UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported):	 	October 22, 2009	

Juniper Networks, Inc. 
__________________________________________
(Exact name of registrant as specified in its charter)

Delaware	000-26339	770422528	
_____________________
(State or other jurisdiction	_____________
(Commission	______________
(I.R.S. Employer	
of incorporation)	File Number)	Identification No.)	
  	 	 	
1194 North Mathilda Avenue, Sunnyvale, California	 	94089	
_________________________________
(Address of principal executive offices)	 	___________
(Zip Code)	
 	 	 	
Registrant’s telephone number, including area code:	 	(408) 745-2000	
Not Applicable
______________________________________________
Former name or former address, if changed since last report
  
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[  ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[  ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[  ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[  ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Top of the Form
Item 2.02 Results of Operations and Financial Condition.
On October 22, 2009, Juniper Networks, Inc. ("we", "us" or "the Company") issued a press release in which we announced preliminary financial results for the quarter ended September 30, 2009. A copy of the press release is furnished as Exhibit 99.1 to this report. Exhibit 99.1 shall not be treated as filed for purposes of the Securities Exchange Act of 1934, as amended.

Discussion of Non-GAAP Financial Measures

The tables contained in the press release furnished as Exhibit 99.1 to this report include tables presenting the following non-GAAP financial measures from our Condensed Consolidated Statements of Operations: cost of product revenue; cost of service revenue; product gross margin; product gross margin as a percentage of product revenue; service gross margin; service gross margin as a percentage of service revenue; gross margin; gross margin as a percentage of revenue; research and development expense; sales and marketing expense; general and administrative expense; operating expense; operating income; operating margin; net other income and expense; income before income taxes; provision for income taxes; income tax rate; net income; net income per share and net income as a percentage of revenue. These measures are not presented in accordance with, nor are they a substitute for, U.S. generally accepted accounting principles, or GAAP. In addition, these measures may be different from non-GAAP measures used by other companies, limiting their usefulness for comparison purposes. The non-GAAP financial measures described herein, and identified in the table in our press release, should not be considered in isolation from measures of financial performance prepared in accordance with GAAP. Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an analytical tool. In particular, many of the adjustments to our GAAP financial measures reflect the exclusion of items that are recurring and will be reflected in our financial results for the foreseeable future.

We utilize a number of different financial measures, both GAAP and non-GAAP, in analyzing and assessing the overall performance of our business, in making operating decisions, forecasting and planning for future periods, and determining payments under compensation programs. We consider the use of the non-GAAP measures presented in our press release to be helpful in assessing the performance of the continuing operation of our business. By continuing operations we mean the ongoing revenue and expenses of the business excluding certain items that render comparisons with prior periods or analysis of on-going operating trends more difficult, such as non-cash expenses not directly related to the actual cash costs of development, sale, delivery or support of our products and services, or expenses that are reflected in periods unrelated to when the actual amounts were incurred or paid. Consistent with this approach, we believe that disclosing non-GAAP financial measures to the readers of our financial statements provides such readers with useful supplemental data that, while not a substitute for financial measures prepared in accordance with GAAP, allows for greater transparency in the review of our financial and operational performance. In addition, we have historically reported non-GAAP results to the investment community and believe that continuing to provide non-GAAP measures provides investors with a tool for comparing results over time. In assessing the overall health of our business for the periods covered by the tables in our press release and, in particular, in evaluating the non-GAAP financial line items presented in the tables in our press release, we have excluded items in the following three general categories, each of which are described below: Acquisition Related Expenses, Other Items, and Stock-Based Compensation Related Items. We also provide additional detail below regarding the shares used to calculate our non-GAAP net income per share. Notes identified for line items in the tables in our press release correspond to the appropriate note description below.

Note A: Acquisition-Related Expenses. We exclude certain expense items resulting from acquisitions including the following, when applicable: (i) amortization of purchased intangible assets associated with our acquisitions; (ii) compensation related to acquisitions; and (iii) acquisition-related charges. The amortization of purchased intangible assets associated with our acquisitions results in our recording expenses in our GAAP financial statements that were already expensed by the acquired company before the acquisition and for which we have not expended cash. Moreover, had we internally developed the products acquired, the amortization of intangible assets, and the expenses of uncompleted research and development would have been expensed in prior periods. Accordingly, we analyze the performance of our operations in each period without regard to such expenses. In addition, acquisitions result in non-continuing operating expenses, which would not otherwise have been incurred by us in the normal course of our business operations. For example, we have incurred deferred compensation charges related to assumed options and transition and integration costs such as retention bonuses and acquisition-related milestone payments to acquired employees. We believe that providing non-GAAP information for acquisition-related expense items in addition to the corresponding GAAP information allows the users of our financial statements to better review and understand the historic and current results of our continuing operations, and also facilitates comparisons to less acquisitive peer companies.

Note B: Other Items. We exclude certain other items that are the result of either unique or unplanned events including the following, when applicable: (i) restructuring and related costs; (ii) impairment charges; (iii) gain or loss on legal settlement, net of related transaction costs; (iv) retroactive impacts of certain tax settlements; (v) significant effects of tax legislation and judicial or administrative interpretation of tax regulations; (vi) gain or loss on equity investments; and (vii) the income tax effect on our financial statements of excluding items related to our non-GAAP financial measures. It is difficult to estimate the amount or timing of these items in advance. Restructuring and impairment charges result from events, which arise from unforeseen circumstances, which often occur outside of the ordinary course of continuing operations. Although these events are reflected in our GAAP financials, these unique transactions may limit the comparability of our on-going operations with prior and future periods. In the case of legal settlements, these gains or losses are recorded in the period in which the matter is concluded or resolved even though the subject matter of the underlying dispute may relate to multiple or different periods. As such, we believe that these expenses do not accurately reflect the underlying performance of our continuing operations for the period in which they are incurred. Similarly, the retroactive impacts of certain tax settlements and significant effects of retroactive tax legislation are unique events that occur in periods that are generally unrelated to the level of business activity to which such settlement or legislation applies. We believe this limits comparability with prior periods and that these expenses do not accurately reflect the underlying performance of our continuing business operations for the period in which they are incurred. Whether we realize gains or losses on equity investments is based primarily on the performance and market value of those independent companies. Accordingly, we believe that these gains and losses do not reflect the underlying performance of our continuing operations. We also believe providing financial information with and without the income tax effect of excluding items related to our non-GAAP financial measures provide our management and users of the financial statements with better clarity regarding the on-going performance and future liquidity of our business. Because of these factors, we assess our operating performance both with these amounts included and excluded, and by providing this information, we believe the users of our financial statements are better able to understand the financial results of what we consider our continuing operations.

