Document and Entity Information

Share data in Thousands, except Per Share data

Jul. 30, 2010

6 Months Ended
Jun. 30, 2010

Document and Entity Information [Abstract]

Entity Registrant Name

JUNIPER NETWORKS INC

Entity Central Index Key

0001043604

Document Type

10-Q

Document Period End Date

06/30/2010

Amendment Flag

FALSE

Document Fiscal Year Focus

2010

Document Fiscal Period Focus

Q2

Current Fiscal Year End Date

12/31

Entity Well-known Seasoned Issuer

No

Entity Voluntary Filers

No

Entity Current Reporting Status

Yes

Entity Filer Category

Large Accelerated Filer

Entity Common Stock, Shares Outstanding

519,918

Condensed Consolidated Statements of Operations (Unaudited) (USD $)

In Thousands, except Per Share data

3 Months Ended
Jun. 30, 2010

6 Months Ended
Jun. 30, 2010

3 Months Ended
Jun. 30, 2009

6 Months Ended
Jun. 30, 2009

Condensed Consolidated Statements of Operations [Abstract]

Net revenues:

Product

$ 774,058

$ 1,495,259

$ 606,959

$ 1,194,822

Service

204,242

395,659

179,404

355,724

Total net revenues

978,300

1,890,918

786,363

1,550,546

Cost of revenues:

Product

231,752

454,133

207,576

400,637

Service

86,610

164,826

72,405

141,235

Total cost of revenues

318,362

618,959

279,981

541,872

Gross margin

659,938

1,271,959

506,382

1,008,674

Operating expenses:

Research and development

224,768

431,762

183,894

369,294

Sales and marketing

202,303

394,678

176,555

364,419

General and administrative

45,880

89,018

39,175

78,386

Amortization of purchased intangible assets

1,204

2,341

3,539

7,929

Restructuring charges

264

8,369

7,529

11,758

Acquisition-related charges

541

Total operating expenses

474,960

926,709

410,692

831,786

Operating income

184,978

345,250

95,690

176,888

Interest and other income, net

833

2,292

2,898

4,848

Gain (loss) on equity investments

3,232

(1,625)

(3,311)

Income before income taxes and noncontrolling interest

189,043

350,774

96,963

178,425

Income tax provision

58,700

55,821

82,194

168,116

Consolidated net income

130,343

294,953

14,769

10,309

Adjust for net loss (income) attributable to noncontrolling interest

168

(1,327)

Net income attributable to Juniper Networks

130,511

293,626

14,769

10,309

Net income per share attributable to Juniper Networks common stockholders:

Basic

0.25

0.56

0.03

0.02

Diluted

0.24

0.55

0.03

0.02

Shares used in computing net income per share:

Basic

524,463

522,812

523,105

523,754

Diluted

538,947

537,989

532,850

531,624

Condensed Consolidated Balance Sheets (Unaudited) (USD $)

In Thousands

Jun. 30, 2010

Dec. 31, 2009

ASSETS

Current assets:

Cash and cash equivalents

$ 1,660,086

$ 1,604,723

Short-term investments

563,315

570,522

Accounts receivable, net of allowances

391,545

458,652

Deferred tax assets, net

224,792

196,318

Prepaid expenses and other current assets

59,568

48,744

Total current assets

2,899,306

2,878,959

Property and equipment, net

466,172

455,651

Long-term investments

512,817

483,505

Restricted cash

73,439

53,732

Purchased intangible assets, net

23,360

13,834

Goodwill

3,711,726

3,658,602

Long-term deferred tax assets, net

8,205

10,555

Other long-term assets

49,302

35,425

Total assets

7,744,327

7,590,263

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

243,228

242,591

Accrued compensation

206,528

176,551

Accrued warranty

38,280

38,199

Deferred revenue

544,578

571,652

Income taxes payable

53,577

34,936

Accrued litigation settlements

0

169,330

Other accrued liabilities

134,828

142,526

Total current liabilities

1,221,019

1,375,785

Long-term deferred revenue

223,217

181,937

Long-term income tax payable

94,950

170,245

Other long-term liabilities

33,336

37,531

Commitments and Contingencies - See Note 15

Juniper Networks stockholders' equity:

Convertible preferred stock, $0.00001 par value; 10,000 shares authorized; none issued and outstanding

0

Common stock, $0.00001 par value; 1,000,000 shares authorized; 521,626 shares and 519,341 shares issued and outstanding at June 30, 2010, and December 31, 2009, respectively

5

Additional paid-in capital

9,363,244

9,060,089

Accumulated other comprehensive loss

(10,667)

(1,433)

Accumulated deficit

(3,181,733)

(3,236,525)

Total Juniper Networks stockholders' equity

6,170,849

5,822,136

Noncontrolling interest

956

2,629

Total equity

6,171,805

5,824,765

Total liabilities and stockholders' equity

$ 7,744,327

$ 7,590,263

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $)

Share data in Thousands, except Per Share data

Jun. 30, 2010

Dec. 31, 2009

Juniper Networks stockholders' equity:

Convertible preferred stock, par value

$ 0.00001

Convertible preferred stock, shares authorized

10,000

Convertible preferred stock, shares issued

0

Convertible preferred stock, shares outstanding

0

Common stock, par value

0.00001

Common stock, shares authorized

1,000,000

Common stock, shares issued

521,626

519,341

Common stock, shares outstanding

521,626

519,341

Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $)

In Thousands

6 Months Ended
Jun. 30,

2010

2009

Condensed Consolidated Statements of Cash Flows [Abstract]

Cash flows from operating activities:

Consolidated net income

$ 294,953

$ 10,309

Adjustments to reconcile consolidated net income to net cash from operating activities:

Depreciation and amortization

72,748

75,355

Share-based compensation

85,164

67,091

(Gain) loss on equity investments

(3,232)

3,311

Change in excess tax benefits from share-based compensation

(28,287)

7,197

Deferred income taxes

(25,594)

69,288

Changes in operating assets and liabilities:

Accounts receivable, net

67,168

840

Prepaid expenses and other assets

(15,712)

(6,116)

Accounts payable

(6,331)

(10,488)

Accrued compensation

29,977

(10,774)

Accrued litigation settlements

(169,330)

Income taxes payable

(683)

37,412

Other accrued liabilities

(4,987)

10,796

Deferred revenue

14,035

58,325

Net cash provided by operating activities

309,889

312,546

Cash flows from investing activities:

Purchases of property and equipment, net

(83,157)

(79,424)

Purchases of trading investments

(1,690)

Purchases of available-for-sale investments

(932,004)

(811,449)

Proceeds from sales of available-for-sale investments

354,890

109,820

Proceeds from maturities of available-for-sale investments

557,363

137,050

Payment for business acquisition, net of cash and cash equivalents acquired

(64,215)

Changes in restricted cash

(12,296)

(1,275)

Purchases of privately-held equity investments, net

(727)

(1,191)

Net cash used in investing activities

(181,836)

(646,469)

Cash flows from financing activities:

Proceeds from issuance of common stock

176,662

50,678

Purchases and retirement of common stock

(253,672)

(169,370)

Change in customer financing arrangements

(20,967)

(5,121)

Change in excess tax benefits from share-based compensation

28,287

(7,197)

Return of capital to noncontrolling interest

(3,000)

Net cash used in financing activities

(72,690)

(131,010)

Net increase (decrease) in cash and cash equivalents

55,363

(464,933)

Cash and cash equivalents at beginning of period

1,604,723

2,019,084

Cash and cash equivalents at end of period

$ 1,660,086

$ 1,554,151

Basis of Presentation

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 and six months ended June 30, 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 June 30, 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

In the first quarter of 2010, the Company reclassified certain selling and marketing costs that were previously reported as cost of service revenues as sales and marketing expense. Accordingly, $6.0 million and $12.6 million of costs reported in the three and six months ended June 30, 2009, respectively, 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.

Summary of Significant Accounting Policies

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. Under the new standard, 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. 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 of the adoption of ASU 2009-13 and ASU 2009-14, net revenues for the three and six months ended June 30, 2010 were approximately $53 million and $78 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 these periods which consisted primarily of $38 million and $60 million for the three- and six-month periods ended June 30, 2010, respectively, related to undelivered product commitments for which the Company was unable to demonstrate fair value pursuant to the previous accounting standards. The remainder of the increase in revenue for the three- and six-month periods was due to products sold into multiple-year service arrangements which were recognized ratably under the previous accounting standards and for the change in the Company’s allocation methodology from the residual method to the relative selling price method as prescribed by the new standard.

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 selling price is based on the price charged when the element is sold separately. In determining VSOE, the Company requires that a substantial majority of the selling prices fall within a reasonable range based on historical discounting trends for specific products and services. TPE of selling price is established by evaluating largely interchangeable competitor products or services in stand-alone sales to similarly situated customers. However, as the Company’s products contain a significant element of proprietary technology and its solutions offer substantially different features and functionality, the comparable pricing of 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 January 1, 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 one or more undelivered items does not exist, revenue from the entire arrangement is deferred and recognized at the earlier of: (i) delivery of those elements or (ii) when fair value can be established unless maintenance 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. 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. The Company’s agreements with its OEM partners may allow future rights of returns. 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 customer financing arrangements 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 May 2010, the FASB issued ASU No. 2010-19, Topic 830 — Foreign Currency Issues: Multiple Foreign Currency Exchange Rates—An announcement made by the staff of the U.S. Securities and Exchange Commission (“ASU 2010-19”), which incorporates the SEC Staff Announcement made at the March 18, 2010 meeting of the FASB Emerging Issues Task Force (“EITF”). The Staff Announcement provided the SEC staff’s view on certain foreign currency issues related to investments in Venezuela. This guidance is effective as of the announcement date, March 18, 2010. The Company’s adoption of ASU 2010-19 did not have an impact on the Company’s consolidated results of operations or financial condition.

