This Annual Report on Form 10-K ("Report"), including the "Management's Discussion and Analysis of Financial Condition and Results of Operations", contains forward-looking statements regarding future events and the future results of Juniper Networks, Inc. (the "Company") that are based on current expectations, estimates, forecasts, and projections about the industry in which we operate and the beliefs and assumptions of our management. Words such as 'expects,' 'anticipates,' 'targets,' 'goals,' 'projects,' 'intends,' 'plans,' 'believes,' 'seeks,' 'estimates,' variations of such words, and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in this Report under the section entitled "Risk Factors" in Item 1A of Part I and elsewhere, and in other reports we file with the SEC, specifically the most recent reports on Form 10-Q. While forward-looking statements are our best prediction at the time that they are made, you should not rely on them. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

The following discussion is based upon our Consolidated Financial Statements included elsewhere in this report, which have been prepared in accordance with U.S. generally accepted accounting principles. In the course of operating our business, we routinely make decisions as to the timing of the payment of invoices, the collection of receivables, the manufacturing, and shipment of products, the fulfillment of orders, the purchase of supplies, and the building of inventory and spare parts, among other matters. Each of these decisions has some impact on the financial results for any given period. In making these decisions, we consider various factors including contractual obligations, customer satisfaction, competition, internal and external financial targets and expectations, and financial planning objectives. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, and related disclosure of contingencies. On an on-going basis, we evaluate our estimates, including those related to sales returns, pricing credits, warranty costs, allowance for doubtful accounts, impairment of long-term assets, especially goodwill and intangible assets, contract manufacturer exposures for carrying and obsolete material charges, assumptions used in the valuation of stock-based compensation, and litigation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

To aid in understanding our operating results for the periods covered by this report, we have provided an executive overview and a summary of the significant events that affected the most recent fiscal year and a discussion of the nature of our operating expenses. These sections should be read in conjunction with the more detailed

discussion and analysis of our consolidated financial condition and results of operations in this Item 7, our "Risk Factors" section included in Item 1A of Part I, and our audited consolidated financial statements and notes included in Item 8 of Part II of this report.

Executive Overview

Our 2008 performance was the result of a combination of strong market demand for networking and security products as well as our focused execution and market share gains. In addition, we began shipment of several new products, which contributed to our revenue growth during the year. While revenue growth was substantial, towards the end of 2008 worldwide economic conditions, in particular the slowdown in the U.S., led to slowing rates of growth and reduced our visibility into future periods. During 2008, we continued implementation of a series of operational excellence initiatives. These initiatives are intended to strengthen the management systems and processes throughout our organization to support our growth and to improve operational efficiency and contain costs in the face of difficult economic and market conditions.

                                                     2008                2007               $ Change          % Change
                                                        (In millions, except per share amounts and percentages)

Net revenues                                     $     3,572.4       $     2,836.1       $        736.3              26 %
Operating income                                 $       695.0       $       407.1       $        287.9              71 %
Percentage of net revenues                                19.5 %              14.4 %
Net income                                       $       511.7       $       360.8       $        150.9              42 %
Percentage of net revenues                                14.3 %              12.7 %
Net income per share:
Basic                                            $        0.96       $        0.67       $         0.29              43 %

Diluted                                          $        0.93       $        0.62       $         0.31              50 %

• Net Revenues: Our net revenues increased in 2008 compared to 2007, primarily due to the growing acceptance of our router and firewall products and services in the service provider and enterprise markets. We experienced growth in both product and service revenues, which represented 81.5% and 18.5%, respectively, of our total net revenues in 2008. Product revenues increased $584.0 million, or 25%, to $2,911.0 million in 2008 compared to 2007. Service revenues increased $152.3 million, or 30%, to $661.4 million in 2008 compared to 2007. Net revenues increased in each of our three geographic regions in 2008 compared to 2007.

• Operating Income: Our operating income as well as operating margin as a percentage of net revenues increased in 2008 compared to 2007. These increases were, in large part, due to the growth in revenues and a decrease in operating expense as a percentage of net revenues, which was attributable to our efforts to better manage expenses and improve efficiencies in 2008 compared to 2007. In our effort to manage our expenses, we expanded our R&D headcount in regions with lower operating costs.

• Net Income and Net Income Per Share: The increase in net income and net income per share in 2008 compared to 2007, is primarily due to the increase in operating income, which resulted from the growth in revenues, and the reduction in operating expense as a percentage of net revenues, which is attributable to a decrease in the amortization of purchased intangible assets and the implementation of certain cost reduction initiatives compared to 2007. The increase in operating income was partially offset by lower net interest and other income primarily due to lower interest rates along with higher income tax expense in 2008.

