable				Unobservable
		For Identical				Remaining				Remaining
		Assets				Inputs				Inputs				Total
		(Level 1)				(Level 2)				(Level 3)
Trading securities:
Mutual funds		$	6.1				—				—			$	6.1
Total trading securities			6.1				—				—				6.1
Available-for-sale debt securities:
U.S. government securities (1)			89.8				269.8				—				359.6
Government sponsored enterprise obligation			195.5				28.2				—				223.7
Foreign government debt securities			26.4				54.9				—				81.3
Commercial paper			—				102.7				—				102.7
Corporate debt securities			—				416.0				—				416.0
Money market funds (2)			969.0				—				—				969.0
Total available-for-sale debt securities			1280.7				871.6				—				2,152.3
Available-for-sale equity securities:
Technology securities			5.6				—				—				5.6
Total available-for-sale equity securities			5.6				—				—				5.6
Total available-for-sale securities			1,286.3				871.6				—				2,157.9
Derivative assets:
Foreign exchange contracts			—				0.2				—				0.2
Total derivative assets			—				0.2				—				0.2
Total		$	1,292.4				871.8				—			$	2,164.2

The following table provides a summary of the liabilities measured at fair value on a recurring basis (in millions):

		Fair Value Measurements at March 31, 2010 Using
		Quoted
		Prices in								Significant
		Active				Significant Other				Other
		Markets For				Observable				Unobservable
		Identical				Remaining				Remaining
		Assets				Inputs				Inputs				Total
		(Level 1)				(Level 2)				(Level 3)
Derivative liabilities:
Foreign exchange contracts		$	—				(1.5	)			—			$	(1.5	)
Total derivative liabilities			—				(1.5	)			—				(1.5	)
Total liabilities measured at fair value		$	—				(1.5	)			—			$	(1.5	)

The Company’s policy is to recognize transfers in and transfers out as of the actual date of the event or change in circumstances that caused the transfer. During the three months ended March 31, 2010, the Company had no transfers of investments between levels of fair value hierarchy of its assets or liabilities measured at fair value.

Net assets measured at fair value on a recurring basis were presented on the Company’s condensed consolidated balance sheets as follows (in millions):

		Fair Value Measurements at March 31, 2010 Using
										Significant
		Quoted Prices in				Significant Other				Other
		Active Markets				Observable				Unobservable
		For Identical				Remaining				Remaining
		Assets				Inputs				Inputs					Total
		(Level 1)				(Level 2)				(Level 3)
Reported as:
Cash equivalents		$	919.0			$	151.2			$	—				$	1070.2
Short-term investments			156.0				436.7				—					592.7
Long-term investments			167.4				283.1				—					450.5
Restricted cash			50.0				0.6				—					50.6
Prepaid expenses and other current assets			—				0.2				—					0.2
Other accrued liabilities			—				(1.5	)			—					(1.5	)
Total net assets measured at fair value		$	1,292.4			$	870.3			$	—				$	2,162.7
		Fair Value Measurements at December 31, 2009 Using
										Significant
		Quoted Prices in				Significant Other				Other
		Active Markets				Observable				Unobservable
		For Identical				Remaining				Remaining
		Assets				Inputs				Inputs					Total
		(Level 1)				(Level 2)				(Level 3)
Reported as:
Cash equivalents		$	1,032.6			$	17.0			$	—				$	1,049.6
Short-term investments			101.3				469.2				—					570.5
Long-term investments			181.2				302.3				—					483.5
Restricted cash			49.9				—				—					49.9
Other accrued liabilities			—				(1.3	)			—					(1.3	)
Total net assets measured at fair value		$	1,365.0			$	787.2			$	—				$	2,152.2

Assets Measured at Fair Value on a Nonrecurring Basis

The following table presents the Company’s assets that are measured at fair value on a nonrecurring basis at least annually or on a quarterly basis, if impairment is indicated (in millions):

																		Total (Losses)
						Fair Value Measurements Using												for
						Quoted Prices in				Significant Other				Significant Other				the Three
		Carrying Value				Active Markets				Observable				Unobservable				Months
		as of				for Identical				Remaining				Remaining				Ended March
		March 31, 2010				Assets				Inputs				Inputs				31, 2010
						(Level 1)				(Level 2)				(Level 3)
Privately-held equity investments		$	0.7			$	—			$	—			$	0.7			$	—
Total		$	0.7			$	—			$	—			$	0.7			$	—

