Edgar Filing: JUNIPER NETWORKS INC

Juniper 10Q 033112

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)



[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended March 31, 2012



[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from to

Commission file number 001-34501

JUNIPER NETWORKS, INC.

(Exact name of registrant as specified in its charter)



Delaware		77-0422528
(State or other jurisdiction of		(IRS Employer
incorporation or organization)		Identification No.)

1194 North Mathilda Avenue
Sunnyvale, California		94089
(Address of principal executive offices)		(Zip code)
(408) 745-2000
(Registrant's telephone number, including area code)
_________________________________
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filings requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):



Large Accelerated Filer [X]	Accelerated Filer [ ]	Non-Accelerated Filer [ ]	Smaller Reporting Company [ ]
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

There were approximately 529,548,000 shares of the Company's Common Stock, par value $0.00001, outstanding as of April 30, 2012.



Table of Contents

PART I - FINANCIAL INFORMATION	3

Item 1. Financial Statements	3

Condensed Consolidated Statements of Comprehensive Income	3

Condensed Consolidated Balance Sheets	4

Condensed Consolidated Statements of Cash Flows	5

Notes to Condensed Consolidated Financial Statements	6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	33

Item 3. Quantitative and Qualitative Disclosures About Market Risk	46

Item 4. Controls and Procedures	46

PART II - OTHER INFORMATION	47

Item 1. Legal Proceedings	47

Item 1A. Risk Factors	47

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	58

Item 6. Exhibits	59

SIGNATURES	60

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Juniper Networks, Inc.

Condensed Consolidated Statements of Comprehensive Income

(In thousands, except per share amounts)

(Unaudited)



	Three Months Ended
	March 31,
	2012			2011
Net revenues:
Product	$	771,873		$	877,440
Service	260,625			224,172
Total net revenues	1,032,498			1,101,612
Cost of revenues:
Product	280,629			265,746
Service	117,814			99,981
Total cost of revenues	398,443			365,727
Gross margin	634,055			735,885
Operating expenses:
Research and development	269,602			261,979
Sales and marketing	257,719			246,291
General and administrative	54,666			44,924
Amortization of purchased intangible assets	1,178			1,544
Restructuring	2,039			(347		)
Acquisition-related	1,142			4,101
Total operating expenses	586,346			558,492
Operating income	47,709			177,393
Other expense, net	(24,431		)	(6,462		)
Income before income taxes and noncontrolling interest	23,278			170,931
Income tax provision	7,008			41,271
Consolidated net income	16,270			129,660
Adjust for net loss attributable to noncontrolling interest	—			90
Net income attributable to Juniper Networks	$	16,270		$	129,750

Net income per share attributable to Juniper Networks common stockholders:
Basic	$	0.03		$	0.24
Diluted	$	0.03		$	0.24
Shares used in computing net income per share:
Basic	527,186			530,789
Diluted	533,683			548,825

Comprehensive income	$	33,148		$	140,847

See accompanying Notes to Condensed Consolidated Financial Statements

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Juniper Networks, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except par values)



	March 31, 2012			December 31, 2011
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	2,913,095		$	2,910,420
Short-term investments	517,403			641,323
Accounts receivable, net of allowances	450,987			577,386
Deferred tax assets, net	168,214			154,310
Prepaid expenses and other current assets	181,319			156,222
Total current assets	4,231,018			4,439,661
Property and equipment, net	647,414			598,581
Long-term investments	785,285			740,659
Restricted cash and investments	82,504			78,307
Purchased intangible assets, net	152,541			123,114
Goodwill	3,987,707			3,928,144
Other long-term assets	58,554			75,354
Total assets	9,945,023			9,983,820
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	195,420			324,843
Accrued compensation	209,263			223,018
Accrued warranty	29,276			28,276
Deferred revenue	760,621			712,663
Income taxes payable	2,566			12,545
Other accrued liabilities	163,610			165,358
Total current liabilities	1,360,756			1,466,703
Long-term debt	999,071			999,034
Long-term deferred revenue	238,964			254,364
Long-term income taxes payable	111,368			108,471
Other long-term liabilities	61,905			65,590
Commitments and Contingencies
Juniper Networks stockholders' equity:
Convertible preferred stock, $0.00001 par value; 10,000 shares authorized; none issued and outstanding	—			—
Common stock, $0.00001 par value; 1,000,000 shares authorized; 529,177 shares and 526,409 shares issued and outstanding at March 31, 2012, and December 31, 2011, respectively	5			5
Additional paid-in capital	10,147,785			10,079,169
Accumulated other comprehensive loss	(712		)	(17,590		)
Accumulated deficit	(2,974,595		)	(2,972,402		)
Total Juniper Networks stockholders' equity	7,172,483			7,089,182
Noncontrolling interest	476			476
Total equity	7,172,959			7,089,658
Total liabilities and equity	$	9,945,023		$	9,983,820

See accompanying Notes to Condensed Consolidated Financial Statements

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Juniper Networks, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)



	Three Months Ended March 31,
	2012			2011
Cash flows from operating activities:
Consolidated net income	$	16,270		$	129,660
Adjustments to reconcile consolidated net income to net cash from operating activities:
Depreciation and amortization	43,396			40,758
Non-cash portion of share-based compensation	65,007			47,586
Deferred income taxes	(13,904		)	1,503
Loss on equity investments	14,000			—
Excess tax benefits from share-based compensation	(4,319		)	(39,041		)
Amortization of debt issuance costs	236			—
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable, net	126,462			125,610
Prepaid expenses and other assets	(22,272		)	(59,372		)
Accounts payable	(126,846		)	(58,468		)
Accrued compensation	(15,426		)	(66,510		)
Income tax payable	(3,750		)	38,099
Other accrued liabilities	(9,146		)	13,981
Deferred revenue	32,558			65,844
Net cash provided by operating activities	102,266			239,650