Note C: Stock-Based Compensation Related Items. We provide non-GAAP information relative to our expense for stock-based compensation and related payroll tax. We began to include stock-based compensation expense in our GAAP financial measures in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 718, Compensation – Stock Compensation ("FASB ASC Topic 718")(formerly referred to as Statement of Financial Accounting Standards No. 123 (revised 2004)), in January 2006. Because of varying available valuation methodologies, subjective assumptions and the variety of award types, which affect the calculations of stock-based compensation, we believe that the exclusion of stock-based compensation allows for more accurate comparisons of our operating results to our peer companies. Further, we believe that excluding stock-based compensation expense allows for a more accurate comparison of our financial results to previous periods during which our equity-based awards were not required to be reflected in our income statement. Stock-based compensation is very different from other forms of compensation. A cash salary or bonus has a fixed and unvarying cash cost. For example, the expense associated with a $10,000 bonus is equal to exactly $10,000 in cash regardless of when it is awarded and who it is awarded by. In contrast, the expense associated with an award of an option for 1,000 shares of stock is unrelated to the amount of compensation ultimately received by the employee; and the cost to the company is based on a stock-based compensation valuation methodology and underlying assumptions that may vary over time and that does not reflect any cash expenditure by the company because no cash is expended. Furthermore, the expense associated with granting an employee an option is spread over multiple years unlike other compensation expenses which are more proximate to the time of award or payment. For example, we may be recognizing expense in a year where the stock option is significantly underwater and is not going to be exercised or generate any compensation for the employee. The expense associated with an award of an option for 1,000 shares of stock by us in one quarter may have a very different expense than an award of an identical number of shares in a different quarter. Finally, the expense recognized by us for such an option may be very different than the expense to other companies for awarding a comparable option, which makes it difficult to assess our operating performance relative to our competitors. Similar to stock-based compensation, payroll tax on stock option exercises is dependent on our stock price and the timing and exercise by employees of our stock-based compensation, over which our management has little control, and as such does not correlate to the operation of our business. Because of these unique characteristics of stock-based compensation and the related payroll tax, management excludes these expenses when analyzing the organization’s business performance. We also believe that presentation of such non-GAAP information is important to enable readers of our financial statements to compare current period results with periods prior to the adoption of FASB ASC Topic 718.

Note D: Non-GAAP Net Income Per Share Items. We provide basic non-GAAP net income per share and diluted non-GAAP net income per share. The basic non-GAAP net income per share amount was calculated based on our non-GAAP net income and the weighted-average number of shares outstanding during the reporting period. The diluted non-GAAP income per share included additional dilution from potential issuance of common stock, except when such issuances would be anti-dilutive.

 
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits

Exhibit No. Description
99.1 Press release issued by Juniper Networks, Inc. on October 22, 2009

Top of the Form
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 	 	Juniper Networks, Inc.	
  	 	 	 	 	
October 22, 2009	 	By:	 	Mitchell L. Gaynor	
 	 	 	 		
 	 	 	 	Name: Mitchell L. Gaynor	
 	 	 	 	Title: Senior Vice President and General Counsel	

Top of the Form
Exhibit Index 

Exhibit No.	 	Description	
	 		
99.1	 	Press release issued by Juniper Networks, Inc. on October 22, 2009	

EXHIBIT 99.1
Investor Relations:
Kathleen Bela
Juniper Networks, Inc.
(408) 936-7804
kbela@juniper.net
Media Relations:

Melanie Branon	
Juniper Networks, Inc	
(408) 936-2632	
mbranon@juniper.net	
JUNIPER NETWORKS REPORTS PRELIMINARY THIRD QUARTER 2009 FINANCIAL RESULTS

 	•	 	Q3 Revenue: $823.9 million, up 5% quarter over quarter	

 	•	 	Q3 Operating Margin: 15.5% GAAP; 20.8% non-GAAP	

 	•	 	Q3 GAAP Net Income Per Share:  $0.16 diluted	

 	•	 	Q3 Non-GAAP Net Income Per Share: $0.23 diluted, up 21% quarter over quarter	
SUNNYVALE, Calif., October 22, 2009 – Juniper Networks, Inc. (NASDAQ: JNPR) today reported preliminary financial results for the three months ended September 30, 2009.
Net revenues for the third quarter of 2009 increased 5% to $823.9 million from $786.4 million reported in the second quarter of 2009 and declined 13% on a year-over-year basis. The Company posted GAAP net income of $83.8 million, or $0.16 per diluted share, and non-GAAP net income of $122.5 million, or $0.23 per diluted share for the third quarter of 2009. Non-GAAP net income per share represents an increase of 21% quarter-over-quarter from the $0.19 per diluted share reported for the second quarter of 2009 and a decrease of 28% from the $0.32 per diluted share reported for the third quarter of 2008. The reconciliation between GAAP and non-GAAP results of operations is provided in a table immediately following the Net Revenues by Reportable Segment table below.
“Juniper is driving execution and gaining momentum at a time when visibility in key areas of our business is beginning to improve,” said Kevin Johnson, Juniper’s Chief Executive Officer. “We are delivering on our R&D roadmap and customers are embracing our offer of integrated routing, switching and security on a common software platform – JUNOS.  Even as our optimism grows, macroeconomic conditions remain uncertain and we will continue to balance sound financial management with our investments in innovation and customer satisfaction.”
Juniper’s operating margin for the third quarter of 2009 increased to 15.5% on a GAAP basis from 12.2% in the second quarter of 2009, and decreased from 21.3% in the prior year third quarter. Non-GAAP operating margin for the third quarter of 2009 increased to 20.8% from 18.1% in the second quarter of 2009 and decreased from 25.1% in the prior year third quarter.
Juniper generated net cash from operations for the third quarter of 2009 of $223.9 million, compared to net cash from operations of $148.7 million in the second quarter of 2009.
Capital expenditures as well as depreciation and amortization expense during the third quarter of 2009 were $33.8 million and $36.5 million, respectively.
“Juniper delivered solid results that featured sequential growth in our service provider and enterprise markets, as well as improved operating margins and good cash from operations,” said Robyn Denholm, Juniper’s Chief Financial Officer.  “On a year-to-date basis, we reduced non-GAAP operating expenses by 4 percent compared to the same period in 2008, while continuing to deliver on our product roadmap, illustrating that our teams are executing well on our core strategy and operating principles.”
Juniper Networks will host a conference call web cast today, October 22, 2009 at 1:45 p.m. (Pacific Time), to be broadcasted live over the Internet at: http://www.juniper.net/company/investor/conferencecall.html .
To participate via telephone, in the U.S. the toll free dial-in number is 877-407-8033; outside of the U.S. dial 201-689-8033. Please call ten minutes prior to the scheduled conference call time. The webcast replay of the conference call will be archived on the Juniper Networks website until December 14, 2009.
About Juniper Networks, Inc.
Juniper Networks, Inc. is the leader in high-performance networking. Juniper offers a high-performance network infrastructure that creates a responsive and trusted environment for accelerating the deployment of services and applications over a single network. This fuels high-performance businesses. Additional information can be found at www.juniper.net .
Juniper Networks, JUNOS and the Juniper Networks logo are registered trademarks of Juniper Networks, Inc. in the United States and other countries. All other trademarks, service marks, registered trademarks, or registered service marks are the property of their respective owners.
Statements in this release concerning Juniper Networks’ business outlook, future financial and operating results, and overall future prospects are forward-looking statements that involve a number of uncertainties and risks. Actual results could differ materially from those anticipated in those forward-looking statements as a result of certain factors, including: general economic conditions globally or regionally; business and economic conditions in the networking industry; changes in overall technology spending; the network capacity requirements of communication service providers; contractual terms that may result in the deferral of revenue; increases in and the effect of competition; the timing of orders and their fulfillment; manufacturing and supply chain constraints; ability to establish and maintain relationships with distributors and resellers; variations in the expected mix of products sold; changes in customer mix; changes in geography mix; customer and industry analyst perceptions of Juniper Networks and its technology, products and future prospects; delays in scheduled product availability; market acceptance of Juniper Networks products and services; rapid technological and market change; adoption of regulations or standards affecting Juniper Networks products, services or the networking industry; the ability to successfully acquire, integrate and manage businesses and technologies; product defects, returns or vulnerabilities; the ability to recruit and retain key personnel; significant effects of tax legislation and judicial or administrative interpretation of tax regulations; currency fluctuations; litigation; and other factors listed in Juniper Networks’ most recent report on Form 10-Q filed with the Securities and Exchange Commission. All statements made in this press release are made only as of the date set forth at the beginning of this release. Juniper Networks undertakes no obligation to update the information in this release in the event facts or circumstances subsequently change after the date of this press release.
Juniper Networks believes that the presentation of non-GAAP financial information provides important supplemental information to management and investors regarding financial and business trends relating to the company’s financial condition and results of operations. For further information regarding why Juniper Networks believes that these non-GAAP measures provide useful information to investors, the specific manner in which management uses these measures, and some of the limitations associated with the use of these measures, please refer to the discussion below.
Juniper Networks, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)