In April 2010, the FASB issued ASU No. 2010-17, Topic 605 — Revenue Recognition – Milestone Method (“ASU 2010-17”), which provides guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for research or development transactions. The amendments in ASU 2010-17 are effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years beginning on or after June 15, 2010. Early adoption is permitted; however, if a Company elects to early adopt, the amendment must be applied retrospectively from the beginning of the year of adoption. The Company’s adoption of ASU 2010-17 is not expected to have an impact on the Company’s consolidated results of operations or financial condition.

In April 2010, the FASB issued ASU No. 2010-13, Topic 718 — Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades (“ASU 2010-13”), which provides guidance on the classification of a share-based payment award as either equity or a liability. A share-based payment award that contains a condition that is not a market, performance, or service condition is required to be classified as a liability. The amendments in ASU 2010-13 are effective for fiscal years, and interim periods within those years beginning on or after December 15, 2010. The Company’s adoption of ASU 2010-13 is not expected to have an impact on the Company’s consolidated results of operations or financial condition.

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.

Business Combination

Note 3. Business Combination

On April 19, 2010 (the “acquisition date”), the Company acquired 100% of the equity securities of Ankeena Networks, Inc. (“Ankeena”), a privately-held provider of new media infrastructure technology. The acquisition will provide the Company with strong video delivery capabilities, as Ankeena’s products optimize web-based video delivery, provide key components of a content delivery network architecture/solution, improve consumers’ online video experience, and reduce service provider and carrier service provider infrastructure costs for providing web-based video.

As of the acquisition date, fair value of the consideration related to the acquisition consisted of the following (in millions):


	Amount
Total consideration:
Cash	$	66.5
Assumed stock option and RSU awards allocated to purchase price(1)		2.4

Total	$	68.9


(1)		The fair value of the stock option and RSU awards assumed was determined based on the closing market price of the Company’s common stock on the acquisition date.

The results of Ankeena’s operations have been included in the consolidated financial statements since the acquisition date. The financial impact of Ankeena from the acquisition date to the period ending June 30, 2010, was immaterial to the Company’s consolidated income statement.

In connection with the acquisition of Ankeena, the Company assumed net assets of $3.6 million, including cash and cash equivalents of $2.3 million, and recognized goodwill of $53.1 million, which was assigned to the Company’s Infrastructure segment. The goodwill recognized is attributable primarily to expected synergies, the assembled workforce of Ankeena, and the economies of scale expected from combining the operations of Ankeena and the Company. None of the goodwill is expected to be deductible for income tax purposes.

In addition, the Company recorded $12.2 million in purchased intangible assets from the Ankeena acquisition. The following table presents details of the acquired intangible assets (in millions, except years):


	Estimated Useful
	Life (In Years)		Amount
Existing technology		4.0	$	5.2
In-process research and development		4.0		3.8
Core technology		4.0		3.2

Total		4.0	$	12.2

Existing technology consists of an acquired product that had reached technological feasibility and was valued using the discounted cash flow method (“DCF”) which involved estimating the sum of the present value of cash flow attributable to the technology.

Acquired in-process research and development (“IPR&D”) consists of existing research and development projects at the time of the acquisition. Projects that qualify as IPR&D assets represent those that have not yet reached technological feasibility and have no alternative future use. IPR&D acquired was valued using the DCF method, which involved estimating the sum of the present value of cash flow attributable to the technology. After initial recognition, acquired IPR&D assets are accounted for as indefinite-lived intangible assets. Development costs incurred after acquisition on acquired developmental projects are expensed as incurred. Upon completion of development, acquired IPR&D assets are considered amortizable finite-lived assets. At the close of the acquisition, total IPR&D assets related to the Ankeena acquisition was $3.8 million and estimated future cost to complete these IPR&D projects was $1.6 million.

Core technology represents a combination of processes and trade secrets that were used for existing products and planned future releases. It was valued using the profit allocation method, which involved estimating the profit saved due to ownership of an asset or license to the asset versus paying for the right to use that asset.

Purchased intangibles with finite lives will be amortized on a straight-line basis over their respective estimated useful lives.

The Company recognized $0.5 million of acquisition-related costs that were expensed in the current period. These costs are reported in its condensed consolidated income statement as acquisition-related charges.

Prior to the acquisition, the Company had a $2.0 million, or a 7.7% ownership interest in Ankeena and accounted for it as a privately-held equity investment. As of the acquisition-date, the fair value of this equity interest in Ankeena was $5.2 million based on a noncontrolling interest fair value and was included in the purchase price. The Company recognized a $3.2 million gain, which was reported within gain (loss) on equity investments in the condensed consolidated income statement.

Net Income per Share

Note 4. Net Income per Share

Basic net income per share and diluted net income per share are computed by dividing net income 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 per share attributable to Juniper Networks (in millions, except per share amounts):


	Three Months Ended June 30,				Six Months Ended June 30,
	2010		2009		2010		2009
Numerator:
Net income attributable to Juniper Networks	$	130.5	$	14.8	$	293.6	$	10.3

Denominator:
Weighted-average shares used to compute basic net income per share		524.5		523.1		522.8		523.8
Effect of dilutive securities:
Employee stock awards		14.4		9.8		15.2		7.8

Weighted-average shares used to compute diluted net income per share		538.9		532.9		538.0		531.6

Net income per share attributable to Juniper Networks common stockholders:
Basic	$	0.25	$	0.03	$	0.56	$	0.02

Diluted	$	0.24	$	0.03	$	0.55	$	0.02

The Company excludes options with exercise prices that are greater than the average market price from the calculation of diluted net income per share because their effect would be anti-dilutive. The Company includes the shares underlying PSA awards in the calculation of diluted net income per share when they become contingently issuable and excludes such shares when they are not contingently issuable. Employee stock option awards and PSAs covering approximately 22.0 million and 22.4 million shares of the Company’s common stock were outstanding but were not included in the computation of diluted earnings per share for the three and six months ended June 30, 2010, respectively, because their effect would have been anti-dilutive. Employee stock awards covering approximately 43.5 million shares and 60.5 million shares of the Company’s common stock in the three and six months ended June 30, 2009, respectively, were outstanding, but were not included in the computation of diluted earnings per share because their effect would have been anti-dilutive.

Cash, Cash Equivalents, and Investments

Note 5. Cash, Cash Equivalents, and Investments

Cash and Cash Equivalents

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


	As of
	June 30,		December 31,
	2010		2009
Cash and cash equivalents:
Cash:
Demand deposits	$	455.9	$	427.2
Time deposits		220.7		127.9

Total cash		676.6		555.1
Cash equivalents:
U.S. government securities		107.6		—
Government-sponsored enterprise obligations		12.0		—
Certificate of deposit		10.0		—
Commercial paper		44.0		17.0
Money market funds		809.9		1,032.6

Total cash equivalents		983.5		1,049.6

Total cash and cash equivalents	$	1,660.1	$	1,604.7

Investments in Available-for-Sale and Trading Securities

The following tables summarize the Company’s unrealized gains and losses, and fair value of investments designated as trading or available-for-sale, as of June 30, 2010, and December 31, 2009 (in millions):


			Gross		Gross
	Amortized		Unrealized		Unrealized			Estimated Fair
	Cost		Gains		Losses			Value
As of June 30, 2010:
Fixed income securities:
U.S. government securities	$	231.8	$	0.3	$	—		$	232.1
Government-sponsored enterprise obligations		225.9		0.6		—			226.5
Foreign government debt securities		52.4		0.2		—			52.6
Certificate of deposit		37.1		—		—			37.1
Commercial paper		22.1		—		—			22.1
Asset-backed securities		42.1		—		—			42.1
Corporate debt securities		451.6		2.2		(0.2	)		453.6

Total fixed income securities		1,063.0		3.3		(0.2	)		1,066.1
Publicly-traded equity securities		11.4		—		(1.4	)		10.0

Total	$	1,074.4	$	3.3	$	(1.6	)	$	1,076.1


Reported as:
Short-term investments	$	563.6	$	1.1	$	(1.4	)	$	563.3
Long-term investments		510.8		2.2		(0.2	)		512.8

Total	$	1,074.4	$	3.3	$	(1.6	)	$	1,076.1


			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 following table presents the Company’s maturities of its available-for-sale investments and publicly-traded securities as of June 30, 2010 (in millions):


			Gross		Gross
	Amortized		Unrealized		Unrealized			Estimated Fair
	Cost		Gains		Losses			Value
Fixed income securities:
Due within one year	$	552.2	$	1.1	$	—		$	553.3
Due between one and five years		510.8		2.2		(0.2	)		512.8

Total fixed income securities		1,063.0		3.3		(0.2	)		1,066.1
Publicly-traded equity securities		11.4		—		(1.4	)		10.0

Total	$	1,074.4	$	3.3	$	(1.6	)	$	1,076.1

The following table presents the Company’s trading and available-for sale investments that are in an unrealized loss position as of June 30, 2010 (in millions):


	Less than 12 Months					12 Months or Greater					Total
			Unrealized					Unrealized					Unrealized
	Fair Value		Loss			Fair Value		Loss			Fair Value		Loss
Corporate debt securities	$	83.8	$	(0.1	)	$	19.5	$	(0.1	)	$	103.3	$	(0.2	)
U.S. government securities (1)		84.0		—			—		—			84.0		—
Government-sponsored enterprise obligations (1)		27.1		—			3.0		—			30.1		—
Foreign government debt securities (1)		12.4		—			—		—			12.4		—
Certificate of deposit (1)		14.1		—			—		—			14.1		—
Commercial paper (1)		5.0		—			—		—			5.0		—
Asset-backed securities (1)		12.6		—			—		—			12.6		—
Publicly-traded equity securities		4.1		(1.4	)		—		—			4.1		(1.4	)

Total	$	243.1	$	(1.5	)	$	22.5	$	(0.1	)	$	265.6	$	(1.6	)


(1)		The unrealized losses rounded to less than $0.1 million for each category and in aggregate.