Cash flows from investing activities:
Purchases of property and equipment	(81,991		)	(53,972		)
Purchases of trading investments	(2,659		)	(2,495		)
Purchases of available-for-sale investments	(371,285		)	(437,773		)
Proceeds from sales of available-for-sale investments	231,366			193,301
Proceeds from maturities of available-for-sale investments	222,840			126,260
Payment for business acquisition, net of cash and cash equivalents acquired	(90,487		)	(28,573		)
Changes in restricted cash	35			—
Purchases of privately-held and other equity investments, net	(1,122		)	(5,972		)
Net cash used in investing activities	(93,303		)	(209,224		)

Cash flows from financing activities:
Proceeds from issuance of common stock	37,798			264,113
Purchases and retirement of common stock	(56,088		)	(205,171		)
Issuance of long-term debt, net	—			991,556
Change in customer financing arrangements	7,683			12,531
Excess tax benefit from share-based compensation	4,319			39,041
Net cash provided by (used in) financing activities	(6,288		)	1,102,070
Net increase in cash and cash equivalents	2,675			1,132,496
Cash and cash equivalents at beginning of period	2,910,420			1,811,887
Cash and cash equivalents at end of period	$	2,913,095		$	2,944,383

See accompanying Notes to Condensed Consolidated Financial Statements

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Juniper Networks, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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. The Condensed Consolidated Balance Sheet as of December 31, 2011, is derived from the audited consolidated financial statements for the year ended December 31, 2011. In the opinion of management, all adjustments, including normal recurring accruals, considered necessary for a fair presentation have been included. The results of operations for the three months ended March 31, 2012, are not necessarily indicative of the results that may be expected for the year ending December 31, 2012, 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, 2011.

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Condensed Financial Statements and accompanying notes. Actual results could differ materially from those estimates.

Beginning in the first quarter of 2012, the Company aligned its organizational structure to focus on its platform and software strategy, which resulted in two reportable segments organized principally by product families: Platform Systems Division ("PSD") and Software Solutions Division ("SSD"). In fiscal 2011, the Company was organized into two reportable segments, Infrastructure and Service Layer Technology ("SLT"). The Company has reclassified the segment data for the prior period to conform to the current period's presentation. The segment change did not impact previously reported consolidated net revenues, operating income, net income, and net income per share. See Note 13, Segments for further discussion of the Company's segment reorganization.

As of March 31, 2012, 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. In July 2011, NSN and the Company entered into an agreement to cease operation of and terminate the joint venture. NSN has assumed the activities of the joint venture. The Company is in the process of winding down this joint venture and the termination of this joint venture is not expected to have a material effect on the Company's financial position or results of operations.

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Juniper Networks, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Note 2. Summary of Significant Accounting Policies

Recent Accounting Pronouncements

In September 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2011-08, Topic 350 - Intangibles - Goodwill and Other ("ASU 2011-08"), which amends Topic 350 and provides entities an option to perform a qualitative assessment to determine whether further impairment testing on goodwill is necessary. Specifically, an entity has the option to first assess qualitative factors to determine whether it is necessary to perform the current two-step test. If an entity believes, as a result of its qualitative assessment, that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is required. Otherwise, no further testing is required. The Company adopted this standard in the first quarter of 2012. The Company’s adoption of the standard during the first quarter of 2012 did not impact its consolidated results of operations or financial condition.

In June 2011, the FASB issued ASU No. 2011-05, Topic 220 - Presentation of Comprehensive Income (“ASU 2011-05”), which requires companies to present net income and other comprehensive income in one continuous statement or in two separate, but consecutive, statements. In addition, in December 2011, the FASB issued Accounting Standards Update ("ASU") No. 2011-12, Topic 220 - Comprehensive Income ("ASU 2011-12"), which defers the requirement to present components of reclassifications of other comprehensive income on the face of the income statement. The Company adopted both standards in the first quarter of 2012. The Company’s adoption of the standard during the first quarter of 2012 did not impact its consolidated results of operations or financial condition.

In May 2011, the FASB issued ASU No. 2011-04, Topic 820 - Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”), which amends the fair value measurement guidance and includes some enhanced disclosure requirements. The most significant change in disclosures is an expansion of the information required for Level 3 measurements based on unobservable inputs. The Company adopted this standard in the first quarter of 2012. The Company’s adoption of the standard during the first quarter of 2012 did not impact its consolidated results of operations or financial condition.

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Juniper Networks, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Note 3. Business Combinations

The Company's consolidated financial statements include the operating results of acquired businesses from the date of each acquisition. Pro forma results of operations for these acquisitions have not been presented as the financial impact to the Company's consolidated results of operations, both individually and in aggregate, is not material.

Q1'12 Acquisitions

In the three months ended March 31, 2012, the Company completed two acquisitions. The fair values of certain tangible assets and liabilities acquired, income based taxes, and residual goodwill are not yet finalized and subject to change. The Company expects to continue to obtain information to assist in determining the fair value of the net assets acquired at the acquisition date during the measurement period. Measurement period adjustments determined to be material will be applied retrospectively to the period of acquisition.

On February 13, 2012, the Company acquired 100% of the equity securities of Mykonos Software, Inc ("Mykonos") for $82.6 million in cash. The acquisition of Mykonos is intended to extend Juniper's security portfolio with an intrusion deception system capable of detecting an attacker before an attack is in process. In connection with this acquisition, the Company acquired net liabilities of $0.8 million, and recognized goodwill of $59.1 million, which was assigned to the SSD segment.

On March 8, 2012, the Company acquired a source code license and patent joint-ownership related to the service management layer of BitGravity, Inc ("BitGravity") Content Delivery Network ("CDN") technology for $13.0 million in cash. The transaction complements the Company's Media Flow Solution and content and media delivery strategy, to enables service providers, on-line media companies, and content delivery networks to deliver on-line content more cost-effectively while simultaneously improving the end-user experience. In connection with this acquisition, the Company acquired net assets of $0.1 million, and recognized goodwill of $0.5 million, which was assigned to the SSD segment.