• Other Financial Highlights: Total deferred revenue increased $77.0 million in 2008, primarily due to the growth in our installed equipment base for maintenance and customer support contracts. In 2008, we generated a net increase of $303.0 million in cash and cash equivalents, primarily resulting from $875.2 million in cash provided by our operating activities, which was offset by the repurchase of $604.7 million of our common stock.

Significant Events

Business and Market Environment

We design, develop, and sell products and services that together provide our customers with high-performance network infrastructure that creates responsive and trusted environments for accelerating the deployment of services and applications over a single IP-based network. We serve the high-performance networking requirements of global service providers, enterprises, governments, and research and education institutions that view the network as critical to their success. High-performance networking is designed to provide fast, reliable, and secure access to applications and services at scale. We offer a high-performance network infrastructure that includes IP routing, Ethernet switching, security, and application acceleration solutions, as well as partnerships designed to extend the value of the network and worldwide services and support designed to optimize customer investments.

In 2008, we continued to deliver new and innovative, high-performance network infrastructure solutions. We entered the enterprise switching market, through the introduction of the EX-series, a family of Ethernet switches that leverage the operational simplicity and carrier-class reliability of our JUNOS software. We also introduced a new category of extensible networking and security products with our SRX series dynamic services gateways. In addition, we introduced a new family of IDP appliances that deliver up to 10 Gigabits per second real-world throughput and performance to enable deployments in the network core, the integration of services, including Firewall and chassis clustering, into JUNOS software for implementation on the J-series services router and the Security Threat Response Manager ("STRM"), a platform capable of providing businesses with a centralized scalable and effective way to log and manage a rapidly evolving threat landscape. We also announced an advanced mobile IP/Multi Protocol Label Switching ("MPLS") solution portfolio with the new BX 7000 multi-access gateway router for the cell site, M-series circuit emulation physical interface cards for the aggregation site, and a suite of software features designed to simplify deployment, provisioning and management of mobile backhaul networks. In addition, we introduced the JCS 1200, a dedicated high-performance control plane scaling platform.

We also delivered new enhancements to existing solutions to help customers maximize their network infrastructure investments and lower their overall total cost of ownership. We expanded our Network and Security Manager ("NSM") to deliver a centralized management solution for routing, security, and switching, enabling customers to consolidate and simplify the management of their network infrastructure. We announced enhancements to our Access Control Solution, to deliver enhanced scalability and performance, with centralized access policy management via NSM, helping customers cost effectively achieve comprehensive network visibility with broad enforcement capabilities. We introduced the next generation of our WXC application acceleration platforms to deliver a more scalable, modular, and cost-effective approach to delivering fast and consistent application response across the WAN. In addition, we announced three new line card families for the MX-series Ethernet Services Routers.

In 2008, the growing weakness of the global economy, and in the United States in particular, has affected the purchasing behavior of our customers and led to lower revenue growth in our fourth quarter compared to previous quarters, delays in purchase decisions, and reduced visibility regarding future business. If economic growth in the United States and other countries' economies continues to decline and/or fail to recover, our customers may delay or reduce their purchases. This could result in reductions in sales of our products, longer sales cycles, slower adoption of new technologies and increased price competition. In 2009, we will continue to invest in key research and development projects that we believe will lead to future growth while at the same time containing other costs and allocating resources effectively.

Japan Distributor Audit

In December 2008, during the course of our performance of routine distributor audits, we became aware of facts that caused us to question the accuracy of point of sale reports of a few distributors in Japan with respect to a small number of transactions. As a result, we commenced a review of revenue from sales through distributors in Japan, which was completed prior to the filing of this report. As a result of this review, we deferred $3.0 million of revenue for sales through distributors in Japan. Total revenues through distributors in Japan, after the $3.0 million deferral, were approximately $53.0 million in 2008 and approximately $13.0 million in the three months ended December 31, 2008. For financial data for the quarter ended December 31, 2008, which incorporates the results of

this review, please see Note 13 - Selected Quarterly Financial Data (Unaudited) in Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual report on Form 10-K.

Stock Repurchase Activity

In 2008, we repurchased $604.7 million, or 25.1 million share of common stock, under the following two stock repurchase programs authorized by our Board of Directors (the "Board").

Under the $2.0 billion stock repurchase program approved in 2006 and 2007 (the "2006 Stock Repurchase Program"), we repurchased approximately 15.4 million shares of our common stock at an average price of $24.53 per share for a total purchase price of $376.8 million in 2008. As of December 31, 2008, we had repurchased and retired approximately 84.8 million shares of our common stock under the 2006 Stock Repurchase Program at an average price of $23.58 per share. The program has no remaining authorized funds available for future stock repurchases.