The Company had 41 and 52 investments that were in an unrealized loss position as of June 30, 2010, and December 31, 2009, respectively. The gross unrealized losses related to these investments were primarily due to changes in interest rates. The contractual terms of fixed income securities do not permit the issuer to settle the securities at a price less than the amortized cost of the investment. For the fixed income securities and publicly-traded equity 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 June 30, 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 June 30, 2010, and December 31, 2009, the carrying values of the Company’s minority equity investments in privately-held companies of $17.1 million and $13.9 million, respectively, were included in other long-term assets in the condensed consolidated balance sheets. During the three and six months ended June 30, 2010, the Company invested $0.5 million and $5.2 million in privately-held companies, respectively, and recognized a gain of $3.2 million from its minority equity investments in Ankeena upon the acquisition of Ankeena.

During the three and six months ended June 30, 2009, the Company recognized a loss of $1.6 million and $3.3 million, respectively, due to the impairment of its minority equity investments in privately-held companies that the Company judged to be other than temporary. The Company invested $2.2 million in privately-held companies during the six months ended June 30, 2009. Additionally, during the six months ended June 30, 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 cash and investments held for escrow accounts required by certain acquisitions completed in 2005 and 2010, the India Gratuity Trust and the Israel Retirement Trust which cover statutory severance obligations in the event of termination of the Company’s India and Israel employees, respectively, and the Directors & Officers (“D&O”) indemnification trust. During the three and six months ended June 30, 2010, the Company increased its restricted cash by $78.9 million and $80.5 million, respectively, primarily for the escrow account required by the acquisition of Ankeena that was completed in April 2010, and to a lesser extent for the Israel Retirement Trust 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 and six months ended June 30, 2010, the Company distributed approximately $60.8 million from its restricted accounts, mainly due to the Ankeena acquisition. In connection with the acquisition, the Company agreed to pay from escrow a total amount of $10.7 million, representing the cash value of unvested restricted shares in Ankeena as of April 8, 2010, to certain former Ankeena employees. As of June 30, 2010, the Company expects to release $9.5 million from escrow as these restricted shares vest over the course of the next two years.

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


	As of
	June 30,		December 31,
	2010		2009
Restricted cash:
Demand deposits	$	20.2	$	3.8

Total restricted cash		20.2		3.8
Restricted investments:
U.S. government securities		0.6		19.8
Corporate debt securities		2.6		—
Money market funds		50.0		30.1

Total restricted investments		53.2		49.9

Total restricted cash and investments	$	73.4	$	53.7

As of June 30, 2010, and December 31, 2009, the unrealized gains and losses related to restricted investments were immaterial.

Fair Value Measurements

Note 6. 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 tables provide a summary of assets measured at fair value on a recurring basis and their presentation on the Company’s condensed consolidated balance sheets (in millions):


	Fair Value Measurements at June 30, 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	$	5.9	$	—	$	—	$	5.9

Total trading securities		5.9		—		—		5.9

Available-for-sale debt securities:
U.S. government securities (1)		101.8		238.5		—		340.3
Government sponsored enterprise obligation		207.5		31.0		—		238.5
Foreign government debt securities		21.3		31.3		—		52.6
Commercial paper		—		66.1		—		66.1
Corporate debt securities (2)		2.6		453.6		—		456.2
Certificate of deposit		—		47.1		—		47.1
Asset backed securities		—		42.1		—		42.1
Money market funds (3)		859.9		—		—		859.9

Total available-for-sale debt securities		1,193.1		909.7		—		2,102.8

Available-for-sale equity securities:
Technology securities		4.1		—		—		4.1

Total available-for-sale equity securities		4.1		—		—		4.1

Total available-for-sale securities		1,197.2		909.7		—		2,106.9

Derivative assets:
Foreign exchange contracts		—		0.2		—		0.2

Total derivative assets		—		0.2		—		0.2


Total assets measured at fair value	$	1,203.1	$	909.9	$	—	$	2,113.0


(1)		Balance includes $0.6 million of restricted investments measured at fair market value, related to an acquisition completed in 2005.

(2)		Balance includes $2.6 million of restricted investments measured at fair market value, related to the Company’s India Gratuity Trust.

(3)		Balance includes $50.0 million of restricted investments measured at fair market value, related to the Company’s D&O trust. For additional information regarding the D&O indemnification trust, see Note 5, Cash, Cash Equivalents, and Investments, under the heading “Restricted Cash.” Restricted investments are included in the restricted cash balance in the condensed consolidated balance sheet.


	Fair Value Measurements at June 30, 2010 Using
	Quoted Prices in		Significant Other		Significant Other
	Active Markets		Observable		Unobservable
	For Identical		Remaining		Remaining
	Assets		Inputs		Inputs		Total
	(Level 1)		(Level 2)		(Level 3)
Reported as:
Cash equivalents	$	809.9	$	173.6	$	—	$	983.5
Short-term investments		165.1		398.2		—		563.3
Long-term investments		175.5		337.3		—		512.8
Restricted cash		52.6		0.6		—		53.2
Prepaid expenses and other current assets		—		0.2		—		0.2

Total assets measured at fair value	$	1,203.1	$	909.9	$	—	$	2,113.0


	Fair Value Measurements at December 31, 2009 Using
	Quoted Prices in		Significant Other		Significant 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

Total assets measured at fair value	$	1,365.0	$	788.5	$	—	$	2,153.5

The following tables provide a summary of the liabilities measured at fair value on a recurring basis and their presentation on the Company’s condensed consolidated balance sheets (in millions):


	Fair Value Measurements at June 30, 2010 Using
	Quoted
	Prices in					Significant
	Active		Significant Other			Other
	Markets For		Observable			Unobservable
	Identical		Remaining			Remaining
	Liabilities		Inputs			Inputs		Total
	(Level 1)		(Level 2)			(Level 3)
Derivative liabilities:
Foreign exchange contracts	$	—	$	(1.4	)	$	—	$	(1.4	)

Total derivative liabilities		—		(1.4	)		—		(1.4	)

Total liabilities measured at fair value	$	—	$	(1.4	)	$	—	$	(1.4	)


	Fair Value Measurements at June 30, 2010 Using
	Quoted Prices in		Significant Other			Significant Other
	Active Markets		Observable			Unobservable
	For Identical		Remaining			Remaining
	Liabilities		Inputs			Inputs		Total
	(Level 1)		(Level 2)			(Level 3)
Reported as:
Other accrued liabilities	$	—	$	(1.4	)	$	—	$	(1.4	)

Total liabilities measured at fair value	$	—	$	(1.4	)	$	—	$	(1.4	)


	Fair Value Measurements at December 31, 2009 Using
	Quoted Prices in		Significant Other			Significant Other
	Active Markets		Observable			Unobservable
	For Identical		Remaining			Remaining
	Liabilities		Inputs			Inputs		Total
	(Level 1)		(Level 2)			(Level 3)
Reported as:
Other accrued liabilities	$	—	$	(1.3	)	$	—	$	(1.3	)

Total liabilities measured at fair value	$	—	$	(1.3	)	$	—	$	(1.3	)

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 and six months ended June 30, 2010, the Company had no transfers between levels of the fair value hierarchy of its assets or liabilities measured at fair value.

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):

Fair Value Measurements Using

Quoted

Total (Losses)

Prices in

Significant

for

Active

Other

the Three

the Six

Carrying

Markets

Observable

Unobservable

Months

Value as of

for Identical

Remaining

Ended

June 30, 2010

Assets

Inputs

June 30, 2010

(Level 1)

(Level 2)

(Level 3)

Privately-held equity investments

$

0.7

$

—

$

—

$

0.7

$

—

$

—

Total

$

0.7

$

—

$

—

$

0.7

$

—

$

—


			Fair Value Measurements Using
			Quoted						Total (Losses)			Total (Losses)
			Prices in		Significant		Significant		for			for
			Active		Other		Other		the Three			the Six
	Carrying		Markets		Observable		Unobservable		Months			Months
	Value as of		for Identical		Remaining		Remaining		Ended			Ended
	June 30, 2009		Assets		Inputs		Inputs		June 30, 2009			June 30, 2009
			(Level 1)		(Level 2)		(Level 3)
Privately-held equity investments	$	1.7	$	—	$	—	$	1.7	$	(1.6	)	$	(3.3	)

Total	$	1.7	$	—	$	—	$	1.7	$	(1.6	)	$	(3.3	)

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 its 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 $1.6 million and $3.3 million during the three and six months ended June 30, 2009, respectively, and classified the investments 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 and six months ended June 30, 2010.