The following table presents the preliminary purchase consideration allocations for these acquisitions, including cash and cash equivalents acquired (in millions):



	Q1'12 Acquisitions
	Mykonos			BitGravity		Total
Net tangible assets/(liabilities) acquired	$	(0.8	)	$	0.1	$	(0.7	)
Intangible assets acquired	24.3			12.4		36.7
Goodwill	59.1			0.5		59.6
Total	$	82.6		$	13.0	$	95.6

The Company recognized $1.1 million and $5.1 million of acquisition-related costs during the first quarter of 2012 and 2011, respectively. These acquisition related charges were expensed in the period incurred and reported in the Company's condensed consolidated statements of comprehensive income within cost of revenues and operating expenses.

The goodwill recognized is attributable primarily to expected synergies. None of the goodwill is deductible for U.S. federal income tax purposes for the acquisitions completed during the first quarter of 2012.

Intangible Assets Acquired

The following table presents details of the intangible assets acquired through the business combinations completed during the first quarter of 2012 (in millions, except years):

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Juniper Networks, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)



	Q1'12 Acquisitions
	Mykonos			BitGravity
	Estimated Useful Life (In Years)	Amount		Estimated Useful Life (In Years)	Amount
Existing technology	6	$	19.3	3	$	12.4
Trade name and trademarks	7	1.0		—	—
In-process research and development	—	4.0		—	—
Total		$	24.3		$	12.4

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. After initial recognition, acquired IPR&D assets are accounted for as indefinite-lived intangible assets. Development costs incurred after acquisition on acquired development projects are expensed as incurred. Upon completion of development, acquired IPR&D assets are considered amortizable intangible assets. If the IPR&D project is abandoned, the Company writes off the related purchased intangible asset in the period it is abandoned.

Note 4. Net Income per Share

The Company computed basic and diluted net income per share attributable to Juniper Networks common stockholders as follows (in millions, except per share amounts):



	Three Months Ended March 31,
	2012		2011
Numerator:
Net income attributable to Juniper Networks	$	16.3	$	129.8
Denominator:
Weighted-average shares used to compute basic net income per share	527.2		530.8
Dilutive effect of employee stock awards	6.5		18.0
Weighted-average shares used to compute diluted net income per share	533.7		548.8
Net income per share attributable to Juniper Networks common stockholders:
Basic	$	0.03	$	0.24
Diluted	$	0.03	$	0.24

Basic net income per share is computed using net income available to common stockholders and the weighted-average number of common shares outstanding for the period. Diluted net income per share is computed using net income available to common stockholders and the weighted-average number of common shares outstanding plus potentially dilutive common shares outstanding during the period. Dilutive potential common shares consist of common shares issuable upon exercise of stock options, employee stock purchase plan, vesting of restricted stock units ("RSUs"), and vesting of performance share awards ("PSAs").

The Company excludes both outstanding stock options with exercise prices that are greater than the average market price and RSUs with grant date fair market value 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 common shares underlying PSAs in the calculation of diluted net income per share when they become contingently issuable and excludes such shares when they are not contingently issuable. Potentially dilutive common shares of approximately 30.6 million and 5.8 million shares were outstanding but were not included in the computation of diluted net income per share for the three months ended March 31, 2012 and 2011, respectively.

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Juniper Networks, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

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
	March 31, 2012		December 31, 2011
Cash:
Demand deposits	$	680.6	$	633.7
Time deposits	885.9		926.0
Total cash	1,566.5		1,559.7
Cash equivalents:
U.S. government securities	102.0		—
Government-sponsored enterprise obligations	—		24.5
Commercial paper	15.0		10.0
Money market funds	1,229.6		1,316.2
Total cash equivalents	1,346.6		1,350.7
Total cash and cash equivalents	$	2,913.1	$	2,910.4

Investments in Available-for-Sale and Trading Securities

The following table summarizes the Company's unrealized gains and losses, based on the specific identification method, and fair value of investments designated as available-for-sale and trading securities, as of March 31, 2012, and December 31, 2011 (in millions):



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
As of March 31, 2012:
Fixed income securities:
U.S. government securities	$	376.9	$	—	$	(0.2	)	$	376.7
Government-sponsored enterprise obligations	275.7		0.5		—			276.2
Certificates of deposit	25.6		—		—			25.6
Commercial paper	15.0		—		—			15.0
Asset-backed securities	141.8		0.2		—			142.0
Corporate debt securities	566.9		1.7		(0.2		)	568.4
Money market funds	1,229.6		—		—			1,229.6
Total fixed income securities	2,631.5		2.4		(0.4		)	2,633.5
Publicly-traded equity securities	2.6		1.3		—			3.9
Total available-for-sale securities	2,634.1		3.7		(0.4		)	2,637.4
Trading securities (1)	11.9		—		—			11.9
Total	$	2,646.0	$	3.7	$	(0.4	)	$	2,649.3

Reported as:
Cash equivalents	$	1,346.6	$	—	$	—		$	1,346.6
Short-term investments	515.8		1.6		—			517.4
Long-term investments	783.6		2.1		(0.4		)	785.3
Total	$	2,646.0	$	3.7	$	(0.4	)	$	2,649.3

________________________________


(1)	Balance includes the Company's non-qualified deferred compensation plan assets. For additional information, see Note 12, Employee Benefit Plans, under the section Deferred Compensation Plan.