 	 	Three Months Ended	 	Nine Months Ended	
 	 	September 30,	 	September 30,	
 	 	2009	 	2008	 	2009	 	2008	
Net revenues:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Product	 	$	634,074	 	 	$	766,969	 	 	$	1,828,896	 	 	$	2,165,100	 	
Service	 	 	189,838	 	 	 	179,993	 	 	 	545,562	 	 	 	483,783	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total net revenues	 	 	823,912	 	 	 	946,962	 	 	 	2,374,458	 	 	 	2,648,883	 	
Cost of revenues:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Product	 	 	206,329	 	 	 	230,060	 	 	 	606,966	 	 	 	636,985	 	
Service	 	 	80,379	 	 	 	77,519	 	 	 	234,215	 	 	 	224,711	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total cost of revenues	 	 	286,708	 	 	 	307,579	 	 	 	841,181	 	 	 	861,696	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross margin	 	 	537,204	 	 	 	639,383	 	 	 	1,533,277	 	 	 	1,787,187	 	
Operating expenses:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Research and development	 	 	185,204	 	 	 	194,014	 	 	 	554,498	 	 	 	551,017	 	
Sales and marketing	 	 	177,345	 	 	 	200,600	 	 	 	529,163	 	 	 	576,886	 	
General and administrative	 	 	39,877	 	 	 	37,623	 	 	 	118,263	 	 	 	106,866	 	
Amortization of purchased intangible assets	 	 	1,330	 	 	 	5,190	 	 	 	9,259	 	 	 	38,318	 	
Restructuring charges	 	 	4,493	 	 	 	—	 	 	 	16,251	 	 	 	—	 	
Other charges	 	 	1,000	 	 	 	—	 	 	 	1,000	 	 	 	9,000	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total operating expenses	 	 	409,249	 	 	 	437,427	 	 	 	1,228,434	 	 	 	1,282,087	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating income	 	 	127,955	 	 	 	201,956	 	 	 	304,843	 	 	 	505,100	 	
Interest and other income, net	 	 	1,733	 	 	 	9,740	 	 	 	6,581	 	 	 	40,517	 	
Loss on minority equity investments	 	 	—	 	 	 	—	 	 	 	(3,311	)	 	 	(1,499	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income before income taxes	 	 	129,688	 	 	 	211,696	 	 	 	308,113	 	 	 	544,118	 	
Provision for income taxes	 	 	45,902	 	 	 	63,188	 	 	 	214,018	 	 	 	164,845	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	$	83,786	 	 	$	148,508	 	 	$	94,095	 	 	$	379,273	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income per share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	$	0.16	 	 	$	0.27	 	 	$	0.18	 	 	$	0.71	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted	 	$	0.16	 	 	$	0.27	 	 	$	0.18	 	 	$	0.67	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Shares used in computing net income per share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	 	523,878	 	 	 	540,983	 	 	 	523,802	 	 	 	534,894	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted	 	 	538,132	 	 	 	554,350	 	 	 	532,686	 	 	 	561,932	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Juniper Networks, Inc.
Stock-Based Compensation by Category
(in thousands)
(unaudited)

 	 	Three Months Ended	 	Nine Months Ended	
 	 	September 30,	 	September 30,	
 	 	2009	 	2008	 	2009	 	2008	
Cost of revenues – Product	 	$	910	 	 	$	754	 	 	$	2,832	 	 	$	2,225	 	
Cost of revenues – Service	 	 	2,904	 	 	 	2,413	 	 	 	8,513	 	 	 	7,009	 	
Research and development	 	 	14,327	 	 	 	12,780	 	 	 	43,988	 	 	 	34,921	 	
Sales and marketing	 	 	10,675	 	 	 	10,946	 	 	 	30,860	 	 	 	26,753	 	
General and administrative	 	 	5,538	 	 	 	1,910	 	 	 	15,252	 	 	 	7,971	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	34,354	 	 	$	28,803	 	 	$	101,445	 	 	$	78,879	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Juniper Networks, Inc.
Stock-Based Compensation Related Payroll Tax by Category
(in thousands)
(unaudited)