Goodwill and Purchased Intangible Assets

Note 7. Goodwill and Purchased Intangible Assets

Goodwill

The change in the carrying amount of goodwill for the six months ended June 30, 2010, is summarized as follows (in millions):


	Infrastructure		Service Layer Technologies			Total
Balance as of January 1, 2010
Goodwill	$	1,500.5	$	3,438.1		$	4,938.6
Accumulated impairment losses		—		(1,280.0	)		(1,280.0	)

Goodwill – Carrying value at January 1, 2010		1,500.5		2,158.1			3,658.6

Goodwill acquired during the year		53.1		—			53.1
Balance as of June 30, 2010
Goodwill		1,553.6		3,438.1			4,991.7
Accumulated impairment losses		—		(1,280.0	)		(1,280.0	)

Goodwill – Carrying value at June 30, 2010	$	1,553.6	$	2,158.1		$	3,711.7

During the second quarter of 2010, goodwill increased by $53.1 million as a result of the Company’s acquisition of Ankeena. For further discussion, see Note 3, Business Combinations, in the Notes to Condensed Consolidated Financial Statements. There were no impairments to goodwill during the three and six months ended June 30, 2010 and 2009.

Purchased Intangible Assets

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


			Accumulated
	Gross		Amortization			Additions		Net
As of June 30, 2010:
Technologies and patents	$	380.0	$	(376.9	)	$	8.4	$	11.5
Other		68.9		(60.8	)		3.8		11.9

Total	$	448.9	$	(437.7	)	$	12.2	$	23.4


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

During the second quarter of 2010, purchased intangible assets increased by $12.2 million as a result of the Company’s acquisition of Ankeena. For further discussion, see Note 3, Business Combinations, in the Notes to Condensed Consolidated Financial Statements.

Amortization of purchased intangible assets included in operating expenses and cost of product revenues totaled $1.5 million and $4.9 million for the three months ended June 30, 2010, and 2009, respectively, and $2.7 million and $10.6 million for the six months ended June 30, 2010, and 2009, respectively. There were no impairment charges with respect to purchased intangible assets in the three and six months ended June 30, 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 six months)	$	3.0
2011		5.1
2012		4.3
2013		4.2
2014		2.4
Thereafter		4.4

Total	$	23.4

Other Financial Information

Note 8. 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 June 30,						Six Months Ended June 30,
	2010			2009			2010			2009
Beginning balance	$	37.8		$	37.5		$	38.2		$	40.1
Provisions made during the period, net		12.1			8.8			24.2			18.6
Change in estimate		(0.1	)		(1.2	)		(0.6	)		(3.3	)
Actual costs incurred during the period		(11.5	)		(9.3	)		(23.5	)		(19.6	)

Ending balance	$	38.3		$	35.8		$	38.3		$	35.8

Deferred Revenue

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


	As of
	June 30,			December 31,
	2010			2009
Deferred product revenue:
Undelivered product commitments and other product deferrals	$	273.6		$	254.7
Distributor inventory and other sell-through items		113.5			136.6

Deferred gross product revenue		387.1			391.3
Deferred cost of product revenue		(150.1	)		(150.0	)

Deferred product revenue, net		237.0			241.3
Deferred service revenue		530.8			512.3

Total	$	767.8		$	753.6

Reported as:
Current	$	544.6		$	571.7
Long-term		223.2			181.9

Total	$	767.8		$	753.6

Deferred product revenue represents primarily unrecognized revenue related to shipments to distributors that have not been sold through to end-users, undelivered product commitments, and other shipments that have not met all revenue recognition criteria. Deferred product revenue is recorded net of the related product costs of revenue. Deferred service revenue represents customer payments made in advance for services, which include technical support, hardware and software maintenance, professional services, and training.

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 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						June 30,
	2009		Charges		Payments			Adjustment			2010
Facilities	$	4.9	$	6.8	$	(1.1	)	$	(1.6	)	$	9.0
Severance, contractual commitments, and other charges		4.5		1.6		(4.7	)		(0.1	)		1.3

Total	$	9.4	$	8.4	$	(5.8	)	$	(1.7	)	$	10.3

In connection with the 2009 Restructuring Plan, the Company recorded $0.3 million and $8.4 million within restructuring charges in the condensed consolidated statements of operations during the three and six months ended June 30, 2010, respectively. The Company paid $1.6 million and $5.8 million for severance and facilities related charges associated with the 2009 Restructuring Plan during the three and six months ended June 30, 2010, respectively. The Company recorded $7.5 million and $11.8 million in restructuring charges during the three and six months ended June 30, 2009, associated with its 2009 Restructuring Plan. The Company paid $0.7 million and $3.2 million for severance related charges associated with the 2009 Restructuring Plan during the three and six months ended June 30, 2009, respectively.

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 June 30,				Six Months Ended June 30,
	2010		2009		2010		2009
Interest income and expense, net	$	0.6	$	1.6	$	1.5	$	3.7
Other income and expense, net		0.2		1.3		0.8		1.1

Total interest and other income, net	$	0.8	$	2.9	$	2.3	$	4.8

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.

Financing Arrangements

Note 9. 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 $156.2 million and $81.1 million during the three months ended June 30, 2010, and 2009, respectively, and $282.4 million and $172.3 million during the six months ended June 30, 2010, and 2009, respectively. During the three months ended June 30, 2010, and 2009, the Company received cash proceeds of $137.6 million and $80.2 million, respectively, and $276.5 million and $175.7 million during the six months ended June 30, 2010, and 2009, 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 June 30, 2010, and December 31, 2009, were $99.0 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 and other long-term liabilities in the condensed consolidated balance sheet. As of June 30, 2010, and December 31, 2009, the estimated amounts of cash received from the financing provider that had not been recognized as revenue from distributors were $31.6 million and $52.6 million, respectively.

Derivative Instruments

Note 10. 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) on the condensed consolidated balance sheets, 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 three and six months ended June 30, 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 accumulated other comprehensive income (loss) are expected to be reclassified into earnings 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 June 30, 2010, and December 31, 2009, was $0.2 million and $0.2 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 June 30, 2010, and December 31, 2009, was $1.4 million and $1.5 million, respectively.

The Company recognized a loss of $2.9 million in accumulated other comprehensive loss for the effective portion of its derivative instruments and reclassified a loss of $2.6 million from other comprehensive loss to operating expense in the condensed consolidated statements of operations during the three months ended June 30, 2010. During the six months ended June 30, 2010, the Company recognized a loss of $4.5 million in accumulated other comprehensive loss for the effective portion of its derivative instruments and reclassified a loss of $3.2 million from other comprehensive income to operating expense in the condensed consolidated statements of operations.

During the three months ended June 30, 2009, the Company recognized a gain of $5.1 million in accumulated other comprehensive loss for the effective portion of its derivative instruments and reclassified a gain of $1.0 million from other comprehensive income to operating expense in the condensed consolidated statements of operations. The Company recognized a loss of $0.7 million in accumulated other comprehensive loss for the effective portion of its derivative instruments and reclassified a loss of $1.7 million from other comprehensive income to operating expense in the condensed consolidated statements of operations during the six months ended June 30, 2009.

The ineffective portion of the Company’s derivative instruments recognized in its condensed consolidated statements of operations was immaterial during the three and six months ended June 30, 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 between one and two months.

As of June 30, 2010, the Company’s top three outstanding derivative positions by currency were as follows (in millions):


	Buy		Buy		Buy
	EUR		GBP		INR
Foreign currency forward contracts:
Notional amount of foreign currency		41.5		8.4		1,570.0
U.S dollar equivalent	$	52.9	$	12.5	$	34.2
Weighted-average maturity	1 month		2 months		2 months

During the three and six months ended June 30, 2010, the Company recognized a loss on non-designated derivative instruments within interest and other income, net, on its condensed consolidated statements of operations of $1.0 million and $1.4 million, respectively. The Company recognized a gain of $3.8 million and $3.2 million on non-designated derivative instruments within interest and other income, net, on its condensed consolidated statements of operations during the three and six months ended June 30 2009, respectively.

Stockholders Equity

Stockholders' Equity

Note 11. 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.