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Juniper Networks, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
As of December 31, 2011:
Fixed income securities:
U.S. government securities	$	301.1	$	—	$	(0.1	)	$	301.0
Government-sponsored enterprise obligations	430.8		0.3		(0.1		)	431.0
Certificates of deposit	31.8		—		—			31.8
Commercial paper	10.0		—		—			10.0
Asset-backed securities	124.7		0.1		(0.1		)	124.7
Corporate debt securities	508.2		1.0		(0.5		)	508.7
Money market funds	1,316.2		—		—			1,316.2
Total fixed income securities	2,722.8		1.4		(0.8		)	2,723.4
Total available-for-sale securities	2,722.8		1.4		(0.8		)	2,723.4
Trading securities (1)	9.3		—		—			9.3
Total	$	2,732.1	$	1.4	$	(0.8	)	$	2,732.7

Reported as:
Cash equivalents	$	1,350.7	$	—	$	—		$	1,350.7
Short-term investments	640.9		0.4		—			641.3
Long-term investments	740.5		1.0		(0.8		)	740.7
Total	$	2,732.1	$	1.4	$	(0.8	)	$	2,732.7

________________________________


(1)	Balance includes the Company's non-qualified deferred compensation plan assets. For additional information, see Note 12, Employee Benefit Plans, under the section Deferred Compensation Plan.

The following table presents the maturities of the Company's available-for-sale and trading securities, as of March 31, 2012 (in millions):



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Due within one year	$	1,847.9	$	0.3	$	—		$	1,848.2
Due between one and five years	783.6		2.1		(0.4		)	785.3
No contractual maturity	14.5		1.3		—			15.8
Total	$	2,646.0	$	3.7	$	(0.4	)	$	2,649.3

The following tables present the Company's available-for-sale investments that are in an unrealized loss position as of March 31, 2012, and December 31, 2011 (in millions):



	Less than 12 Months					12 Months or Greater				Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
As of March 31, 2012
Corporate debt securities	$	117.8	$	(0.2	)	$	—	$	—	$	117.8	$	(0.2	)
U.S. government securities	207.2		(0.2		)	—		—		207.2		(0.2		)
Government-sponsored enterprise obligations (1)	34.5		—			—		—		34.5		—
Asset-backed securities (1)	23.5		—			0.4		—		23.9		—
Total	$	383.0	$	(0.4	)	$	0.4	$	—	$	383.4	$	(0.4	)

________________________________


(1)	Balance includes investments that were in an immaterial unrealized loss position as of March 31, 2012.

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Juniper Networks, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)



	Less than 12 Months					12 Months or Greater				Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
As of December 31, 2011
Corporate debt securities	$	189.9	$	(0.5	)	$	—	$	—	$	189.9	$	(0.5	)
U.S. government securities	186.7		(0.1		)	—		—		186.7		(0.1		)
Government-sponsored enterprise obligations	146.0		(0.1		)	—		—		146.0		(0.1		)
Asset-backed securities (1)	76.8		(0.1		)	0.3		—		77.1		(0.1		)
Total	$	599.4	$	(0.8	)	$	0.3	$	—	$	599.7	$	(0.8	)

________________________________


(1)	Balance includes investments that were in an immaterial unrealized loss position as of December 31, 2011.

The Company had 89 and 135 investments in unrealized loss positions as of March 31, 2012, and December 31, 2011, respectively. The gross unrealized losses related to these investments were primarily due to changes in market interest rates. For the fixed income securities that have unrealized losses, the Company determined that (i) it does not have the intent to sell any of these investments and (ii) it is not more likely than not that it will be required to sell any of these investments before recovery of the entire amortized cost basis. The Company did not consider these investments to be other-than-temporarily impaired as of March 31, 2012, and December 31, 2011. 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.

Restricted Cash and Investments

The Company classifies cash and investments as restricted cash and investments on its condensed consolidated balance sheet for: (i) amounts held in escrow accounts, as required by certain acquisitions completed between 2005 and 2012; (ii) the India Gratuity Trust and Israel Retirement Trust, which cover statutory severance obligations in the event of termination of the Company's India and Israel employees, respectively; and (iii) the Directors and Officers ("D&O") indemnification trust. During the three months ended March 31, 2012, the Company distributed approximately $79.0 million of restricted cash, mainly related to the 2012 acquisitions.

In connection with the 2010 acquisition of Ankeena Networks, Inc. ("Ankeena"), the Company agreed to pay from escrow a total amount of $10.7 million, representing the cash value of unvested restricted shares of Ankeena common stock as of April 8, 2010, held by certain former Ankeena employees. Through March 31, 2012, the Company has released $10.6 million from escrow and expects to release the remaining $0.1 million from escrow over the next six months.

The following table summarizes the Company's cash and investments that are classified as restricted cash and investments in the condensed consolidated balance sheets (in millions):



	As of
	March 31, 2012		December 31, 2011
Restricted cash:
Demand deposits	$	0.6	$	0.6
Total restricted cash	0.6		0.6
Restricted investments:
Corporate debt securities	1.7		1.6
Mutual funds	1.0		1.0
Money market funds	79.2		75.1
Total restricted investments	81.9		77.7
Total restricted cash and investments	$	82.5	$	78.3

As of March 31, 2012, and December 31, 2011, the unrealized gains and losses related to restricted investments were immaterial.

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Juniper Networks, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Privately-Held Investments

As of March 31, 2012, and December 31, 2011, the carrying values of the Company’s privately-held and other equity investments of $36.0 million and $51.8 million, respectively, were included in other long-term assets in the condensed consolidated balance sheets. During the three months ended March 31, 2012, the Company invested $1.1 million in privately-held and other equity investments. During the three months ended March 31, 2011, the Company invested $6.0 million in privately-held and other equity investments.

In the three months ended March 31, 2012, the Company recognized an other-than-temporary non-cash impairment of $14.0 million, related to one of the Company's privately-held equity investments. There were no losses from the Company's privately-held and other equity investments during the three months ended March 31, 2011.