 	 	Three Months Ended	 	Nine Months Ended	
 	 	September 30,	 	September 30,	
 	 	2009	 	2008	 	2009	 	2008	
Cost of revenues – Product	 	$	32	 	 	$	6	 	 	$	48	 	 	$	64	 	
Cost of revenues – Service	 	 	89	 	 	 	18	 	 	 	145	 	 	 	200	 	
Research and development	 	 	353	 	 	 	61	 	 	 	540	 	 	 	663	 	
Sales and marketing	 	 	276	 	 	 	169	 	 	 	669	 	 	 	1,565	 	
General and administrative	 	 	38	 	 	 	7	 	 	 	81	 	 	 	111	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	788	 	 	$	261	 	 	$	1,483	 	 	$	2,603	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Juniper Networks, Inc.
Net Revenues by Reportable Segment
(in thousands)
(unaudited)

 	 	Three Months Ended	 	Nine Months Ended	
 	 	September 30,	 	September 30,	
 	 	2009	 	2008	 	2009	 	2008	
Infrastructure — Product	 	$	471,976	 	 	$	610,289	 	 	$	1,396,220	 	 	$	1,714,899	 	
Infrastructure — Service	 	 	123,229	 	 	 	118,976	 	 	 	350,074	 	 	 	308,663	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Infrastructure	 	$	595,205	 	 	$	729,265	 	 	$	1,746,294	 	 	$	2,023,562	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Service Layer Technologies — Product	 	$	162,098	 	 	$	156,680	 	 	$	432,676	 	 	$	450,201	 	
Service Layer Technologies — Service	 	 	66,609	 	 	 	61,017	 	 	 	195,488	 	 	 	175,120	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Service Layer Technologies	 	$	228,707	 	 	$	217,697	 	 	$	628,164	 	 	$	625,321	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Infrastructure and Service Layer Technologies	 	$	823,912	 	 	$	946,962	 	 	$	2,374,458	 	 	$	2,648,883	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Juniper Networks, Inc.
Reconciliation between GAAP and non-GAAP Financial Measures
(in thousands, except percentages)
(unaudited) 

 	 	 	 	 	 	Three Months Ended	 	Nine Months Ended	
 	 	 	 	 	 	September 30,	 	September 30,	
 	 	 	 	 	 	2009	 	2008	 	2009	 	2008	
GAAP Cost of revenues – Product	 	 	 	 	 		$206,329		 	$	230,060	 	 	$	606,966	 	 	$	636,985	 	
Stock-based compensation expense	 		C		 			(910)	 	 	(754	)	 	 	(2,832	)	 	 	(2,225	)	
Stock-based compensation related payroll tax	 		C		 			(32)	 	 	(6	)	 	 	(48	)	 	 	(64	)	
Amortization of purchased intangible assets	 		A		 		(1,369	)	 	 	(1,369	)	 	 	(4,107	)	 	 	(4,107	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP Cost of revenues – Product	 	 	 	 	 		204,018		 	 	227,931	 	 	 	599,979	 	 	 	630,589	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP Cost of revenues – Service	 	 	 	 	 		80,379		 	 	77,519	 	 	 	234,215	 	 	 	224,711	 	
Stock-based compensation expense	 		C		 		(2,904	)	 	 	(2,413	)	 	 	(8,513	)	 	 	(7,009	)	
Stock-based compensation related payroll tax	 		C		 			(89)	 	 	(18	)	 	 	(145	)	 	 	(200	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP Cost of revenues – Service	 	 	 	 	 		77,386		 	 	75,088	 	 	 	225,557	 	 	 	217,502	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP Gross margin — Product	 	 	 	 	 		427,745		 	 	536,909	 	 	 	1,221,930	 	 	 	1,528,115	 	
Stock-based compensation expense	 		C		 		910		 	 	754	 	 	 	2,832	 	 	 	2,225	 	
Stock-based compensation related payroll tax	 		C		 		32		 	 	6	 	 	 	48	 	 	 	64	 	
Amortization of purchased intangible assets	 		A		 		1,369		 	 	1,369	 	 	 	4,107	 	 	 	4,107	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP Gross margin — Product	 	 	 	 	 		430,056		 	 	539,038	 	 	 	1,228,917	 	 	 	1,534,511	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP Product gross margin as a % of product revenue	 	 	 	 	 		67.5	%	 	 	70.0	%	 	 	66.8	%	 	 	70.6	%	
Stock-based compensation expense as a % of product revenue	 		C		 		0.1	%	 	 	0.1	%	 	 	0.2	%	 	 	0.1	%	
Stock-based compensation related payroll tax as a % of product revenue	 		C		 		—		 	 	—	 	 	 	—	 	 	 	—	 	
Amortization of purchased intangible assets as a % of product revenue	 		A		 		0.2	%	 	 	0.2	%	 	 	0.2	%	 	 	0.2	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP Product gross margin as a % of product revenue	 	 	 	 	 		67.8	%	 	 	70.3	%	 	 	67.2	%	 	 	70.9	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP Gross margin — Service	 	 	 	 	 		109,459		 	 	102,474	 	 	 	311,347	 	 	 	259,072	 	
Stock-based compensation expense	 		C		 		2,904		 	 	2,413	 	 	 	8,513	 	 	 	7,009	 	
Stock-based compensation related payroll tax	 		C		 		89		 	 	18	 	 	 	145	 	 	 	200	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP Gross margin — Service	 	 	 	 	 		112,452		 	 	104,905	 	 	 	320,005	 	 	 	266,281	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP Service gross margin as a % of service revenue	 	 	 	 	 		57.7	%	 	 	56.9	%	 	 	57.1	%	 	 	53.6	%	
Stock-based compensation expense as a % of service revenue	 		C		 		1.5	%	 	 	1.4	%	 	 	1.6	%	 	 	1.5	%	
Stock-based compensation related payroll tax as a % of service revenue	 		C		 		—		 	 	—	 	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP Service gross margin as a % of service revenue	 	 	 	 	 		59.2	%	 	 	58.3	%	 	 	58.7	%	 	 	55.1	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Juniper Networks, Inc.
Reconciliation between GAAP and non-GAAP Financial Measures
(in thousands, except percentages)
(unaudited) 