Under the 2008 Stock Repurchase Program, the Company repurchased approximately 6.5 million shares of its common stock at an average price of $27.33 per share for an aggregate purchase price of $177.4 million during the three months ended June 30, 2010, and approximately 9.2 million shares of its common stock at an average price of $27.24 per share for an aggregate purchase price of $251.8 million during the six months ended June 30, 2010. The Company repurchased approximately 2.2 million shares of its common stock at an average price of $22.73 per share for an aggregate purchase price of $49.5 million during the three months ended June 30, 2009, and approximately 9.7 million shares of its common stock at an average price of $17.52 per share for an aggregate purchase price of $169.2 million during the six months ended June 30, 2009, under the 2008 Stock Repurchase Program. As of June 30, 2010, the 2008 and 2010 Stock Repurchase Programs had remaining aggregate authorized funds of $1,066.8 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. There were no repurchases in connection with net issuances during the three months ended June 30, 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 during the six months ended June 30, 2010. The Company repurchased an immaterial amount of common stock from its employees in connection with net issuance of shares, during the three and six months ended June 30, 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 Attributable to Juniper Networks

Comprehensive income consists of the following (in millions):


	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2010			2009		2010			2009
Consolidated net income	$	130.3		$	14.8	$	295.0		$	10.3
Other comprehensive loss, net of tax:
Change in net unrealized (losses) gains on investments, net tax of nil		(1.3	)		6.2		(1.7	)		2.6
Change in foreign currency translation adjustment, net tax of nil		(4.8	)		11.6		(7.5	)		1.1

Total other comprehensive (loss) income, net of tax		(6.1	)		17.8		(9.2	)		3.7

Consolidated comprehensive income		124.2			32.6		285.8			14.0
Adjust for comprehensive (income) loss attributable to noncontrolling interest		0.2			—		(1.3	)		—

Comprehensive income attributable to Juniper Networks	$	124.4		$	32.6	$	284.5		$	14.0

The following tables summarize stockholders’ equity activity for the three and six months ended June 30, 2010 (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
Consolidated net income		—			—			130.5			(0.2	)		130.3
Change in unrealized loss on investments, net tax of nil		—			(1.3	)		—			—			(1.3	)
Foreign currency translation loss, net tax of nil		—			(4.8	)		—			—			(4.8	)
Exercise of stock options by employees, net of repurchases		53.7			—			—			—			53.7
Return of capital to noncontrolling interest		—			—			—			(1.0	)		(1.0	)
Shares assumed in connection with business acquisition		2.3			—			—			—			2.3
Retirement of common stock		(9.1	)		—			(168.3	)		—			(177.4	)
Share-based compensation expense		43.3			—			—			—			43.3
Adjustment related to tax benefit from employee stock option plans		5.4			—			—			—			5.4

Balance at June 30, 2010	$	9,363.2		$	(10.6	)	$	(3,181.7	)	$	0.9		$	6,171.8

The following table summarizes stockholders’ equity activity for the three and six months ended June 30, 2009 (in millions):


				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
Consolidated net income		—			—			(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
Consolidated net income		—			—			14.7			14.7
Change in unrealized gains on investments, net tax of nil		—			6.2			—			6.2
Foreign currency translation loss, net tax of nil		—			11.6			—			11.6
Exercise of stock options by employees, net of repurchases		29.2			—			—			29.2
Retirement of common stock		(0.4	)		—			(49.1	)		(49.5	)
Share-based compensation expense		33.5			—			—			33.5
Adjustment related to tax benefit from employee stock option plans		(58.6	)		—			—			(58.6	)

Balance at June 30, 2009	$	8,881.8		$	(0.5	)	$	(3,064.5	)	$	5,816.8

Employee Benefit Plans

Note 12. 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.

When the 2006 Plan was adopted and approved by the Company’s stockholders in May 2006, it had an initial authorized share reserve of 64.5 million shares of common stock plus the addition of any shares subject to options under the 2000 Plan and the 1996 Plan that were outstanding as of May 18, 2006, and that subsequently expire unexercised, up to a maximum of an additional 75 million shares. In the second quarter of 2010, the Company’s stockholders’ approved an amendment to the 2006 Plan that increased the number of shares reserved for issuance thereunder by an additional 30 million shares. As of June 30, 2010, the 2006 Plan had 62.9 million shares subject to currently outstanding equity awards and 32.0 million shares available for future issuance.

In connection with the acquisition of Ankeena, the Company assumed stock option and RSU awards under the Ankeena stock plan and exchanged those awards for stock options and RSUs covering approximately 820,000 shares of the Company’s common stock, based upon an exchange ratio prescribed by the acquisition agreement. As of June 30, 2010, stock options and RSUs covering approximately 2.3 million shares of common stock were outstanding under plans assumed through the Company’s past acquisitions.

Stock Option Activities

The following table summarizes the Company’s stock option activity and related information as of and for the six months ended June 30, 2010 (in millions, except for per share amounts and years):


	Outstanding Options
						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		5.3			28.76
Options assumed⁽¹⁾		0.4			29.42
Options canceled		(0.9	)		21.08
Options exercised		(8.7	)		17.82
Options expired		(0.6	)		63.61

Balance at June 30, 2010		62.9		$	21.47	4.4 years	$	218.7


As of June 30, 2010:
Vested or expected-to-vest options		55.6		$	21.31	4.3 years	$	198.3
Exercisable options		40.8		$	20.66	3.7 years	$	158.9


(1)		Stock options assumed in connection with the acquisition of Ankeena.

Aggregate intrinsic value represents the difference between the Company’s closing stock price on the last trading day of the period, which was $22.82 per share as of June 30, 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 $37.2 million and $96.4 million for the three and six months ended June 30, 2010, respectively. Total fair value of options vested for the three and six months ended June 30, 2010, was $19.2 million and $47.1 million, respectively.

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 six months ended June 30, 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 granted		2.8			28.80
RSUs assumed⁽¹⁾		0.4			31.18
PSAs granted⁽²⁾		3.3			28.30
RSUs vested		(1.7	)		26.40
PSAs vested		(0.2	)		26.64
RSUs canceled		(0.3	)		24.48

Balance at June 30, 2010		13.4		$	24.98	2.0 years	$	305.5


As of June 30, 2010:
Vested and expected-to-vest RSUs and PSAs		8.7		$	24.99	2.0 years	$	197.5


(1)		RSUs assumed in connection with the acquisition of Ankeena.

(2)		The number of shares subject to PSAs granted represents the aggregate maximum number of shares that may be issued pursuant to the award over its full term. The aggregate number of shares subject to these PSAs that would be issued if performance goals determined by the Compensation Committee are achieved at target is 1.3 million. Depending on achievement of such performance goals, the range of shares that could be issued under these awards is 0 to 3.3 million.

Employee Stock Purchase Plan

The Company’s 2008 Purchase Plan is implemented in a series of offering periods, each six months in duration, or a shorter period as determined by the Board. There were no employee purchases under the 2008 Purchase Plan in the three months ended June 30, 2010. During the six months ended June 30, 2010, employees purchased approximately 1.0 million shares of common stock at an average per share price of $21.11. There were no employee purchases under the 2008 Purchase plan in the three and six months ended June 30, 2009.

Employees purchased approximately 1.6 million shares of common stock through the 1999 Employee Stock Purchase Plan at an average price of $12.04 per share in the six months ended June 30, 2009. Effective February 1, 2009, immediately following the conclusion of the offering period ended January 30, 2009, the 1999 Employee Stock Purchase Plan was discontinued, and no shares remained available for future issuance.

As of June 30, 2010, approximately 1.0 million shares had been issued under the 2008 Purchase Plan, and 9.4 million shares remained available for future issuance under the 2008 Purchase Plan.

Shares Available for Grant

The following table presents the stock grant activity for the six months ended June 30, 2010 and the total number of shares available for grant under the 2006 Plan as of June 30, 2010 (in millions):


	Number of
	Shares
Balance at January 1, 2010		18.0
Additional authorized share reserve approved by stockholders		30.0
RSUs and PSAs granted (1)		(13.4	)
RSUs assumed		0.4
Options granted		(5.7	)
Options assumed		0.4
RSUs canceled (1)		0.7
Options canceled (2)		0.9
Options expired (2)		0.6

Balance at June 30, 2010		31.9


(1)		RSUs and PSAs with a per share or unit purchase price lower than 100% of the fair market value of the Company’s common stock on the day of the grant under the 2006 Plan are counted against shares authorized under the plan as two and one-tenth shares of common stock for each share subject to such award. The number of shares subject to PSAs granted represents the maximum number of shares that may be issued pursuant to the award over its full term.

(2)		Includes canceled or expired options under the 1996 Plan and the 2000 Plan that expired unexercised after May 18, 2006, which become available for grant under the 2006 Plan according to its terms.

Common Stock Reserved for Future Issuance

As of June 30, 2010, the Company had reserved an aggregate of approximately 117.6 million shares of common stock for future issuance under its equity incentive plans and the 2008 Purchase Plan.

Share-Based Compensation Expense

The Company determines the fair value of its stock options utilizing the Black-Scholes-Merton (“BSM”) option-pricing model, which incorporates various assumptions including volatility, risk-free interest rate, expected life, and dividend yield. The expected volatility is based on the implied volatility of market-traded options on the Company’s common stock, adjusted for other relevant factors including historical volatility of the Company’s common stock over the most recent period commensurate with the estimated expected life of the Company’s stock options. The expected life of a stock option award is based on historical experience and on the terms and conditions of the stock awards granted to employees, as well as the potential effect from stock options that had not been exercised at the time. Since 2006, the Company has granted stock option awards that have a maximum contractual life of seven years from the date of grant. Prior to 2006, stock option awards generally had a ten-year contractual life from the date of grant.

The Company determines the fair value of its RSUs and PSAs based upon the fair market value of the shares of the Company’s common stock at the date of grant.