																		Total (Losses)
						Fair Value Measurements Using												for
						Quoted Prices in				Significant Other				Significant Other				the Three
		Carrying Value				Active Markets				Observable				Unobservable				Months
		as of				for Identical				Remaining				Remaining				Ended March
		March 31, 2009				Assets				Inputs				Inputs				31, 2009
						(Level 1)				(Level 2)				(Level 3)
Privately-held equity investments		$	1.2			$	—			$	—			$	1.2			$	(1.7	)
Total		$	1.2			$	—			$	—			$	1.2			$	(1.7	)

The privately-held equity investments in the preceding tables, which are normally carried at cost, were measured at fair value due to events and circumstances that the Company identified as significantly impacting the fair value of the investments during the quarter. The Company measured the fair value of these privately-held equity investments using an analysis of the financial condition and near-term prospects of the investee, including recent financing activities and their capital structure. As a result, the Company recognized an impairment loss of $1.7 million during the three months ended March 31, 2009, and classified the investment as a Level 3 asset due to the absence of quoted market prices and inherent lack of liquidity. The Company had no impairment charges against its privately-held equity investments during the three months ended March 31, 2010.

Note 6. Goodwill and Purchased Intangible Assets

Goodwill

The following table presents goodwill by segment as of March 31, 2010, and December 31, 2009 (in millions):

Segments
Infrastructure		$	1,500.5
Service Layer Technologies			2,158.1
Total		$	3,658.6

There were no changes to goodwill during the first quarter of 2010.

Purchased Intangible Assets

The following table presents the Company’s purchased intangible assets with definite lives (in millions):

						Accumulated
		Gross				Amortization				Net
As of March 31, 2010:
Technologies and patents		$	380.0			$	(376.2	)		$	3.8
Other			68.9				(60.0	)			8.9
Total		$	448.9			$	(436.2	)		$	12.7
As of December 31, 2009:
Technologies and patents		$	380.0			$	(376.0	)		$	4.0
Other			68.9				(59.1	)			9.8
Total		$	448.9			$	(435.1	)		$	13.8

Amortization of purchased intangible assets of $1.1 million and $5.7 million were included in operating expenses and cost of product revenues for the three months ended March 31, 2010, and 2009, respectively. There were no impairment charges with respect to purchased intangible assets in the three months ended March 31, 2010, and 2009.

The estimated future amortization expense of purchased intangible assets with definite lives for future periods is as follows (in millions):

Years Ending December 31,		Amount
2010 (remaining nine months)		$	2.8
2011			2.1
2012			1.3
2013			1.2
2014			1.0
Thereafter			4.3
Total		$	12.7

Note 7. Other Financial Information

Warranties

The Company provides for the estimated cost of product warranties at the time revenue is recognized. This provision is reported as accrued warranty within current liabilities on the condensed consolidated balance sheets. Changes in the Company’s warranty reserve were as follows (in millions):

		Three Months Ended March 31,
		2010				2009
Beginning balance		$	38.2			$	40.1
Provisions made during the period, net			12.1				9.8
Change in estimate			(0.5	)			(2.1	)
Actual costs incurred during the period			(12.0	)			(10.3	)
Ending balance		$	37.8			$	37.5

Deferred Revenue

Details of the Company’s deferred revenue were as follows (in millions):

		As of
		March 31,				December 31,
		2010				2009
Deferred product revenue:
Deferred gross product revenue		$	402.6			$	391.3
Deferred cost of product revenue			(152.5	)			(150.0	)
Deferred product revenue, net			250.1				241.3
Deferred service revenue			539.8				512.3
Total		$	789.9			$	753.6
Reported as:
Current		$	620.0			$	571.7
Long-term			169.9				181.9
Total		$	789.9			$	753.6

Restructuring Liabilities

In 2009, the Company implemented a restructuring plan (the “2009 Restructuring Plan”) in an effort to better align its business operations with the current market and macroeconomic conditions. The 2009 Restructuring Plan included a worldwide workforce reduction and restructuring of certain business functions and the reduction of facilities. The Company incurred restructuring charges of $8.1 million and paid $4.1 million for severance and facilities related charges associated with the 2009 Restructuring Plan during the three months ended March 31, 2010. During the three months ended March 31, 2009, the Company recorded $4.2 million in restructuring charges and paid $2.5 million for severance related charges associated with the 2009 Restructuring Plan.