 	 	 	 	 	 	Three Months Ended	 	Nine Months Ended	
 	 	 	 	 	 	September 30,	 	September 30,	
 	 	 	 	 	 	2009	 	2008	 	2009	 	2008	
GAAP Gross margin	 	 	 	 	 	$	537,204		 	$	639,383	 	 	$	1,533,277	 	 	$	1,787,187	 	
Stock-based compensation expense	 		C		 		3,814		 	 	3,167	 	 	 	11,345	 	 	 	9,234	 	
Stock-based compensation related payroll tax	 		C		 		121		 	 	24	 	 	 	193	 	 	 	264	 	
Amortization of purchased intangible assets	 		A		 		1,369		 	 	1,369	 	 	 	4,107	 	 	 	4,107	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP Gross margin	 	 	 	 	 		542,508		 	 	643,943	 	 	 	1,548,922	 	 	 	1,800,792	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP Gross margin as a % of revenue	 	 	 	 	 		65.2	%	 	 	67.5	%	 	 	64.6	%	 	 	67.5	%	
Stock-based compensation expense as a % of revenue	 		C		 		0.4	%	 	 	0.3	%	 	 	0.4	%	 	 	0.3	%	
Stock-based compensation related payroll tax as a % of revenue	 		C		 		—		 	 	—	 	 	 	—	 	 	 	—	 	
Amortization of purchased intangible assets as a % of revenue	 		A		 		0.2	%	 	 	0.2	%	 	 	0.2	%	 	 	0.2	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP Gross margin as a % of revenue	 	 	 	 	 		65.8	%	 	 	68.0	%	 	 	65.2	%	 	 	68.0	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP Research and development expense	 	 	 	 	 		185,204		 	 	194,014	 	 	 	554,498	 	 	 	551,017	 	
Stock-based compensation expense	 		C		 		(14,327	)	 	 	(12,780	)	 	 	(43,988	)	 	 	(34,921	)	
Stock-based compensation related payroll tax	 		C		 			(353)	 	 	(61	)	 	 	(540	)	 	 	(663	)	
Non-GAAP Research and development expense	 	 	 	 	 		170,524		 	 	181,173	 	 	 	509,970	 	 	 	515,433	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP Sales and marketing expense	 	 	 	 	 		177,345		 	 	200,600	 	 	 	529,163	 	 	 	576,886	 	
Stock-based compensation expense	 		C		 		(10,675	)	 	 	(10,946	)	 	 	(30,860	)	 	 	(26,753	)	
Stock-based compensation related payroll tax	 		C		 			(276)	 	 	(169	)	 	 	(669	)	 	 	(1,565	)	
Non-GAAP Sales and marketing expense	 	 	 	 	 		166,394		 	 	189,485	 	 	 	497,634	 	 	 	548,568	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP General and administrative expense	 	 	 	 	 		39,877		 	 	37,623	 	 	 	118,263	 	 	 	106,866	 	
Stock-based compensation expense	 		C		 		(5,538	)	 	 	(1,910	)	 	 	(15,252	)	 	 	(7,971	)	
Stock-based compensation related payroll tax	 		C		 			(38)	 	 	(7	)	 	 	(81	)	 	 	(111	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP General and administrative expense	 	 	 	 	 		34,301		 	 	35,706	 	 	 	102,930	 	 	 	98,784	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP Operating expense	 	 	 	 	 		409,249		 	 	437,427	 	 	 	1,228,434	 	 	 	1,282,087	 	
Stock-based compensation expense	 		C		 		(30,540	)	 	 	(25,636	)	 	 	(90,100	)	 	 	(69,645	)	
Stock-based compensation related payroll tax	 		C		 			(667)	 	 	(237	)	 	 	(1,290	)	 	 	(2,339	)	
Amortization of purchased intangible assets	 		A		 		(1,330	)	 	 	(5,190	)	 	 	(9,259	)	 	 	(38,318	)	
Restructuring charges	 		B		 		(4,493	)	 	 	—	 	 	 	(16,251	)	 	 	—	 	
Other charges — legal settlement	 		B		 		(1,000	)	 	 	—	 	 	 	(1,000	)	 	 	(9,000	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP Operating expense	 	 	 	 	 	$	371,219		 	$	406,364	 	 	$	1,110,534	 	 	$	1,162,785	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Juniper Networks, Inc.
Reconciliation between GAAP and non-GAAP Financial Measures
(in thousands, except percentages)
(unaudited) 

 	 	 	 	 	 	Three Months Ended	 	Nine Months Ended	
 	 	 	 	 	 	September 30,	 	September 30,	
 	 	 	 	 	 	2009	 	2008	 	2009	 	2008	
GAAP Operating income	 	 	 	 	 	$	127,955		 	$	201,956	 	 	$	304,843	 	 	$	505,100	 	
Stock-based compensation expense	 		C		 		34,354		 	 	28,803	 	 	 	101,445	 	 	 	78,879	 	
Stock-based compensation related payroll tax	 		C		 		788		 	 	261	 	 	 	1,483	 	 	 	2,603	 	
Amortization of purchased intangible assets	 		A		 		2,699		 	 	6,559	 	 	 	13,366	 	 	 	42,425	 	
Restructuring charges	 		B		 		4,493		 	 	—	 	 	 	16,251	 	 	 	—	 	
Other charges — legal settlement	 		B		 		1,000		 	 	—	 	 	 	1,000	 	 	 	9,000	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP Operating income	 	 	 	 	 		171,289		 	 	237,579	 	 	 	438,388	 	 	 	638,007	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP Operating margin	 	 	 	 	 		15.5	%	 	 	21.3	%	 	 	12.8	%	 	 	19.1	%	
Stock-based compensation expense as a % of revenue	 		C		 		4.2	%	 	 	3.0	%	 	 	4.3	%	 	 	3.0	%	
Stock-based compensation related payroll tax as a % of revenue	 		C		 		0.1	%	 	 	0.1	%	 	 	0.1	%	 	 	0.1	%	
Amortization of purchased intangible assets as a % of revenue	 		A		 		0.3	%	 	 	0.7	%	 	 	0.6	%	 	 	1.6	%	
Restructuring charges as a % of revenue	 		B		 		0.6	%	 	 	—	 	 	 	0.7	%	 	 	—	 	
Other charges — legal settlement as a % of revenue	 		B		 		0.1	%	 	 	—	 	 	 	—	 	 	 	0.3	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP Operating margin	 	 	 	 	 		20.8	%	 	 	25.1	%	 	 	18.5	%	 	 	24.1	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP Other income and expense, net	 	 	 	 	 		1,733		 	 	9,740	 	 	 	3,270	 	 	 	39,018	 	
Loss on minority equity investments	 		B		 		—		 	 	—	 	 	 	3,311	 	 	 	1,499	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP Other income and expense, net	 	 	 	 	 		1,733		 	 	9,740	 	 	 	6,581	 	 	 	40,517	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP Provision for income tax	 	 	 	 	 		45,902		 	 	63,188	 	 	 	214,018	 	 	 	164,845	 	
Non-recurring income tax charge	 		B		 		(4,559	)	 	 	—	 	 	 	(56,683	)	 	 	—	 	
Valuation allowance on deferred tax assets	 		B		 		—		 	 	—	 	 	 	(61,755	)	 	 	—	 	
Income tax effect of non-GAAP exclusions	 		B		 		9,162		 	 	8,535	 	 	 	31,498	 	 	 	31,927	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP Provision for income tax	 	 	 	 	 		50,505		 	 	71,723	 	 	 	127,078	 	 	 	196,772	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP Income tax rate	 	 	 	 	 		29.2	%	 	 	29.0	%	 	 	28.6	%	 	 	29.0	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP Income before income taxes*	 	 	 	 	 	$	173,022		 	$	247,319	 	 	$	444,969	 	 	$	678,524	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
• Consists of non-GAAP operating income plus non-GAAP net other income and expense.
Juniper Networks, Inc.
Reconciliation between GAAP and non-GAAP Financial Measures
(in thousands, except per share amounts and percentages)
(unaudited) 