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Juniper Networks, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Note 6. Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables provide a summary of assets and liabilities measured at fair value on a recurring basis and as reported in the condensed consolidated balance sheets (in millions):



	Fair Value Measurements at March 31, 2012 Using:
	Quoted Prices in Active Markets For Identical Assets		Significant Other Observable Remaining Inputs		Significant Other Unobservable Remaining Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Available-for-sale debt securities:
U.S. government securities	$	187.0	$	189.7	$	—	$	376.7
Government-sponsored enterprise obligations	252.2		24.0		—		276.2
Commercial paper	—		15.0		—		15.0
Corporate debt securities (1)	—		570.1		—		570.1
Certificate of deposit	—		25.6		—		25.6
Asset-backed securities	—		142.0		—		142.0
Mutual funds (2)	1.0		—		—		1.0
Money market funds (3)	1,308.8		—		—		1,308.8
Total available-for-sale debt securities	1,749.0		966.4		—		2,715.4
Available-for-sale equity securities:
Publicly-traded equity securities	3.9		—		—		3.9
Total available-for-sale securities	1,752.9		966.4		—		2,719.3
Trading securities:
Mutual funds (4)	11.9		—		—		11.9
Total trading securities	11.9		—		—		11.9
Derivative assets:
Foreign exchange contracts	—		2.4		—		2.4
Total derivative assets	—		2.4		—		2.4
Total assets measured at fair value	$	1,764.8	$	968.8	$	—	$	2,733.6

Liabilities measured at fair value:
Derivative liabilities:
Foreign exchange contracts	$	—	$	3.1	$	—	$	3.1
Total derivative liabilities	—		3.1		—		3.1
Total liabilities measured at fair value	$	—	$	3.1	$	—	$	3.1

________________________________


(1)	Balance includes $1.7 million of restricted investments measured at fair market value, related to the Company's India Gratuity Trust.


(2)	Balance relates to the restricted investments measured at fair market value of the Company's India Gratuity Trust.


(3)	Balance includes $79.2 million of restricted investments measured at fair market value, related to the Company's D&O trust and acquisitions related escrows.


(4)	Balance relates to investments measured at fair value related to the Company's non-qualified deferred compensation plan assets.

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Juniper Networks, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)



	Fair Value Measurements at March 31, 2012 Using:
	Quoted Prices in Active Markets For Identical Assets		Significant Other Observable Remaining Inputs		Significant Other Unobservable Remaining Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Reported as:
Cash equivalents	$	1,229.6	$	117.0	$	—	$	1,346.6
Short-term investments	185.5		331.9		—		517.4
Long-term investments	269.5		515.8		—		785.3
Restricted investments	80.2		1.7		—		81.9
Prepaid expenses and other current assets	—		2.4		—		2.4
Total assets measured at fair value	$	1,764.8	$	968.8	$	—	$	2,733.6

Total liabilities measured at fair value, reported as:
Other accrued liabilities	$	—	$	3.1	$	—	$	3.1
Total liabilities measured at fair value	$	—	$	3.1	$	—	$	3.1



	Fair Value Measurements at December 31, 2011 Using:
	Quoted Prices in Active Markets For Identical Assets		Significant Other Observable Remaining Inputs		Significant Other Unobservable Remaining Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Assets measured at fair value:
Available-for-sale debt securities:
U.S. government securities	$	149.3	$	151.7	$	—	$	301.0
Government-sponsored enterprise obligations	314.2		116.8		—		431.0
Commercial paper	—		10.0		—		10.0
Corporate debt securities (1)	—		510.3		—		510.3
Certificate of deposit	—		31.8		—		31.8
Asset-backed securities	—		124.7		—		124.7
Money market funds (2)	1,391.3		—		—		1,391.3
Total available-for-sale debt securities	1,854.8		945.3		—		2,800.1
Total available-for-sale securities	1,854.8		945.3		—		2,800.1
Trading securities:
Mutual funds (3)	10.3		—		—		10.3
Total trading securities	10.3		—		—		10.3
Derivative assets:
Foreign exchange contracts	—		0.4		—		0.4
Total derivative assets	—		0.4		—		0.4
Total assets measured at fair value	$	1,865.1	$	945.7	$	—	$	2,810.8

Liabilities measured at fair value:
Derivative liabilities:
Foreign exchange contracts	$	—	$	9.6	$	—	$	9.6
Total derivative liabilities	—		9.6		—		9.6
Total liabilities measured at fair value	$	—	$	9.6	$	—	$	9.6

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Juniper Networks, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

________________________________


(1)	Balance includes $1.6 million of restricted investments measured at fair market value, related to the Company's India Gratuity Trust.


(2)	Balance includes $75.1 million of restricted investments measured at fair market value, related to the Company's D&O trust and acquisition related escrows.


(3)	Balance includes $9.3 million of the Company's non-qualified deferred compensation plan assets and $1.0 million of restricted investments measured at fair market value, related to the Company's India Gratuity Trust.



	Fair Value Measurements at December 31, 2011 Using:
	Quoted Prices in Active Markets For Identical Assets		Significant Other Observable Remaining Inputs		Significant Other Unobservable Remaining Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Total assets measured at fair value, reported as:
Cash equivalents	$	1,316.2	$	34.5	$	—	$	1,350.7
Short-term investments	168.9		472.4		—		641.3
Long-term investments	303.9		436.8		—		740.7
Restricted investments	76.1		1.6		—		77.7
Prepaid expenses and other current assets	—		0.4		—		0.4
Total assets measured at fair value	$	1,865.1	$	945.7	$	—	$	2,810.8
Total liabilities measured at fair value, reported as:
Other accrued liabilities	$	—	$	9.6	$	—	$	9.6
Total liabilities measured at fair value	$	—	$	9.6	$	—	$	9.6

The Company's policy is to recognize asset or liability transfers among Level 1, Level 2, and Level 3 as of the actual date of the events or change in circumstances that caused the transfer. During the three months ended March 31, 2012, and 2011, the Company had no transfers between levels of the fair value hierarchy of its assets or liabilities measured at fair value.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

As of March 31, 2012, and December 31, 2011, the carrying value of privately-held equity investments measured at fair value on a nonrecurring basis was $6.0 million and $0.4 million, respectively. These privately-held equity investments, which are normally carried at cost, were measured at fair value due to events and circumstances that the Company identified during the quarter as significantly impacting the fair value of the investments. 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, cash flow projections, and probability-weighted expected value based on the expected recoverability of the investments. As a result, the Company recognized an other-than-temporary non-cash impairment of $14.0 million in the three months ended March 31, 2012, and classified the investment as Level 3 assets 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 in the three months ended March 31, 2011. The Company had no liabilities measured at fair value on a nonrecurring basis as of March 31, 2012 and December 31, 2011.