The Board approved a $1.0 billion stock repurchase program in March 2008 (the "2008 Stock Repurchase Program"). Under this program, we repurchased approximately 9.7 million shares of our common stock at an average price of $23.43 per share for a total purchase price of $227.9 million in 2008. As of December 31, 2008, the 2008 Stock Repurchase Program had remaining authorized funds of $772.1 million. See Note 14 - Subsequent Events in Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K, for discussion of our stock repurchase activity in 2009.

Nature of Expenses

Most of our manufacturing, repair, and supply chain operations are outsourced to independent contract manufacturers. Accordingly, most of our cost of revenues consists of payments to our independent contract manufacturers for the standard product costs. The independent contract manufacturers produce our products using design specifications, quality assurance programs, and standards that we establish. Controls around manufacturing, engineering, and documentation are conducted at our facilities in Sunnyvale, California, and Westford, Massachusetts. Our independent contract manufacturers have facilities primarily in Canada, China, Malaysia, Mexico, and the United States. We generally do not own the components and title to products transfers from the contract manufacturers to us and immediately to our customers upon shipment.

The contract manufacturers procure components based on our build forecasts, and if actual component usage is lower than our forecasts, we may be, and have been in the past, liable for carrying or obsolete material charges.

In recent years, an increasing amount of our products have been manufactured in Asia, and we anticipate that a larger percentage of our products will be produced outside the United States and Canada in the future. Our contracts generally provide for passage of title and risk of loss at the designated point of shipment to the customer. The manufacturing of products in Asia for shipment to customers in EMEA and the Americas resulted in additional shipment logistics, freight and timing issues for us and those customers. In an ongoing effort to balance our and the customers' needs, we have made changes on occasion to the payment of freight and the point of shipment with respect to products shipped from Asia. These changes impact shipping costs and the timing of revenue recognition of the affected shipments.

We have employees in our manufacturing and operations organization who manage relationships with our contract manufacturers, manage our supply chain, and monitor product testing and quality.

Employee-related costs have historically been the primary driver of our operating expenses, and we expect this trend to continue. Employee-related costs include items such as wages, commissions, bonuses, vacation, benefits, stock-based compensation, and travel. We had 7,014, 5,879, and 4,833 employees as of December 31, 2008, 2007, and 2006, respectively. The year-over-year increases were primarily attributable to increases in our research and development and sales and marketing organizations. Our headcount is expected to remain flat in 2009 as we continue our cost reduction activities. We accounted for stock-based compensation under the fair value approach of Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment ("SFAS 123R"), in 2008, 2007, and 2006. Details of our stock-based compensation expense are described in Note 10 - Employee

Benefit Plans in Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K.

Facility and information technology departmental costs are allocated to other departments based on usage and headcount, respectively. These departmental costs have increased in 2008, 2007, and 2006 due to increases in headcount and facility leases resulting from infrastructure systems added to support our growth and past acquisitions. Facility and information technology related headcount was 267, 224, and 177 as of December 31, 2008, 2007, and 2006, respectively. In 2009, we expect to continue to invest in our company-wide information technology infrastructure as we implement our operational excellence initiatives.

Our operating expenses are denominated in U.S. dollars as well as other foreign currencies including the British Pound, the Euro, Indian Rupee, and Japanese Yen. Changes in related currency exchange rates may affect our operating results. Periodically, we use foreign currency forward and/or option contracts to hedge certain forecasted foreign currency transactions relating to operating expenses. 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 appropriate line item of the consolidated statement of operations to which the hedged transaction relates. Any ineffectiveness of the hedging instruments is reported in other income (expense) on our consolidated statements of operations. The increase in operating expenses including research and development, sales and marketing, as well as general and administrative expenses, due to foreign currency fluctuations was approximately 1% in 2008.

Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles requires us to make judgments, assumptions, and estimates that affect the amounts reported in the Consolidated Financial Statements and the accompanying notes. We base our estimates and assumptions on current facts, historical experience, and various other factors that we believe are reasonable under the circumstances, to determine the carrying values of assets and liabilities that are not readily apparent from other sources. Note 1 - Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K, describes the significant accounting policies and methods used in the preparation of the Consolidated Financial Statements. The critical accounting policies described below are significantly affected by critical accounting estimates. Such accounting policies require significant judgments, assumptions, and estimates used in the preparation of the Consolidated Financial Statements and actual results could differ materially from the amounts reported based on these policies. To the extent there are material differences between our estimates and the actual results, our future results of operations may be affected.