 	 	 	 	 	 	Three Months Ended	 	Nine Months Ended	
 	 	 	 	 	 	September 30,	 	September 30,	
 	 	 	 	 	 	2009	 	2008	 	2009	 	2008	
GAAP Net income	 	 	 	 	 	$	83,786		 	$	148,508	 	 	$	94,095	 	 	$	379,273	 	
Stock-based compensation expense	 		C		 		34,354		 	 	28,803	 	 	 	101,445	 	 	 	78,879	 	
Stock-based compensation related payroll tax	 		C		 		788		 	 	261	 	 	 	1,483	 	 	 	2,603	 	
Amortization of purchased intangible assets	 		A		 		2,699		 	 	6,559	 	 	 	13,366	 	 	 	42,425	 	
Restructuring charges	 		B		 		4,493		 	 	—	 	 	 	16,251	 	 	 	—	 	
Other charges — legal settlement	 		B		 		1,000		 	 	—	 	 	 	1,000	 	 	 	9,000	 	
Loss on minority equity investments	 		B		 		—		 	 	—	 	 	 	3,311	 	 	 	1,499	 	
Non-recurring income tax charge	 		B		 		4,559		 	 	—	 	 	 	56,683	 	 	 	—	 	
Valuation allowance on deferred tax assets	 		B		 		—		 	 	—	 	 	 	61,755	 	 	 	—	 	
Income tax effect of non-GAAP exclusions	 		B		 		(9,162	)	 	 	(8,535	)	 	 	(31,498	)	 	 	(31,927	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP Net income	 	 	 	 	 	$	122,517		 	$	175,596	 	 	$	317,891	 	 	$	481,752	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP Net income per share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 		D		 	$	0.23		 	$	0.32	 	 	$	0.61	 	 	$	0.90	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted	 		D		 	$	0.23		 	$	0.32	 	 	$	0.60	 	 	$	0.86	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Shares used in computing non-GAAP net income per share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 		D		 		523,878		 	 	540,983	 	 	 	523,802	 	 	 	534,894	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted	 		D		 		538,132		 	 	554,350	 	 	 	532,686	 	 	 	561,932	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP Net income as a % of revenue	 	 	 	 	 		10.2	%	 	 	15.7	%	 	 	4.0	%	 	 	14.3	%	
Stock-based compensation expense as a % of revenue	 		C		 		4.2	%	 	 	3.0	%	 	 	4.3	%	 	 	3.0	%	
Stock-based compensation related payroll tax as a % of revenue	 		C		 		0.1	%	 	 	—	 	 	 	0.1	%	 	 	0.1	%	
Amortization of purchased intangible assets as a % of revenue	 		A		 		0.3	%	 	 	0.7	%	 	 	0.6	%	 	 	1.6	%	
Restructuring charges as a % of revenue	 		B		 		0.6	%	 	 	—	 	 	 	0.7	%	 	 	—	 	
Other charges — legal settlement as a % of revenue	 		B		 		0.1	%	 	 	—	 	 	 	—	 	 	 	0.3	%	
Loss on minority equity investments	 		B		 		—		 	 	—	 	 	 	0.1	%	 	 	0.1	%	
Non-recurring income tax charge as a % of revenue	 		B		 		0.6	%	 	 	—	 	 	 	2.3	%	 	 	—	 	
Valuation allowance on deferred tax assets as a % of revenue	 		B		 		—		 	 	—	 	 	 	2.6	%	 	 	—	 	
Income tax effect of non-GAAP exclusions as a % of revenue	 		B		 		(1.2	)%	 	 	(0.9	)%	 	 	(1.3	)%	 	 	(1.2	)%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP Net income as a % of revenue	 	 	 	 	 		14.9	%	 	 	18.5	%	 	 	13.4	%	 	 	18.2	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Discussion of Non-GAAP Financial Measures
The table above includes the following non-GAAP financial measures from our Condensed Consolidated Statements of Operations: cost of product revenue; cost of service revenue; product gross margin, product gross margin as a percentage of product revenue; service gross margin; service gross margin as a percentage of service revenue; gross margin; gross margin as a percentage of revenue; research and development expense; sales and marketing expense; general and administrative expense; operating expense; operating income; operating margin; net other income and expense; income before income taxes; provision for income taxes; income tax rate; net income; net income per share and net income as a percentage of revenue. These measures are not presented in accordance with, nor are they a substitute for; U.S. generally accepted accounting principles, or GAAP. In addition, these measures may be different from non-GAAP measures used by other companies, limiting their usefulness for comparison purposes. The non-GAAP financial measures used in the table above should not be considered in isolation from measures of financial performance prepared in accordance with GAAP. Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an analytical tool. In particular, many of the adjustments to our GAAP financial measures reflect the exclusion of items that are recurring and will be reflected in our financial results for the foreseeable future.
We utilize a number of different financial measures, both GAAP and non-GAAP, in analyzing and assessing the overall performance of our business, in making operating decisions, forecasting and planning for future periods, and determining payments under compensation programs. We consider the use of the non-GAAP measures presented above to be helpful in assessing the performance of the continuing operation of our business. By continuing operations we mean the ongoing revenue and expenses of the business excluding certain items that render comparisons with prior periods or analysis of on-going operating trends more difficult, such as expenses not directly related to the actual cash costs of development, sale, delivery or support of our products and services, or expenses that are reflected in periods unrelated to when the actual amounts were incurred or paid. Consistent with this approach, we believe that disclosing non-GAAP financial measures to the readers of our financial statements provides such readers with useful supplemental data that, while not a substitute for financial measures prepared in accordance with GAAP, allows for greater transparency in the review of our financial and operational performance. In addition, we have historically reported non-GAAP results to the investment community and believe that continuing to provide non-GAAP measures provides investors with a tool for comparing results over time. In assessing the overall health of our business for the periods covered by the tables above and, in particular, in evaluating the financial line items presented in the table above, we have excluded items in the following three general categories, each of which are described below: Acquisition-Related Expenses, Other Items, and Stock-Based Compensation Related Items. We also provide additional detail below regarding the shares used to calculate our non-GAAP net income per share. Notes identified for line items in the table above correspond to the appropriate note description below.
Note A: Acquisition-Related Expenses . We exclude certain expense items resulting from acquisitions including the following, when applicable: (i) amortization of purchased intangible assets associated with our acquisitions; (ii) compensation related to acquisitions; and (iii) acquisition-related charges. The amortization of purchased intangible assets associated with our acquisitions results in our recording expenses in our GAAP financial statements that were already expensed by the acquired company before the acquisition and for which we have not expended cash. Moreover, had we internally developed the products acquired, the amortization of intangible assets, and the expenses of uncompleted research and development would have been expensed in prior periods. Accordingly, we analyze the performance of our operations in each period without regard to such expenses. In addition, acquisitions result in non-continuing operating expenses, which would not otherwise have been incurred by us in the normal course of our business operations. For example, we have incurred deferred compensation charges related to assumed options and transition and integration costs such as retention bonuses and acquisition-related milestone payments to acquired employees. We believe that providing non-GAAP information for acquisition-related expense items in addition to the corresponding GAAP information allows the users of our financial statements to better review and understand the historic and current results of our continuing operations, and also facilitates comparisons to less acquisitive peer companies.