Assets and Liabilities Not Measured at Fair Value

The carrying amounts of the Company's accounts receivable, financing receivables, accounts payable, and other accrued liabilities approximate fair value due to their short maturities. The fair value of the Company’s long-term debt is disclosed in Note 10, Long-Term Debt and Financing, and was determined using quoted market prices (Level 1).

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Juniper Networks, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Note 7. Derivative Instruments

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

The notional amount of Company's foreign currency derivatives are summarized as follows (in millions):



	As of
	March 31, 2012		December 31, 2011
Cash flow hedges	$	122.4	$	184.3
Non-designated hedges	122.9		122.7
Total	$	245.3	$	307.0

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 one year or less. The effective portion of the derivative's gain or loss is initially reported as a component of accumulated other comprehensive income (loss), and upon occurrence of the forecasted transaction, is subsequently reclassified into the cost of services or operating expense line item to which the hedged transaction relates. The Company records any ineffectiveness of the hedging instruments in interest and other income, net in its consolidated statements of comprehensive income. Cash flows from such hedges are classified as operating activities. All amounts within 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 recorded in other current assets on the condensed consolidated balance sheet as of March 31, 2012, and December 31, 2011, was $2.3 million and $0.4 million, respectively. The total fair value of the Company’s derivative liabilities located in other accrued liabilities on the condensed consolidated balance sheet as of March 31, 2012, and December 31, 2011, was $3.1 million and $9.6 million, respectively.

During the three months ended March 31, 2012 and 2011, the Company recognized a gain of $6.0 million and $5.2 million, respectively, in accumulated other comprehensive income for the effective portion of its derivative instruments and reclassified a loss of $3.5 million and a gain of $0.5 million, respectively, from other comprehensive income to operating expense in the condensed consolidated statements of comprehensive income.

The ineffective portion of the Company's derivative instruments recognized in its condensed consolidated statements of comprehensive income was immaterial during the three months ended March 31, 2012, and 2011.

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 hedges do not qualify for special hedge accounting treatment. These derivatives are carried at fair value with changes recorded in other income and expense, net. Changes in the fair value of these derivatives are largely offset by re-measurement of the underlying assets and liabilities. Cash flows from such derivatives are classified as operating activities. The derivatives have maturities of approximately two months.

During the three months ended March 31, 2012 and 2011, the Company recognized a net loss of $0.1 million and $0.2 million, respectively, within other expense and income, net, on its condensed consolidated statements of comprehensive income from non-designated derivative instruments.

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Juniper Networks, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Note 8. Goodwill and Purchased Intangible Assets

Goodwill

The following table presents the goodwill allocated to the Company's reportable segments as of and during the three months ended March 31, 2012 (in millions):



	PSD		SSD		Total
Balance as of January 1, 2012	$	1,795.6	$	2,132.5	$	3,928.1
Additions due to business combinations	—		59.6		59.6
Balance as of March 31, 2012	1,795.6		2,192.1		3,987.7

The Company had no adjustments to goodwill during the three months ended March 31, 2012. The additions to goodwill during the three months ended March 31, 2012 were based on preliminary allocations of the purchase prices. There were no impairments to goodwill during the three months ended March 31, 2012, and 2011.

Purchased Intangible Assets

Changes to the Company’s purchased intangible assets were as follows (in millions):



	Gross		Accumulated Amortization			Net
As of March 31, 2012:
Intangible assets with finite lives:
Technologies and patents	$	531.2	$	(410.5	)	$	120.7
Other	92.5		(67.5		)	25.0
Total intangible assets with finite lives	623.7		(478.0		)	145.7
IPR&D with indefinite lives	6.8		—			6.8
Total purchased intangible assets	$	630.5	$	(478.0	)	$	152.5

As of December 31, 2011:
Intangible assets with finite lives:
Technologies and patents	$	499.5	$	(404.2	)	$	95.3
Other	91.5		(66.5		)	25.0
Total intangible assets with finite lives	591.0		(470.7		)	120.3
IPR&D with indefinite lives	2.8		—			2.8
Total purchased intangible assets	$	593.8	$	(470.7	)	$	123.1

Amortization of purchased intangible assets included in operating expenses and cost of product revenues totaled $7.3 million and $6.7 million for the three months ended March 31, 2012 and 2011, respectively. There were no impairment charges with respect to the purchased intangible assets in the three months ended March 31, 2012, and 2011.

The purchased intangible assets balance as of March 31, 2012, includes intangible assets acquired through acquisitions completed during the first quarter of 2012. Refer to Note 3, Business Combinations, for further details.

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Juniper Networks, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

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



Years Ending December 31,	Amount
2012 (remaining nine months)	$	26.2
2013	34.7
2014	32.8
2015	24.8
2016	11.1
Thereafter	16.1
Total	$	145.7

Note 9. Other Financial Information

Inventories, net

The Company's inventories are stated at the lower of standard cost or market, which approximates actual cost. Inventories, net are reported within prepaid expenses and other current assets on the condensed consolidated balance sheet, and consist of the following (in millions):



	As of
	March 31, 2012		December 31, 2011
Inventories, net
Production materials	$	77.3	$	52.4
Finished goods	14.7		16.7
Total inventories, net	$	92.0	$	69.1

Warranties

The Company accrues for warranty costs as part of its cost of sales based on associated material costs, labor costs for customer support, and overhead at the time revenue is recognized. This provision is reported as accrued warranty within current liabilities on the condensed consolidated balance sheets. Changes in the Company’s warranty reserve were as follows (in millions):