The following table provides a summary of changes in the Company’s restructuring liability (in millions):

		Remaining																Remaining
		Liability as of																Liability as of
		December 31,								Cash								March 31,
		2009				Charges				Payments				Adjustment				2010
Facilities		$	4.9			$	6.8			$	(0.3	)		$	(1.6	)		$	9.8
Severance, contractual commitments, and other charges			4.5				1.3				(3.8	)			0.2				2.2
Total restructuring charges		$	9.4			$	8.1			$	(4.1	)		$	(1.4	)		$	12.0

The Company had no acquisition related restructuring charges during the three months ended March 31, 2010 or 2009. Restructuring charges were based on the Company’s restructuring plans that were committed by management. Any changes in the estimates of executing the approved plans will be reflected in the Company’s results of operations.

Interest and Other Income, Net

Interest and other income, net, consist of the following (in millions):

		Three Months Ended March 31,
		2010				2009
Interest income and expense, net		$	0.9			$	2.1
Other income and expense, net			0.6				(0.2	)
Total interest and other income, net		$	1.5			$	1.9

Interest income and expense, net, primarily includes interest income from the Company’s cash, cash equivalents, and investments and interest expense from our customer financing arrangements. Other income and expense, net, primarily includes foreign exchange gains and losses and other miscellaneous expenses such as bank fees.

Note 8. Financing Arrangements

The Company has customer financing arrangements to sell its accounts receivable to a major third-party financing provider. The program does not and is not intended to affect the timing of revenue recognition because the Company only recognizes revenue upon sell-through. Under the financing arrangements, proceeds from the financing provider are due to the Company 30 days from the sale of the receivable. In these transactions with the financing provider, the Company has surrendered control over the transferred assets. The accounts receivable have been isolated from the Company and put beyond the reach of creditors, even in the event of bankruptcy. The Company does not maintain effective control over the transferred assets through obligations or rights to redeem, transfer, or repurchase the receivables after they have been transferred.

Pursuant to the financing arrangements for the sale of receivables, the Company sold net receivables of $135.6 million and $91.2 million during the three months ended March 31, 2010, and 2009, respectively. During the three months ended March 31, 2010, and 2009, the Company received cash proceeds of $138.9 million and $95.6 million, respectively, from the financing provider. The amounts owed by the financing provider recorded as accounts receivable on the Company’s condensed consolidated balance sheets as of March 31, 2010, and December 31, 2009, were $82.6 million and $89.8 million, respectively.

The portion of the receivable financed that has not been recognized as revenue is accounted for as a financing arrangement and is included in other accrued liabilities in the condensed consolidated balance sheet. As of March 31, 2010, and December 31, 2009, the estimated amounts of cash received from the financing provider that has not been recognized as revenue from distributors were $54.7 million and $52.6 million, respectively.

Note 9. Derivative Instruments

The Company uses derivatives partially to offset its market exposure to fluctuations in certain foreign currencies and does not enter into derivatives for speculative or trading purposes.

Cash Flow Hedges

The Company uses foreign currency forward or option contracts to hedge certain forecasted foreign currency transactions relating to cost of services and operating expenses. The derivatives are intended to protect the U.S. Dollar equivalent of the Company’s planned cost of services and operating expenses denominated in foreign currencies. These derivatives are designated as cash flow hedges. Execution of these cash flow hedge derivatives typically occurs every month with maturities of less than one year. The effective portion of the derivative’s gain or loss is initially reported as a component of accumulated other comprehensive income (loss), and upon occurrence of the forecasted transaction, is subsequently reclassified into the cost of services or operating expense line item to which the hedged transaction relates. The Company records any ineffectiveness of the hedging instruments, which was immaterial during the first quarter of 2010 and 2009, respectively, in interest and other income, net, on its condensed consolidated statements of operations. Cash flows from such hedges are classified as operating activities. All amounts within other comprehensive income (loss) are expected to be reclassified into income within the next 12 months.

The total fair value of the Company’s derivative assets located in other current assets on the condensed consolidated balance sheet as of March 31, 2010 and 2009 was $0.2 million and $0.7 million, respectively. The total fair value of the Company’s derivative liabilities located in other accrued liabilities on the condensed consolidated balance sheet as of March 31, 2010, and 2009, was $1.5 million and $1.2 million, respectively.

The Company recognized a loss of $1.5 million and $5.7 million in other comprehensive income for the effective portion of its derivative instruments as of March 31, 2010, and 2009, respectively. The amount of loss reclassified from other comprehensive loss to the condensed consolidated statements of operations was $0.7 million and $2.7 million as of March 31, 2010, and 2009, respectively. The ineffective portion of the Company’s derivative instruments recognized in its condensed consolidated statements of operations was immaterial during the three months ended March 31, 2010, and 2009.