Note B: Other Items . We exclude certain other items that are the result of either unique or unplanned events including the following, when applicable: (i) restructuring and related costs; (ii) impairment charges; (iii) gain or loss on legal settlement, net of related transaction costs; (iv) retroactive impacts of certain tax settlements; (v) significant effects of tax legislation and judicial or administrative interpretation of tax regulations; (vi) gain or loss on equity investments; and (vii) the income tax effect on our financial statements of excluding items related to our non-GAAP financial measures. It is difficult to estimate the amount or timing of these items in advance. Restructuring and impairment charges result from events, which arise from unforeseen circumstances, which often occur outside of the ordinary course of continuing operations. Although these events are reflected in our GAAP financials, these unique transactions may limit the comparability of our on-going operations with prior and future periods. In the case of legal settlements, these gains or losses are recorded in the period in which the matter is concluded or resolved even though the subject matter of the underlying dispute may relate to multiple or different periods. As such, we believe that these expenses do not accurately reflect the underlying performance of our continuing operations for the period in which they are incurred. Similarly, the retroactive impacts of certain tax settlements and significant effects of retroactive tax legislation are unique events that occur in periods that are generally unrelated to the level of business activity to which such settlement or legislation applies.  We believe this limits comparability with prior periods and that these expenses do not accurately reflect the underlying performance of our continuing business operations for the period in which they are incurred. Whether we realize gains or losses on equity investments is based primarily on the performance and market value of those independent companies. Accordingly, we believe that these gains and losses do not reflect the underlying performance of our continuing operations. We also believe providing financial information with and without the income tax effect of excluding items related to our non-GAAP financial measures provide our management and users of the financial statements with better clarity regarding the on-going performance and future liquidity of our business. Because of these factors, we assess our operating performance both with these amounts included and excluded, and by providing this information, we believe the users of our financial statements are better able to understand the financial results of what we consider our continuing operations.
Note C: Stock-Based Compensation Related Items . We provide non-GAAP information relative to our expense for stock-based compensation and related payroll tax. We began to include stock-based compensation expense in our GAAP financial measures in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, Compensation – Stock Compensation (“FASB ASC Topic 718”), in January 2006. Because of varying available valuation methodologies, subjective assumptions and the variety of award types, which affect the calculations of stock-based compensation, we believe that the exclusion of stock-based compensation allows for more accurate comparisons of our operating results to our peer companies. Further, we believe that excluding stock-based compensation expense allows for a more accurate comparison of our financial results to previous periods during which our equity-based awards were not required to be reflected in our income statement. Stock-based compensation is very different from other forms of compensation. A cash salary or bonus has a fixed and unvarying cash cost. For example, the expense associated with a $10,000 bonus is equal to exactly $10,000 in cash regardless of when it is awarded and who it is awarded by. In contrast, the expense associated with an award of an option for 1,000 shares of stock is unrelated to the amount of compensation ultimately received by the employee; and the cost to the company is based on a stock-based compensation valuation methodology and underlying assumptions that may vary over time and that does not reflect any cash expenditure by the company because no cash is expended. Furthermore, the expense associated with granting an employee an option is spread over multiple years unlike other compensation expenses which are more proximate to the time of award or payment. For example, we may be recognizing expense in a year where the stock option is significantly underwater and is not going to be exercised or generate any compensation for the employee. The expense associated with an award of an option for 1,000 shares of stock by us in one quarter may have a very different expense than an award of an identical number of shares in a different quarter. Finally, the expense recognized by us for such an option may be very different than the expense to other companies for awarding a comparable option, which makes it difficult to assess our operating performance relative to our competitors. Similar to stock-based compensation, payroll tax on stock option exercises is dependent on our stock price and the timing and exercise by employees of our stock-based compensation, over which our management has little control, and as such does not correlate to the operation of our business. Because of these unique characteristics of stock-based compensation and the related payroll tax, management excludes these expenses when analyzing the organization’s business performance. We also believe that presentation of such non-GAAP information is important to enable readers of our financial statements to compare current period results with periods prior to the adoption of FASB ASC Topic 718.
Note D: Non-GAAP Net Income Per Share Items. We provide basic non-GAAP net income per share and diluted non-GAAP net income per share. The basic non-GAAP net income per share amount was calculated based on our non-GAAP net income and the weighted-average number of shares outstanding during the reporting period. The diluted non-GAAP income per share included additional dilution from potential issuance of common stock, except when such issuances would be anti-dilutive.
Juniper Networks, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)