The assumptions used and the resulting estimates of fair value for employee stock options and the employee stock purchase plan during the three and six months ended June 30, 2010, and 2009 were:


	Three Months Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009
Employee Stock Options:
Volatility factor		33% - 41	%		49% - 52	%		33% - 41	%		49% - 58	%
Risk-free interest rate		1.7% - 2.2	%		0.5% - 2.9	%		1.7% - 2.2	%		0.4% - 2.9	%
Expected life (years)		4.3			4.3 – 5.8			4.3			4.3 – 5.8
Dividend yield		—			—			—			—
Fair value per share	$	7.83 - $30.36		$	7.54 - $10.49		$	7.83 - $30.36		$	6.02 - $10.49


Employee Stock Purchase Plan:
Volatility factor		35	%		58	%		35	%		58	%
Risk-free interest rate		1.7	%		0.4	%		1.7	%		0.4	%
Expected life (years)		0.5			0.5			0.5			0.5
Dividend yield		—			—			—			—
Weighted-average fair value per share	$	$6.19		$	4.51		$	6.19		$	4.51

The Company expenses the cost of its stock options, on a straight line basis, over the vesting period. The Company expenses the cost of its RSUs ratably over the period during which the restrictions lapse. In addition, the Company estimates share-based compensation expense for its PSAs based on the vesting criteria and only recognizes expense for the portions of such awards for which annual targets have been set. The weighted-average fair value per share of RSUs and PSAs granted during these periods were:


	Three Months Ended June 30,				Six Months Ended June 30,
	2010		2009		2010		2009
Weighted-average fair value per share:
RSUs	$	28.69	$	22.66	$	29.48	$	15.56
PSAs	$	28.98	$	18.42	$	28.78	$	15.12

The Company’s share-based compensation expense associated with stock options, employee stock purchases, RSUs, and PSAs is recorded in the following cost and expense categories for the three and six months ended June 30, 2010, and 2009 (in millions):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2010		2009 (1)		2010		2009 (1)
Cost of revenues — Product	$	1.0	$	0.9	$	2.1	$	1.9
Cost of revenues — Service		3.2		2.5		6.7		5.0
Research and development		18.7		15.0		35.7		29.7
Sales and marketing		13.9		10.6		25.6		20.8
General and administrative		7.8		4.5		15.1		9.7

Total	$	44.6	$	33.5	$	85.2	$	67.1


(1)		Prior period information has been reclassified to conform to the current period’s presentation.

The following table summarizes share-based compensation expense by award type (in millions):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2010		2009		2010		2009
Options	$	20.8	$	20.7	$	40.9	$	39.5
Assumed options		0.6		—		0.6		—
Other acquisition-related compensation		1.3		—		1.3		—
Assumed RSUs		0.5		—		0.5		—
RSUs and PSAs		19.2		9.2		35.5		20.0
Employee stock purchase plan		2.2		3.6		6.4		7.6

Total	$	44.6	$	33.5	$	85.2	$	67.1

As of June 30, 2010, approximately $134.2 million of unrecognized compensation cost, adjusted for estimated forfeitures, related to unvested stock options will be recognized over a weighted-average period of approximately 2.6 years while approximately $137.4 million of unrecognized compensation cost, adjusted for estimated forfeitures, related to unvested RSUs and unvested PSAs will be recognized over a weighted-average period of approximately 2.6 years.

401(k) Plan

The Company maintains a savings and retirement plan qualified under Section 401(k) of the Internal Revenue Code of 1986, as amended. Employees meeting the eligibility requirements, as defined, may contribute up to the statutory limits of the year. The Company has matched employee contributions since January 1, 2001, currently matching 25% of all eligible employee contributions. All matching contributions vest immediately. The Company’s matching contributions to the plan totaled $3.5 million and $7.5 million in the three and six months ended June 30, 2010, respectively, and $3.2 million and $7.0 million in the three and six months ended June 30, 2009, respectively.

Deferred Compensation Plan

The Company’s non-qualified deferred compensation (“NQDC”) plan is an unfunded and unsecured deferred compensation arrangement. Under the NQDC plan, officers and other senior employees may elect to defer a portion of their compensation and contribute such amounts to one or more investment funds. The NQDC plan assets are included within investments, and offsetting obligations are included within accrued compensation on the condensed consolidated balance sheet. The investments are considered trading securities and are reported at fair value. The realized and unrealized holding gains and losses related to these investments are recorded in interest and other income, net, and the offsetting compensation expense are recorded as operating expenses in the condensed consolidated results of operations. The deferred compensation liability under the NQDC plan was approximately $6.0 million and $4.7 million as of June 30, 2010, and December 31, 2009, respectively.

Segments

Note 13. Segments

The Company’s chief operating decision maker (“CODM”) allocates resources and assesses performance based on financial information by the Company’s business groups. The Company’s operations are organized into two reportable segments: Infrastructure and Service Layer Technologies (“SLT”). The Infrastructure segment includes products from the E-, M-, MX-, and T-series router product families, EX-series switching products, as well as the circuit-to-packet products. The SLT segment consists primarily of Firewall virtual private network (“Firewall”) systems and appliances, SRX service gateways, secure socket layer (“SSL”) virtual private network (“VPN”) appliances, intrusion detection and prevention (“IDP”) appliances, the J-series router product family and wide area network (“WAN”) optimization platforms.

The primary financial measure used by the CODM in assessing performance of the segments is segment operating income, which includes certain cost of revenues, research and development (“R&D”) expenses, sales and marketing expenses, and general and administrative (“G&A”) expenses. The CODM does not allocate certain miscellaneous expenses to its segments even though such expenses are included in the Company’s management operating income.

For arrangements with both Infrastructure and SLT products and services, revenue is attributed to the segment based on the underlying purchase order, contract, or sell-through report. Direct costs and operating expenses, such as standard costs, R&D, and product marketing expenses, are generally applied to each segment. Indirect costs, such as manufacturing overhead and other cost of revenues, are allocated based on standard costs. Indirect operating expenses, such as sales, marketing, business development, and G&A expenses are generally allocated to each segment based on factors including headcount, usage, and revenue. The CODM does not allocate share-based compensation, amortization of purchased intangible assets, restructuring and impairment charges, gains or losses on equity investments, other net income and expense, income taxes, or certain other charges to the segments.

The following table summarizes financial information for each segment used by the CODM (in millions):


	Three Months Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009
Net revenues:
Infrastructure:
Product	$	590.2		$	469.9		$	1,146.3		$	924.2
Service		130.2			114.1			252.7			226.9

Total Infrastructure revenues		720.4			584.0			1,399.0			1,151.1
Service Layer Technologies:
Product		183.8			137.1			348.9			270.6
Service		74.1			65.3			143.0			128.8

Total Service Layer Technologies revenues		257.9			202.4			491.9			399.4

Total net revenues		978.3			786.4			1,890.9			1,550.5
Operating income:
Infrastructure		181.2			119.9			357.7			231.8
Service Layer Technologies		52.6			22.2			87.7			35.3

Total management operating income		233.8			142.1			445.4			267.1
Amortization of purchased intangible assets (1)		(1.5	)		(5.0	)		(2.6	)		(10.7	)
Share-based compensation expense		(44.6	)		(33.5	)		(85.2	)		(67.1	)
Share-based payroll tax expense		(1.9	)		(0.4	)		(3.4	)		(0.7	)
Restructuring charges		(0.3	)		(7.5	)		(8.4	)		(11.7	)
Acquisition-related charges		(0.5	)		—			(0.5	)		—

Total operating income		185.0			95.7			345.3			176.9
Interest and other income, net		0.8			2.9			2.3			4.8
Gain (loss) on equity investment		3.2			(1.6	)		3.2			(3.3	)

Income before income taxes and noncontrolling interest	$	189.0		$	97.0		$	350.8		$	178.4


(1)		Amount includes amortization expense of purchased intangible assets in operating expenses and in cost of revenues.

Depreciation expense allocated to the Infrastructure segment was $26.4 million and $51.1 million in the three months and six months ended June 30, 2010, respectively, and $22.9 million and $45.0 million in the three months and six months ended June 30, 2009, respectively. The depreciation expense allocated to the SLT segment was $9.6 million and $19.1 million in the three and six months ended June 30, 2010, respectively, and $10.0 million and $19.7 million in the three and six months ended June 30, 2009, respectively.

The Company attributes revenues to geographic region based on the customer’s ship-to location. The following table shows net revenues by geographic region (in millions):


	Three Months Ended June 30,				Six Months Ended June 30,
	2010		2009		2010		2009
Americas:
United States	$	439.9	$	350.3	$	886.8	$	665.0
Other		54.3		40.6		95.9		85.5

Total Americas		494.2		390.9		982.7		750.5
Europe, Middle East and Africa		289.5		232.0		553.6		455.2
Asia Pacific		194.6		163.5		354.6		344.8

Total	$	978.3	$	786.4	$	1,890.9	$	1,550.5

During the three months ended June 30, 2010, no single customer accounted for greater than 10.0% of the Company’s net revenues, and during the six months ended June 30, 2010, Verizon Communications, Inc. (“Verizon”) accounted for 10.7% of net revenues. During the three and six months ended June 30, 2009, no single customer accounted for greater than 10.0% or more of the Company’s net revenues.

The Company tracks assets by physical location. The majority of the Company’s assets, excluding cash and cash equivalents and investments, as of June 30, 2010, and December 31, 2009, were attributable to U.S. operations. As of June 30, 2010, and December 31, 2009, property and equipment, held in the U.S. as a percentage of total property and equipment was 80% and 81%, respectively. Although management reviews asset information on a corporate level and allocates depreciation expense by segment, the CODM does not review asset information on a segment basis.

Income Taxes

Note 14. Income Taxes

The Company recorded a tax provision of $58.7 million and $82.2 million for the three months ended June 30, 2010, and 2009, or effective tax rates of 31% and 85%, respectively. The Company recorded a tax provision of $55.8 million and $168.1 million for the six months ended June 30, 2010, and 2009, or effective tax rates of 16% and 94%, respectively.