Non-Designated Hedges

The Company also uses foreign currency forward contracts to mitigate variability in gains and losses generated from the re-measurement of certain monetary assets and liabilities denominated in foreign currencies. These derivatives do not qualify for special hedge accounting treatment. These derivatives are carried at fair value with changes recorded in interest and other income, net. Changes in the fair value of these derivatives are largely offset by re-measurement of the underlying assets and liabilities. Cash flows from such derivatives are classified as operating activities. The derivatives have maturities of approximately two months.

As of March 31, 2010, the Company’s top three outstanding derivative positions by currency were as follows (in millions):

Buy

Buy

Buy

Foreign currency forward contracts:

EUR

GBP

INR

Notional amount of foreign currency

29.5

13.7

1,520.7

U.S dollar equivalent

$

40.9

$

21.1

$33.2

Weighted-average maturity

2 months

2 months

2 months

The Company recognized a loss on non-designated derivative instruments located in other income, net, on its condensed consolidated statements of operations during the three months ended March 31, 2010, and 2009, of $0.3 million and $3.8 million, respectively.

Note 10. Stockholders’ Equity

Stock Repurchase Activities

In February 2010, the Company’s Board of Directors (the “Board”) approved a new stock repurchase program (the “2010 Stock Repurchase Program”) which authorized the Company to repurchase up to $1.0 billion of its common stock. This new authorization is in addition to the stock repurchase program approved by the Board in March 2008 (the “2008 Stock Repurchase Program”), which also enabled the Company to repurchase up to $1.0 billion of the Company’s common stock.

During the three months ended March 31, 2010, the Company repurchased approximately 2.8 million shares of its common stock at an average price of $27.04 per share for an aggregate purchase price of $74.4 million under the 2008 Stock Repurchase Program. As of March 31, 2010, the 2008 and 2010 Stock Repurchase Programs had remaining aggregate authorized funds of $1,244.2 million.

In addition to repurchases under the Company’s stock repurchase programs, the Company repurchased common stock from its employees in connection with net issuance of shares to satisfy its tax withholding obligations for the vesting of certain RSUs and PSAs. During the three months ended March 31, 2010, the Company repurchased approximately 0.1 million shares of its common stock at an average price of $25.47 per share for an aggregate purchase price of $1.8 million in connection with the net issuances. The Company repurchased an immaterial amount of common stock from its employees in connection with net issuance of shares, during the three months ended March 31, 2009.

All shares of common stock that have been repurchased under the Company’s stock repurchase programs and from its employees in connection with net issuances have been retired. Future share repurchases under the Company’s stock repurchase programs will be subject to a review of the circumstances in place at that time and will be made from time to time in private transactions or open market purchases as permitted by securities laws and other legal requirements. These programs may be discontinued at any time.

Comprehensive Income (Loss) Attributable to Juniper Networks

Comprehensive income (loss) consists of the following (in millions):

		Three Months Ended
		March 31,
		2010				2009
Consolidated net income (loss)		$	164.6			$	(4.5	)
Other comprehensive loss, net of tax:
Change in net unrealized losses on investments, net of tax of nil			(0.4	)			(3.6	)
Change in foreign currency translation adjustment, net of tax of nil			(2.7	)			(10.5	)
Total other comprehensive loss, net of tax			(3.1	)			(14.1	)
Consolidated comprehensive income (loss)			161.5				(18.6	)
Less: comprehensive income attributable to noncontrolling interest			1.5				—
Comprehensive income (loss) attributable to Juniper Networks		$	160.0			$	(18.6	)

The following tables summarize stockholders’ equity activity for the three months ended March 31, 2010, and 2009 (in millions):

						Accumulated
		Common Stock &				Other								Non-				Total
		Additional Paid-in-				Comprehensive				Accumulated				controlling				Stockholders’
		Capital				Loss				Deficit				Interest				Equity
Balance at December 31, 2009		$	9,060.1			$	(1.4	)		$	(3,236.5	)		$	2.6			$	5,824.8
Consolidated net income			—				—				163.1				1.5				164.6
Change in unrealized loss on investments, net tax of nil			—				(0.4	)			—				—				(0.4	)
Foreign currency translation loss, net tax of nil			—				(2.7	)			—				—				(2.7	)
Issuance of shares in connection with Employee Stock Purchase Plan			20.8				—				—				—				20.8
Exercise of stock options by employees, net of repurchases			101.2				—				—				—				101.2
Return of capital to noncontrolling interest			—				—				—				(2.0	)			(2.0	)
Retirement of common stock			(5.7	)			—				(68.7	)			—				(74.4	)
Repurchases related to net issuances			—				—				(1.8	)			—				(1.8	)
Share-based compensation expense			40.6				—				—				—				40.6
Adjustment related to tax benefit from employee stock option plans			50.6				—				—				—				50.6
Balance at March 31, 2010		$	9,267.6			$	(4.5	)		$	(3,143.9	)		$	2.1			$	6,121.3