	Three Months Ended
	March 31,
	2012			2011
Beginning balance	$	28.3		$	35.9
Provisions made during the period, net	8.9			15.3
Change in estimate	—			(0.8		)
Actual costs incurred during the period	(7.9		)	(12.1		)
Ending balance	$	29.3		$	38.3

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Juniper Networks, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Deferred Revenue

Details of the Company's deferred revenue, as reported on the condensed consolidated balance sheets, were as follows (in millions):



	As of
	March 31, 2012			December 31, 2011
Deferred product revenue:
Undelivered product commitments and other product deferrals	$	286.4		$	288.1
Distributor inventory and other sell-through items	114.0			134.0
Deferred gross product revenue	400.4			422.1
Deferred cost of product revenue	(118.4		)	(136.9		)
Deferred product revenue, net	282.0			285.2
Deferred service revenue	717.6			681.8
Total	$	999.6		$	967.0
Reported as:
Current	$	760.6		$	712.6
Long-term	239.0			254.4
Total	$	999.6		$	967.0

Deferred product revenue represents unrecognized revenue related to shipments to distributors that have not 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 costs of product 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 the third quarter of 2011, the Company implemented a restructuring plan (the "2011 Restructuring Plan") in an effort to better align its business operations with the current market and macroeconomic conditions. The 2011 Restructuring Plan primarily consisted of certain workforce reductions, and to a lesser extent, contract terminations.

During 2009, the Company implemented a restructuring plan (the "2009 Restructuring Plan") in an effort to better align its business operations with the market and macroeconomic conditions. The 2009 Restructuring Plan included restructuring of certain business functions that resulted in reductions of workforce and facilities. The Company recorded the majority of the restructuring charges associated with this plan during the years ended 2010 and 2009.

The Company recorded net restructuring charges of $2.0 million in the three months ended March 31, 2012, related to remaining restructuring activities from the 2011 Restructuring Plan, and recorded an adjustment of $0.3 million within restructuring in the condensed consolidated statements of comprehensive income during the three months ended March 31, 2011 in connection with the restructuring plan implemented in 2009. As of March 31, 2012, the remaining restructuring liability under the 2011 Restructuring Plan relates to severance costs to be paid out in 2012, as well as facilities-related charges under the two Restructuring Plans, which are expected to be completed by February 2015.

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. Restructuring liabilities are reported within other accrued liabilities and other long-term liabilities on the condensed consolidated balance sheets. The following table provides a summary of changes in the Company’s restructuring liability (in millions):

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Juniper Networks, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)



	Remaining Liability as of December 31, 2011		Charges			Cash payments			Non-cash Settlements and Other Adjustments		Remaining Liability as of March 31, 2012
Facilities	$	1.0	$	(0.2	)	$	(0.2	)	$	—	$	0.6
Severance, contractual commitments, and other charges	3.1		2.2			(1.7		)	0.9		4.5
Total	$	4.1	$	2.0		$	(1.9	)	$	0.9	$	5.1

Other Expense and Income, Net

Other expense and income, net consists of the following (in millions):



	Three Months Ended
	March 31,
	2012			2011
Interest income	$	2.8		$	2.4
Interest expense	(14.2		)	(6.5		)
Other	(13.0		)	(2.4		)
Other (expense) income, net	$	(24.4	)	$	(6.5	)

Interest income primarily includes interest earned on the Company’s cash, cash equivalents, and investments. Interest expense primarily includes interest expense from long-term debt and customer financing arrangements. Other income and expense typically consists of investment and foreign exchange gains and losses and other non-operational income and expense items. In the three months ended March 31, 2012, the Company recognized an other-than-temporary non-cash impairment of $14.0 million, related to one of the Company's privately-held equity investments. The Company had no such charges during the three months ended March 31, 2011.

Note 10. Long-Term Debt and Financing

Long-Term Debt

The following table summarizes the Company's long-term debt (in millions, except percentages):



	As of
	March 31, 2012
	Amount			Effective Interest Rates
Senior notes:
3.10% fixed-rate notes, due 2016	$	300.0		3.12	%
4.60% fixed-rate notes, due 2021	300.0			4.63	%
5.95% fixed-rate notes, due 2041	400.0			6.01	%
Total senior notes	1,000.0
Unaccreted discount	(0.9		)
Total	$	999.1

The effective interest rates for the notes include the interest on the notes, accretion of the discount, and amortization of issuance costs. At March 31, 2012 and December 31, 2011, the estimated fair value of the notes included in long-term debt was approximately $1,097.6 million and $1,069.8 million, respectively, based on quoted market prices (Level 1).

Customer Financing Arrangements

The Company has customer financing arrangements to sell its accounts receivable to a major third-party financing provider. The

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Juniper Networks, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

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 surrendered control over the transferred assets. The accounts receivable were 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 $120.6 million and $174.8 million during the three months ended March 31, 2012, and 2011, respectively.

The Company received cash proceeds from the financing provider of $178.5 million and $194.3 million during the three months ended March 31, 2012, and 2011, respectively. The amounts owed by the financing provider were recorded as accounts receivable on the Company’s condensed consolidated balance sheets as of March 31, 2012, and December 31, 2011, was $101.3 million and $162.9 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 sheets. As of March 31, 2012, and December 31, 2011, the estimated cash received from the financing provider not recognized as revenue from distributors was $40.9 million and $33.3 million, respectively.

Note 11. Equity

Stock Repurchase Activities

In February 2010, the Company’s Board of Directors (the “Board”) approved a stock repurchase program (the “2010 Stock Repurchase Program”) which authorized the Company to repurchase up to $1.0 billion of its common stock. This authorization was 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.