The effective tax rates for the three and six months ended June 30, 2010, differ from the federal statutory rate of 35% primarily due to the benefit of earnings in foreign jurisdictions which are subject to lower tax rates, and a $54.1 million income tax benefit recorded during the Company’s first quarter resulting from a change in the Company’s estimate of unrecognized tax benefits related to share-based compensation. The change in estimate was a result of the taxpayer favorable ruling by the U.S. Court of Appeals for the Ninth Circuit (the “Court”) in Xilinx Inc. v. Commissioner in March 2010. These benefits were partially offset by charges for increases in the valuation allowance against the Company’s California deferred tax assets of approximately $2.7 million and $5.2 million, respectively.

The effective tax rates for the three and six months ended June 30, 2009, differ from the federal statutory rate of 35% primarily due to two income tax charges: a $52.1 million charge in the Company’s second quarter of 2009, related to a change in the Company’s estimate of unrecognized tax benefits as a result of the original decision reached in May of 2009 by the Court in Xilinx Inc. v. Commissioner, which was not held in favor of the taxpayer; and a $61.8 million charge which resulted from changes in California income tax laws enacted during the Company’s first quarter of 2009. The tax rates for the three and six months periods ended June 30, 2009, were favorably impacted by the benefit of earnings in foreign jurisdictions, which are subject to lower tax rates, and the federal Research and Development (“R&D”) credit.

The gross unrecognized tax benefits decreased by approximately $71.2 million for the six months ended June 30, 2010. Interest and penalties for the same period, decreased by approximately $5.9 million. Interest and penalties accrued for the three months ended June 30, 2010, were not significant. The decrease in the gross unrecognized tax benefits and the accrued interest and penalties is primarily related to the change in estimate during the Company’s first quarter of 2010, resulting from the Court’s decision in Xilinx v. Commissioner referenced above.

The Company is currently under examination by the Internal Revenue Service (“IRS”) for the 2004 through 2006 tax years. The Company is also subject to two separate ongoing examinations by the India tax authorities for the 2004 tax year and 2004 through 2008 tax years, respectively, and has received an inquiry from the Hong Kong tax authorities for the 2002 through 2008 tax years. Additionally, the Company has not reached a final resolution with the IRS on an adjustment it proposed for the 1999 and 2000 tax years. The Company is not aware of any other income tax examination by taxing authorities in any other major jurisdictions in which it files income tax returns as of June 30, 2010.

In 2009, as part of the on-going 2004 IRS audit, the Company received a proposed adjustment related to the license of acquired intangibles under an intercompany R&D cost sharing arrangement. In March 2009 and April 2010, the Company received assessments from the Hong Kong tax authorities specifically related to inquiries of the 2002 and 2003 tax years, respectively. In December 2008, the Company received a proposed adjustment from the India tax authorities related to the 2004 tax year.

In July 2009, the India tax authorities commenced a separate investigation of our 2004 through 2008 tax returns and are disputing the Company’s determination of taxable income due to the cost basis of certain fixed assets. The Company accrued $4.6 million in penalties and interest in 2009 related to this matter. The Company understands that the India tax authorities may issue an initial assessment that is substantially higher than this amount. As a result, in accordance with the administrative and judiciary process in India, the Company may be required to make payments that are substantially higher than the amount accrued in order to ultimately settle this issue. The Company strongly believes that any assessment it may receive in excess of the amount accrued would be inconsistent with applicable India tax laws and intends to defend this position vigorously.

The Company is pursuing all available administrative procedures relative to the matters referenced above. The Company believes that it has adequately provided for any reasonably foreseeable outcomes related to these proposed adjustments, and the ultimate resolution of these matters is unlikely to have a material effect on its consolidated financial condition or results of operations; however, there is a possibility that an adverse outcome of these matters could have a material effect on its consolidated financial condition and results of operations. For more information, please see Note 15, Commitments and Contingencies, under the heading “IRS Notices of Proposed Adjustments.”

The Company engages in continuous discussions and negotiations with tax authorities regarding tax matters in various jurisdictions. It is reasonably possible that the balance of the gross unrecognized tax benefits will decrease by approximately $5.9 million within the next twelve months due to lapses of applicable statute of limitations in multiple jurisdictions that the Company operated in. However, at this time, the Company is unable to make a reasonably reliable estimate of the timing of payments related to the remaining unrecognized tax liabilities due to uncertainties in the timing of tax audit outcomes.

Commitments and Contingencies

Note 15. Commitments and Contingencies

Commitments

The following table summarizes the Company’s principal contractual obligations as of June 30, 2010 (in millions):


	Total			2010			2011		2012		2013		2014		Thereafter		Other
Operating leases	$	293.4		$	26.7		$	46.0	$	40.8	$	31.3	$	26.0	$	122.6	$	—
Sublease rental income		(0.3	)		(0.3	)		—		—		—		—		—		—
Purchase commitments		147.1			147.1			—		—		—		—		—		—
Tax liabilities		98.9			—			—		—		—		—		—		98.9
Other contractual obligations		54.5			25.2			18.0		9.5		1.8		—		—		—

Total	$	593.6		$	198.7		$	64.0	$	50.3	$	33.1	$	26.0	$	122.6	$	98.9

Operating Leases

The Company leases its facilities under operating leases that expire at various times, the longest of which expires in November 2022. Future minimum payments under the non-cancelable operating leases, net of committed sublease income, totaled $293.1 million as of June 30, 2010. Rent expense was $13.7 million and $27.8 million for the three and six months ended June 30, 2010, respectively, and $14.3 million and $28.3 million for the three and six months ended June 30, 2009, respectively.

Purchase Commitments

In order to reduce manufacturing lead times and ensure adequate component supply, contract manufacturers utilized by the Company place non-cancelable, non-returnable (“NCNR”) orders for components based on the Company’s build forecasts. As of June 30, 2010, there were NCNR component orders placed by the contract manufacturers with a value of $147.1 million. The contract manufacturers use the components to build products based on the Company’s forecasts and customer purchase orders received by the Company. Generally, the Company does not own the components and title to the products transfers from the contract manufacturers to the Company and immediately to the Company’s customers upon delivery at a designated shipment location. If the components remain unused or the products remain unsold for specified periods, the Company may incur carrying charges or obsolete materials charges for components that the contract manufacturers purchased to build products to meet the Company’s forecast or customer orders. As of June 30, 2010, the Company had accrued $22.0 million based on its estimate of such charges.

Tax Liabilities

As of June 30, 2010, the Company had $98.9 million included in current and long-term liabilities in the condensed consolidated balance sheet for unrecognized tax positions. At this time, the Company is unable to make a reasonably reliable estimate of the timing of payments related to the additional $98.9 million in liability due to uncertainties in the timing of tax audit outcomes.

Other Contractual Obligations

As of June 30, 2010, other contractual obligations primarily consisted of $19.3 million of indemnity-related and service related escrows required by certain acquisitions completed in 2005 and 2010, $15.4 million remaining balance for a data center hosting agreement that requires payments through the end of April 2013, $12.1 million for license and service agreements, and $7.7 million under a software subscription agreement that requires payments through the end of January 2011.

Guarantees

The Company enters into agreements with customers that contain indemnification provisions relating to potential situations where claims could be alleged that the Company’s products infringe the intellectual property rights of a third party. Other guarantees or indemnification arrangements include guarantees of product and service performance, guarantees related to third-party customer-financing arrangements, and standby letters of credit for certain lease facilities. As of June 30, 2010, the Company had $22.4 million in guarantees and standby letters of credit and recorded a liability of $9.7 million related to a third-party customer-financing guarantee. As of December 31, 2009, the Company had $34.0 million in guarantees and standby letters of credit along with a liability of $21.9 million related to a third-party customer-financing guarantee.

Legal Proceedings

The Company is subject to legal claims and litigation arising in the ordinary course of business, such as employment or intellectual property claims, including the matters described below. The outcome of any such matters is currently not determinable. Although the Company does not expect that any such legal claims or litigation will ultimately have a material adverse effect on its consolidated financial condition or results of operations, an adverse result in one or more of such matters could negatively affect the Company’s consolidated financial results in the period in which they occur.

Federal Securities Class Action

On July 14, 2006, and August 29, 2006, two purported class actions were filed in the Northern District of California against the Company and certain of the Company’s current and former officers and directors. On November 20, 2006, the Court consolidated the two actions as In re Juniper Networks, Inc. Securities Litigation, No. C06-04327-JW, and appointed the New York City Pension Funds as lead plaintiffs. The lead plaintiffs filed a Consolidated Class Action Complaint on January 12, 2007, and filed an Amended Consolidated Class Action Complaint on April 9, 2007. The Amended Consolidated Complaint alleges that the defendants violated federal securities laws by manipulating stock option grant dates to coincide with low stock prices and issuing false and misleading statements including, among others, incorrect financial statements due to the improper accounting of stock option grants. The Amended Consolidated Complaint asserts claims for violations of the Securities Act of 1933 and the Securities Exchange Act of 1934 on behalf of all persons who purchased or otherwise acquired Juniper Networks’ publicly-traded securities from July 12, 2001, through and including August 10, 2006. Plaintiffs seek unspecified damages in an unspecified amount. On June 7, 2007, the defendants filed a motion to dismiss certain of the claims, and a hearing was held on September 10, 2007. On March 31, 2008, the Court issued an order granting in part and denying in part the defendants’ motion to dismiss. The order dismissed with prejudice plaintiffs’ section 10(b) claim to the extent it was based on challenged statements made before July 14, 2001. The order also dismissed, with leave to amend, plaintiffs’ section 10(b) claim against Pradeep Sindhu. The order upheld all of plaintiffs’ remaining claims. Plaintiffs did not amend their complaint.