						Accumulated
		Common Stock &				Other								Total
		Additional Paid-in-				Comprehensive				Accumulated				Stockholders’
		Capital				Loss				Deficit				Equity
Balance at December 31, 2008		$	8,811.5			$	(4.2	)		$	(2,905.9	)		$	5,901.4
Net income including noncontrolling interest			—				—				(4.5	)			(4.5	)
Change in unrealized loss on investments, net tax of nil			—				(3.6	)			—				(3.6	)
Foreign currency translation loss, net tax of nil			—				(10.5	)			—				(10.5	)
Issuance of shares in connection with Employee Stock Purchase Plan			19.3				—				—				19.3
Exercise of stock options by employees, net of repurchases			3.3				—				—				3.3
Retirement of common stock			(0.1	)			—				(119.7	)			(119.8	)
Share-based compensation expense			33.6				—				—				33.6
Adjustment related to tax benefit from employee stock option plans			10.5				—				—				10.5
Balance at March 31, 2009		$	8,878.1			$	(18.3	)		$	(3,030.1	)		$	5,829.7

Note 11. Employee Benefit Plans

Share-Based Compensation Plans

The Company’s share-based compensation plans include the 2006 Equity Incentive Plan (the “2006 Plan”), 2000 Nonstatutory Stock Option Plan (the “2000 Plan”), Amended and Restated 1996 Stock Plan (the “1996 Plan”), as well as various equity incentive plans assumed through acquisitions. Under these plans the Company has granted (or in the case of acquired plans, assumed) stock options, and in certain plans RSUs and PSAs. In addition, the Company’s 2008 Employee Stock Purchase Plan (the “2008 Purchase Plan”) permits eligible employees to acquire shares of the Company’s common stock at a 15% discount to the offering price (as determined in the 2008 Plan) through periodic payroll deductions of up to 10% of base compensation, subject to individual purchase limits of 6,000 shares in any twelve-month period or $25,000 worth of stock, determined at the fair market value of the shares at the time the stock purchase option is granted, in one calendar year.

Stock Option Activities

The following table summarizes the Company’s stock option activity and related information as of and for the three months ended March 31, 2010 (in millions, except for per share amounts and years):

										Weighted
						Weighted				Average
						Average				Remaining
		Number of				Exercise				Contractual				Aggregate
		Shares				Price				Term				Intrinsic Value
Balance at January 1, 2010			67.4			$	20.84
Options granted			5.0				28.77
Options canceled			(0.6	)			20.96
Options exercised			(5.7	)			18.03
Options expired			(0.3	)			48.21
Balance at March 31, 2010			65.8			$	21.55				4.6			$	631.2
As of March 31, 2010:
Vested or expected-to-vest options			58.0			$	21.42				4.4			$	566.3
Exercisable options			41.7			$	20.90				3.9			$	436.3

Aggregate intrinsic value represents the difference between the Company’s closing stock price on the last trading day of the period, which was $30.68 as of March 31, 2010, and the exercise price multiplied by the number of related options. The pre-tax intrinsic value of options exercised, representing the difference between the fair market value of the Company’s common stock on the date of the exercise and the exercise price of each option, was $59.2 million for the three months ended March 31, 2010. Total fair value of options vested for the three months ended March 31, 2010, was $27.5 million.

Restricted Stock Units and Performance Share Awards Activities

RSUs generally vest over a period of three to four years from the date of grant, and PSAs granted generally vest after three years provided that certain annual performance targets and other vesting criteria are met. Until vested, RSUs and PSAs do not have the voting and dividend participation rights of common stock and the shares underlying the awards are not considered issued and outstanding.

The following table summarizes information about the Company’s RSUs and PSAs as of and for the three months ended March 31, 2010 (in millions, except per share amounts and years):

		Outstanding RSUs and PSAs
										Weighted
						Weighted				Average
						Average				Remaining
		Number of				Grant-Date				Contractual				Aggregate
		Shares				Fair Value				Term				Intrinsic Value
Balance at January 1, 2010			9.1			$	21.76
RSUs and PSAs granted			5.7				29.12
RSUs and PSAs vested			(1.8	)			24.89
RSUs and PSAs canceled			(0.2	)			20.91
Balance at March 31, 2010			12.8			$	24.61				2.2			$	393.7
As of March 31, 2010:
Vested and expected-to-vest RSUs and PSAs			8.3			$	24.58				2.1			$	254.1