The Company repurchased and retired approximately 2.4 million shares of its common stock at an average price of $21.75 per share for an aggregate purchase price of $51.6 million during the three months ended March 31, 2012 under the 2010 Stock Repurchase Program. The Company repurchased and retired approximately 4.8 million shares of its common stock at an average price of $42.14 per share for an aggregate purchase price of $200.2 million during the three months ended March 31, 2011 under the two stock repurchase programs. There were no remaining authorized funds under the 2008 Stock Repurchase Program and $162.2 million remaining authorized funds under the 2010 Stock Repurchase Program as of March 31, 2012.

Comprehensive Income Attributable to Juniper Networks

Comprehensive income attributable to Juniper Networks consists of the following (in millions):



	Three Months Ended
	March 31,
	2012		2011
Consolidated net income	$	16.3	$	129.7
Other comprehensive income, net of tax:
Change in unrealized gain on investments, net of tax of nil	12.3		4.4
Change in foreign currency translation adjustment, net of tax of nil	4.6		6.6
Total other comprehensive income, net of tax	16.9		11.0
Consolidated comprehensive income	33.2		140.7
Adjust for comprehensive loss attributable to noncontrolling interest, net of tax	—		0.1
Comprehensive income attributable to Juniper Networks	$	33.2	$	140.8

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Juniper Networks, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

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, 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 Purchase 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.

The 2006 Plan, adopted and approved by the Company’s stockholders in May 2006, 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 75.0 million shares. In addition, the Company’s stockholders’ approved amendments to the 2006 Plan that increased the number of shares reserved for issuance under the 2006 Plan, thereby increasing the authorized share reserve by 30.0 million shares in each of May 2010 and 2011. As of March 31, 2012, the 2006 Plan had 64.9 million shares subject to currently outstanding equity awards and 22.2 million shares available for future issuance.

In connection with past acquisitions, the Company assumed stock option and RSU awards under the stock plans of the acquired companies. The Company exchanged those awards for Juniper Networks' stock options and RSUs. As of March 31, 2012, stock options and RSUs covering approximately 1.6 million shares of common stock were outstanding under awards assumed through the Company's past acquisitions.

Stock Option Activities

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 following table summarizes the Company’s stock option activity and related information as of and for the three months ended March 31, 2012 (in millions, except for per share amounts and years):



	Outstanding Options
	Number of Shares		Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term (In Years)	Aggregate Intrinsic Value
Balance at January 1, 2012	38.6		$	23.98
Options granted	3.0		22.93
Options canceled	(0.5	)	28.48
Options exercised	(0.7	)	12.67
Options expired	(0.2	)	26.18
Balance at March 31, 2012	40.2		$	24.02	3.7	$	106.4

As of March 31, 2012:
Vested or expected-to-vest options	38.3		$	23.80	3.6	$	104.5
Exercisable options	27.7		$	22.47	2.9	$	87.7

Aggregate intrinsic value represents the difference between the Company’s closing stock price on the last trading day of the period, which was $22.88 per share as of March 31, 2012, 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 $6.9 million for the three months ended March 31, 2012. Total fair value of options vested for the three months ended March 31, 2012, was $27.9 million.

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Juniper Networks, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

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 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 the Company’s RSU and PSA activity and related information as of and for the three months ended March 31, 2012 (in millions, except per share amounts and years):



	Outstanding RSUs and PSAs
	Number of Shares		Weighted Average Grant-Date Fair Value per Share		Weighted Average Remaining Contractual Term (In Years)	Aggregate Intrinsic Value
Balance at January 1, 2012	19.6		$	30.27
RSUs granted	6.5		22.04
RSUs assumed	0.2		22.47
PSAs granted (1)	2.2		23.22
RSUs vested	(1.6	)	27.55
PSAs vested	(1.4	)	15.63
RSUs canceled	(0.4	)	30.20
PSAs canceled	(0.4	)	31.73
Balance at March 31, 2012	24.7		$	28.54	1.6	$	558.3

As of March 31, 2012:
Vested and expected-to-vest RSUs and PSAs	28.8		$	—	1.4	$	456.5

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(1)

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 0.9 million shares. Depending on achievement of such performance goals, the range of shares that could be issued under these awards is 0 to 2.2 million shares.

Shares Available for Grant

The following table presents the stock grant activity and the total number of shares available for grant under the 2006 Plan as of March 31, 2012 (in millions):



	Number of Shares
Balance at January 1, 2012	41.1
RSUs and PSAs granted (1)	(18.3	)
Options granted	(3.0	)
RSUs and PSAs canceled (1)	1.7
Options canceled (2)	0.5
Options expired (2)	0.2
Balance at March 31, 2012	22.2

________________________________

(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.

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Juniper Networks, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

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. Under the 2008 Purchase Plan, employees purchased approximately 1.7 million shares at an average per share price of $17.79 for the three months ended March 31, 2012, and 1.0 million shares at an average price of $23.89 for the three months ended March 31, 2011.

As of March 31, 2012, approximately 7.7 million shares had been issued and 4.3 million shares remained available for future issuance under the 2008 Purchase Plan.

Common Stock Reserved for Future Issuance

As of March 31, 2012, the Company had reserved an aggregate of approximately 93.0 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. 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 weighted average assumptions used and the resulting estimates of fair value for employee stock options and the employee stock purchase plan during the three months ended March 31, 2012 and 2011 were:



	Three Months Ended March 31,
	2012	2011
Employee Stock Options:
Volatility factor	46%	41%
Risk-free interest rate	0.8%	1.7%
Expected life (years)	4.2	4.1
Dividend yield	—	—
Fair value per share	$8.51	$14.43

Employee Stock Purchase Plan:
Volatility factor	51%	33%
Risk-free interest rate	0.1%	1.8%
Expected life (years)	0.5	0.5
Dividend yield	—	—
Weighted-average fair value per share	$6.38	$9.07

The Company expenses the cost of its stock options on a straight-line basis over the vesting period and expenses the cost of its RSUs ratably over the vesting period. With respect to PSAs, for the portion of the award attributable to each performance year, the Company recognizes PSA expense ratably over the remaining vesting period starting in the period in which the annual performance targets are set for each such performance year.