On September 25, 2009, the Court certified a plaintiff class consisting of all persons and entities who purchased or otherwise acquired the Company’s securities from July 11, 2003 to August 10, 2006 inclusive, and were damaged thereby, including those who received or acquired Juniper Networks’ common stock issued pursuant to the registration statement on SEC Form S-4, dated March 10, 2004, for the Company’s merger with NetScreen Technologies Inc. and purchasers of Zero Coupon Convertible Senior Notes due June 15, 2008 issued pursuant to a registration statement on SEC Form S-3 dated November 20, 2003. Excluded from the class are the defendants and the current and former officers and directors of the Company, their immediate families, their heirs, successors, or assigns and any entity controlled by any such person.

On February 5, 2010, the Company and the lead plaintiffs entered into an agreement in principle to settle the claims against the Company and each of the Company’s current and former officers and directors. The settlement is contingent upon final approval by the Court. On April 12, 2010, the Court granted preliminary approval of the proposed settlement and scheduled a fairness hearing for August 30, 2010, to consider whether to grant final approval of the settlement. Under the proposed settlement, the claims against the Company and its officers and directors will be dismissed with prejudice and released in exchange for a $169.0 million cash payment by the Company. The Company considers the proposed payment to be probable and reasonably estimable and, therefore, recorded the cash settlement amount as a pre-tax operating expense in its consolidated statement of operations for the fourth quarter ended December 31, 2009.

Calamore Proxy Statement Action

On March 28, 2007, an action titled Jeanne M. Calamore v. Juniper Networks, Inc., et al., No. C-07-1772-JW, was filed by Jeanne M. Calamore in the Northern District of California against the Company and certain of the Company’s current and former officers and directors. The complaint alleges that the proxy statement for the Company’s 2006 Annual Meeting of Stockholders contained various false and misleading statements in that it failed to disclose stock option backdating information. As a result, the plaintiff seeks preliminary and permanent injunctive relief with respect to the Company’s 2006 Equity Incentive Plan, including seeking to invalidate the plan and all equity awards granted and grantable thereunder. On May 21, 2007, the Company filed a motion to dismiss, and the plaintiff filed a motion for preliminary injunction. On July 19, 2007, the Court issued an order denying the plaintiff’s motion for a preliminary injunction and dismissing the complaint in its entirety with leave to amend. The plaintiff filed an amended complaint on August 27, 2007, and the defendants filed a motion to dismiss on October 9, 2007. On August 13, 2008, the Court issued an order granting the Company’s motion to dismiss with prejudice, and entered final judgment in favor of the Company. On September 9, 2008, the plaintiff filed a Notice of Appeal in the United States Court of Appeals for the Ninth Circuit. The plaintiff’s appeal was fully briefed and the Court of Appeals heard oral argument on the appeal on October 7, 2009. On February 5, 2010, the Ninth Circuit issued a memorandum decision affirming the District Court’s dismissal with prejudice. On February 19, 2010, plaintiff filed a Petition for Rehearing and Suggestion for Rehearing En Banc and on March 24, 2010, the Ninth Circuit denied that petition.

IPO Allocation Case

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 (collectively, the “Underwriters”), Juniper Networks and certain of Juniper Networks’ officers. This action was brought on behalf of purchasers of the Company’s common stock in its initial public offering in June 1999 and the Company’s 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 the Company’s subsequent secondary offering contained certain false and misleading statements or omissions regarding the practices of the 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. Various plaintiffs have filed actions asserting similar allegations concerning the initial public offerings of approximately 300 other issuers. These various cases pending in the Southern District of New York have been coordinated for pretrial proceedings as In re Initial Public Offering Securities Litigation, 21 MC 92. In April 2002, the plaintiffs filed a consolidated amended complaint in the action against the Company, alleging violations of the Securities Act of 1933 and the Securities Exchange Act of 1934. The defendants in the coordinated proceeding filed motions to dismiss. In October 2002, the Company’s officers were dismissed from the case without prejudice pursuant to a stipulation. On February 19, 2003, the Court granted in part and denied in part the motion to dismiss, but declined to dismiss the claims against the Company.

The parties have reached a global settlement of the litigation. On October 5, 2009, the Court entered an Opinion and Order granting final approval of the settlement. Under the settlement, the insurers are to pay the full amount of settlement share allocated to the Company, and the Company will bear no financial liability. The Company, as well as the officer and director defendants who were previously dismissed from the action pursuant to tolling agreements, will receive complete dismissals from the case. Certain objectors have appealed the Court’s October 5, 2009, final order to the Second Circuit Court of Appeals.

IRS Notices of Proposed Adjustments

In 2007, the IRS opened an examination of the Company’s U.S. federal income tax and employment tax returns for the 2004 fiscal year. Subsequently, the IRS extended their examination of the Company’s employment tax returns to include fiscal years 2005 and 2006. As of June 30, 2010, the IRS has not yet concluded its examinations of these returns. In September 2008, as part of its ongoing audit of the U.S. federal income tax return, the IRS issued a Notice of Proposed Adjustment (“NOPA”) regarding the Company’s business credits. The Company believes that it has adequately provided for any reasonably foreseeable outcome related to this proposed adjustment.

In July 2009, the Company received a NOPA from the IRS claiming that the Company owes additional taxes, plus interest and possible penalties, for the 2004 tax year based on a transfer pricing transaction related to the license of acquired intangibles under an intercompany R&D cost sharing arrangement. The asserted changes to the Company’s 2004 tax year would affect the Company’s income tax liabilities in tax years subsequent to 2003. Because of the NOPA, the estimated incremental tax liability would be approximately $807 million, excluding interest and penalties. The Company has filed a protest to the proposed deficiency with the IRS, which will cause the matter to be referred to the Appeals Division of the IRS. The Company strongly believes the IRS’ position with regard to this matter is inconsistent with applicable tax laws and existing Treasury regulations, and that the Company’s previously reported income tax provision for the year in question is appropriate. However, there can be no assurance that this matter will be resolved in the Company’s favor. Regardless of whether this matter is resolved in the Company’s favor, the final resolution of this matter could be expensive and time-consuming to defend and/or settle. While the Company believes it has provided adequately for this matter, there is a possibility that an adverse outcome of the matter could have a material effect on its results of operations and financial condition.

The Company has not reached a final resolution with the IRS on an adjustment the IRS proposed for the 1999 and 2000 tax years. The Company is also under routine examination by certain state and non-U.S. tax authorities. The Company believes that it has adequately provided for any reasonably foreseeable outcomes related to these audits.

Joint Venture

Note 16. Joint Venture

In 2009, the Company entered into an agreement to form a joint venture to provide a combined carrier Ethernet-based solution with NSN. Since inception, the Company has had a 60 percent interest in the joint venture. Both NSN and Juniper Networks are entitled to appoint two board members to the Board of the joint venture. The Board shall consist of four board members at all times.

Given the Company’s majority ownership interest in the joint venture, the venture’s financial results have been consolidated with the accounts of the Company, and a noncontrolling interest has been recorded to reflect the noncontrolling investor’s interest in the venture’s results. All intercompany transactions have been eliminated, with the exception of the noncontrolling interest.

Subsequent Events

Note 17. Subsequent Events

Stock Repurchases

Subsequent to June 30, 2010, through the filing of this report, the Company repurchased and retired approximately 3.1 million shares of its common stock for approximately $79.5 million through its 2008 and 2010 Stock Repurchase Programs at an average purchase price of $25.76 per share. As of the filing date, the Company’s 2010 Stock Repurchase Program had remaining authorized funds of $987.3 million for future stock repurchases and the 2008 Stock Repurchase Program had no remaining authorized funds available for future stock repurchases. Purchases under the Company’s stock repurchase programs are subject to a review of the circumstances in place at the time and will be made from time to time as permitted by securities laws and other legal requirements. These programs may be discontinued at any time.

Business Acquisition

In July 2010, the Company announced it had entered into a definitive agreement to acquire SMobile Systems, Inc., a privately-held software company focused on smart-phone and tablet security solutions for a total consideration of approximately $70 million. The acquisition of SMobile Systems, Inc. was consummated on July 30, 2010.

Summary of Significant Accounting Policies (Policies)

6 Months Ended
Jun. 30, 2010

Summary of Significant Accounting Policies (Policies) [Abstract]

Revenue Recognition Policy including ASU 2010-17 Topic 605

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Foreign Currency Issues: Multiple Foreign Currency Exchange Rates

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ASU 2010-17

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Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades

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FASB issued variable interest entities and special-purpose entities under Topic 810

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ASU No. 2009-16 and FASB ASC Topic 860

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ASU 2010-06 Topic 820- Improving Disclosures about Fair Value Measurements

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Revenue Recognition Policy including ASU 2010-17 Topic 605

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. Under the new standard, 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. 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 of the adoption of ASU 2009-13 and ASU 2009-14, net revenues for the three and six months ended June 30, 2010 were approximately $53 million and $78 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 these periods which consisted primarily of $38 million and $60 million for the three- and six-month periods ended June 30, 2010, respectively, related to undelivered product commitments for which the Company was unable to demonstrate fair value pursuant to the previous accounting standards. The remainder of the increase in revenue for the three- and six-month periods was due to products sold into multiple-year service arrangements which were recognized ratably under the previous accounting standards and for the change in the Company’s allocation methodology from the residual method to the relative selling price method as prescribed by the new standard.

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.