• Revenue Recognition. Our products are generally integrated with software that is essential to the functionality of our equipment. Additionally, we provide unspecified upgrades and enhancements related to our integrated software through our maintenance contracts for most of our products. Accordingly, we account for revenue in accordance with Statement of Position No. 97-2, Software Revenue Recognition, and all related interpretations.

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

• Persuasive evidence of an arrangement exists. We generally rely upon sales contracts, or agreements and customer purchase orders to determine the existence of an arrangement.

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

• Sales price is fixed or determinable. We assess whether the sales price is fixed or determinable based on the payment terms and whether the sales price is subject to refund or adjustment.

• Collectability is reasonably assured. We assess collectability based on the creditworthiness of the customer as determined by our credit checks and the customer's payment history. We record accounts receivable net of allowance for doubtful accounts, estimated customer returns, and pricing credits.

For arrangements with multiple elements, such as sales of products that include services, we allocate revenue to each element using the residual method based on the vendor-specific objective evidence ("VSOE") of fair value of the undelivered items. Under the residual method, the amount of revenue allocated to delivered elements equals the total arrangement consideration less the aggregate fair value of any undelivered elements. VSOE of fair value is based on the price charged when the element is sold separately. We then recognize revenue on each deliverable in accordance with our policies for product and service revenue recognition. If VSOE of fair value of one or more undelivered items does not exist, revenue is deferred and recognized at the earlier of (i) delivery of those elements or (ii) when fair value can be established unless maintenance is the only undelivered element, in which case, the entire arrangement fee is recognized ratably over the contractual support period. Our ability to recognize revenue in the future may be affected if actual selling prices are significantly less than fair value. In addition, our ability to recognize revenue in the future could be impacted by conditions imposed by our customers.

For sales to direct end-users and value-added resellers, we recognize product revenue upon transfer of title and risk of loss, which is generally upon shipment. It is our practice to identify an end-user prior to shipment to a value-added reseller. For our end-users and value-added resellers, there are no significant obligations for future performance such as rights of return or pricing credits. A portion of our sales are made through distributors under agreements allowing for pricing credits or rights of return. We recognize product revenue on sales made through these distributors upon sell-through as reported to us by the distributors. Deferred revenue on shipments to distributors reflects the effects of distributor pricing credits and the amount of gross margin expected to be realized upon sell-through. Deferred revenue is recorded net of the related product costs of revenue.

We record reductions to revenue for estimated product returns and pricing adjustments, such as rebates and price protection, in the same period that the related revenue is recorded. The amount of these reductions is based on historical sales returns and price protection credits, specific criteria included in rebate agreements, and other factors known at the time. Should actual product returns or pricing adjustments differ from our estimates, additional reductions to revenue may be required. In addition, we report revenue net of sales taxes.

Services include maintenance, training, and professional services. Maintenance is offered under renewable contracts. Revenue from maintenance service contracts is deferred and is recognized ratably over the contractual support period, which is generally one to three years. Revenue from training and professional services is recognized as the services are completed or ratably over the contractual period, which is generally one year or less.

We sell certain interests in accounts receivable on a non-recourse basis as part of a distributor accounts receivable financing arrangement primarily with one major financing company. We record cash received under this arrangement in advance of revenue recognition as short-term debt with a balance of $33.0 million and $10.0 million as of December 31, 2008, and 2007, respectively.

• Contract Manufacturer Liabilities. We outsource most of our manufacturing, repair, and supply chain management operations to our independent contract manufacturers and a significant portion of our cost of revenues consists of payments to them. Our independent contract manufacturers procure components and manufacture our products based on our demand forecasts. These forecasts are based on our estimates of future demand for our products, which are in turn based on historical trends and an analysis from our sales and marketing organizations, adjusted for overall market conditions. We establish a provision for inventory, carrying costs and obsolete material exposures for excess components purchased based on historical trends. If the actual component usage and product demand are significantly lower than forecasted, which may be caused by factors outside of our control, it could have an adverse impact on our gross margins and profitability. Supply chain management remains an area of focus as we balance the risk of material obsolescence and supply chain flexibility in order to reduce lead times.

• Warranty Costs. We generally offer a one-year warranty on all of our hardware products and a 90-day warranty on the media that contains the software embedded in the products. We accrue for warranty costs as part of our cost of sales based on associated material costs, labor costs for customer support, and overhead at the time revenue is recognized. Material cost is estimated primarily based upon the historical costs to repair or replace product returns within the warranty period. Technical support labor and overhead cost are estimated primarily based upon historical trends in the cost to support the customer cases within the warranty period. Although we engage in extensive product quality programs and processes, our warranty obligation is affected by product failure rates, use

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