 	 	September 30, 2009	 	December 31, 2008	
 	 	 	 	 	 	 	 	 	
ASSETS	 	 	 	 	 	 	 	 	
Current assets:	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	$	1,618,590	 	 	$	2,019,084	 	
Short-term investments	 	 	448,986	 	 	 	172,896	 	
Accounts receivable, net of allowances	 	 	373,241	 	 	 	429,970	 	
Deferred tax assets, net	 	 	160,230	 	 	 	145,230	 	
Prepaid expenses and other current assets	 	 	52,724	 	 	 	49,026	 	
 	 	 	 	 	 	 	 	 	
Total current assets	 	 	2,653,771	 	 	 	2,816,206	 	
Property and equipment, net	 	 	449,814	 	 	 	436,433	 	
Long-term investments	 	 	531,509	 	 	 	101,415	 	
Restricted cash	 	 	54,534	 	 	 	43,442	 	
Purchased intangible assets, net	 	 	15,895	 	 	 	28,861	 	
Goodwill	 	 	3,658,602	 	 	 	3,658,602	 	
Long-term deferred tax assets, net	 	 	14,083	 	 	 	71,079	 	
Other long-term assets	 	 	36,239	 	 	 	31,303	 	
 	 	 	 	 	 	 	 	 	
Total assets	 	$	7,414,447	 	 	$	7,187,341	 	
 	 	 	 	 	 	 	 	 	
LIABILITIES AND STOCKHOLDERS’ EQUITY	 	 	 	 	 	 	 	 	
Current liabilities:	 	 	 	 	 	 	 	 	
Accounts payable	 	$	243,585	 	 	$	249,854	 	
Accrued compensation	 	 	139,598	 	 	 	160,471	 	
Accrued warranty	 	 	37,255	 	 	 	40,090	 	
Deferred revenue	 	 	480,832	 	 	 	459,749	 	
Income taxes payable	 	 	61,145	 	 	 	33,047	 	
Other accrued liabilities	 	 	120,854	 	 	 	113,399	 	
 	 	 	 	 	 	 	 	 	
Total current liabilities	 	 	1,083,269	 	 	 	1,056,610	 	
Long-term deferred revenue	 	 	162,363	 	 	 	130,514	 	
Long-term income tax payable	 	 	173,343	 	 	 	78,164	 	
Other long-term liabilities	 	 	38,050	 	 	 	20,648	 	
Commitments and contingencies	 	 	 	 	 	 	 	 	
Stockholders’ equity:	 	 	 	 	 	 	 	 	
Common stock, $0.00001 par value	 	 	5	 	 	 	5	 	
Additional paid-in capital	 	 	9,006,351	 	 	 	8,811,497	 	
Accumulated other comprehensive income (loss)	 	 	3,461	 	 	 	(4,245	)	
Accumulated deficit	 	 	(3,052,395	)	 	 	(2,905,852	)	
 	 	 	 	 	 	 	 	 	
Total stockholders’ equity	 	 	5,957,422	 	 	 	5,901,405	 	
 	 	 	 	 	 	 	 	 	
Total liabilities and stockholders’ equity	 	$	7,414,447	 	 	$	7,187,341	 	
 	 	 	 	 	 	 	 	 	
Juniper Networks, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

 	 	Nine Months Ended	
 	 	September 30,	
 	 	2009	 	2008	
Cash flows from operating activities:	 	 	 	 	 	 	 	 	
Net income	 	$	94,095	 	 	$	379,273	 	
Adjustments to reconcile net income to net cash from operating activities:	 	 	 	 	 	 	 	 	
Depreciation and amortization	 	 	111,803	 	 	 	134,623	 	
Stock-based compensation	 	 	101,445	 	 	 	78,877	 	
Loss on minority equity investment	 	 	3,311	 	 	 	1,499	 	
Change in excess tax benefits from share-based compensation	 	 	673	 	 	 	(38,756	)	
Deferred income taxes	 	 	41,996	 	 	 	(9,208	)	
Other non-cash charges	 	 	—	 	 	 	698	 	
Changes in operating assets and liabilities:	 	 	 	 	 	 	 	 	
Accounts receivable, net	 	 	56,729	 	 	 	11,155	 	
Prepaid expenses and other assets	 	 	(11,444	)	 	 	3,862	 	
Accounts payable	 	 	(778	)	 	 	2,738	 	
Accrued compensation	 	 	(20,873	)	 	 	(29,569	)	
Income tax payable	 	 	84,813	 	 	 	62,441	 	
Other accrued liabilities	 	 	21,790	 	 	 	13,169	 	
Deferred revenue	 	 	52,932	 	 	 	49,266	 	
 	 	 	 	 	 	 	 	 	
Net cash provided by operating activities	 	 	536,492	 	 	 	660,068	 	
Cash flows from investing activities:	 	 	 	 	 	 	 	 	
Purchases of property and equipment, net	 	 	(113,210	)	 	 	(121,728	)	
Purchases of available-for-sale investments	 	 	(1,164,833	)	 	 	(384,835	)	
Proceeds from sales of available-for-sale investments	 	 	202,276	 	 	 	95,932	 	
Proceeds from maturities of available-for-sale investments	 	 	262,325	 	 	 	231,764	 	
Changes in restricted cash	 	 	(11,276	)	 	 	(8,103	)	
Minority equity investments	 	 	(5,289	)	 	 	(4,500	)	
 	 	 	 	 	 	 	 	 	
Net cash used in investing activities	 	 	(830,007	)	 	 	(191,470	)	
Cash flows from financing activities:	 	 	 	 	 	 	 	 	
Proceeds from issuance of common stock	 	 	131,391	 	 	 	115,424	 	
Purchases and retirement of common stock	 	 	(241,481	)	 	 	(562,187	)	
Net proceeds from customer financing arrangements	 	 	3,784	 	 	 	2,083	 	
Redemption of convertible debt	 	 	—	 	 	 	(287	)	
Change in excess tax benefits from share-based compensation	 	 	(673	)	 	 	38,756	 	
 	 	 	 	 	 	 	 	 	
Net cash used in financing activities	 	 	(106,979	)	 	 	(406,211	)	
 	 	 	 	 	 	 	 	 	
Net (decrease) increase in cash and cash equivalents	 	 	(400,494	)	 	 	62,387	 	
Cash and cash equivalents at beginning of period	 	 	2,019,084	 	 	 	1,716,110	 	
 	 	 	 	 	 	 	 	 	
Cash and cash equivalents at end of period	 	$	1,618,590	 	 	$	1,778,497	 	
 	 	 	 	 	 	 	 	 	
Supplemental disclosure of non-cash investing and financing activities:	 	 	 	 	 	 	 	 	
Common stock issued in connection with conversion of the Senior Notes	 	$	—	 	 	$	399,153	 	
Juniper Networks, Inc.
Cash, Cash Equivalents, Trading, and Available-For-Sale Investments
(in thousands)
(unaudited)

 	 	September 30, 2009	 	December 31, 2008	
 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	$	1,618,590	 	 	$	2,019,084	 	
Short-term investments	 	 	448,986	 	 	 	172,896	 	
Long-term investments	 	 	531,509	 	 	 	101,415	 	
 	 	 	 	 	 	 	 	 	
Total	 	$	2,599,085	 	 	$	2,293,395