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. ("we," "us," or the "Company") that are based on our current expectations, estimates, forecasts, and projections about our business, our results of operations, the industry in which we operate and the beliefs and assumptions of our management. Words such as "expects," "anticipates," "targets," "goals," "projects," "would," "could," "intends," "plans," "believes," "seeks," "estimates," variations of such words, and similar expressions are intended to identify such forward-looking statements. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, and 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. While forward-looking statements are based on reasonable expectations of our management 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 ("U.S. GAAP"). 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, expenses, and related disclosure of contingencies. On an ongoing 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 share-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. For further information about our critical accounting policies and estimates, see Note 2, Significant Accounting Policies, in Notes to Consolidated Financial Statements in Item 8 of Part II of this Report, and our "Critical Accounting Policies and Estimates" section included in this "Management's Discussion and Analysis of Financial Condition and Results of Operations." 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 business and market environment. 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 Consolidated Financial Statements and notes thereto included in Item 8 of Part II of this Report.

Business and Market Environment

At Juniper Networks, we design, develop, and sell products and services that together provide our customers with a high-performance network infrastructure built on simplicity, security, openness, and scale. We serve the high-performance networking requirements of global service providers, enterprises, governments, and research and public sector organizations that view the network as critical to their success. Our core competencies in hardware systems, silicon design, network architecture, and our open cross-network software platform are helping customers achieve superior performance, greater choice and flexibility, while reducing overall total cost of ownership.

We do business in three geographic regions: Americas, EMEA, and APAC. Beginning in the first quarter of 2012, we aligned our organizational structure to focus on our platform and software strategy, which resulted in two business segments organized principally by product families: PSD and SSD. Our PSD segment primarily offers scalable routing and switching products that are used in service provider, enterprise, and public sector networks to control and direct network traffic between data centers, core, edge, aggregation, campus, WANs, branch, and consumer and business devices. Our SSD segment offers software solutions focused on network security and network services applications for both service providers and enterprise customers. Both segments offer worldwide services, including technical support and professional services, as well as educational and training programs to our customers.

We remain focused on a common vision for the new network and we believe that the organizational structure we have in place will effectively drive our innovative portfolio and support our customers' next-generation network requirements. Together, our high-performance product and service offerings help our customers to convert legacy networks that provide commoditized services into more valuable assets that provide differentiation, value, increased performance, reliability, and security to end-users. We remain dedicated to uncovering new ideas and innovations that will serve the exponentially increasing demands of the networked world, and we will endeavor to continue to build solutions that center on simplification, automation, and open innovation.
During 2012, we saw moderate growth in some of our primary markets. We continued to experience an uncertain global macroeconomic environment in which our customers exercised care and conservatism in their investment prioritization and project deployments. We expect that our customers will continue to remain cautious with their capital spending in the near term. We also continued to experience declining product gross margins and pricing pressures from our competitors. We believe our product gross margins may continue to decline in the future, offset by operational improvements and cost efficiencies. Nevertheless, we are focused on executing our strategy to address the market trends of mobile Internet and cloud computing and we continue to see positive long-term fundamentals for high-performance networking.

We continue to invest in innovation and strengthening our product portfolio, which resulted in new product offerings during 2012, including a smaller version of our QFabric solutions, the latest QFX3000-M QFabric System, T4000 Core Routers, PTX Series Packet Transport switches. Additionally, we experienced new customer wins contributing to the growth in the EX Series, MX Series, and SRX Series. We launched the new ACX Series router with support for both Ethernet access/aggregation and MPLS, which extends network intelligence closer to the subscriber and features an open, standards-based management system with software development kit ("SDK")-enabled programmability to enable rapid third-party innovation. We also announced new products and features in our Simply Connected portfolio, including SRX Series Services Gateways and WLA Series Wireless LAN Access Points, which simplify and secure mobile device access to enterprise networks. Furthermore, we acquired Mykonos Web Security Software, in February 2012 to complement our network security applications portfolio.

Additionally, we announced innovative products to enable service providers to rapidly deliver and expand new consumer and business services. These products include our MX2020 and MX2010 3D Universal Edge Routers and new JunosV App Engine, which enable service providers to transform the network edge into a platform for rapid service deployment. We also launched the Junos Content Encore with MX Application Services Modular Line Card, which enables the delivery of premium content services over broadband connections across multiple device types. Furthermore, we announced a technology partnership with Riverbed Technology, Inc. ("Riverbed") that provides us with new capabilities for application delivery control, in exchange for Juniper providing WAN acceleration technology to Riverbed, along with promoting Riverbed as its WAN optimization provider of choice going forward.

Throughout 2012, we focused on improved operational execution, continued innovation, and prudent capital allocation. We continue to believe that the underlying trends driving network investment around the cloud and mobility are intact and remain strong. During 2012, we also initiated a variety of actions to ensure we are positioned for the future, resulting in a restructuring plan (the "2012 Restructuring Plan") to bring our cost structure more in line with our desired long-term financial and strategic model. The 2012 Restructuring Plan consists of workforce reductions, facility consolidations or closures, and supply chain and procurement efficiencies. In connection with the 2012 Restructuring Plan, we recorded costs of $40.4 million for workforce reductions, facility consolidations or closures, and other charges during 2012. We also recorded certain inventory charges, intangible asset impairment charges, and contract termination costs of $52.9 million. We expect to incur charges related to the 2012 Restructuring Plan through the end of fiscal 2013. We continue to anticipate that our restructuring and cost reduction activities will result in approximately $150.0 million in cost reduction savings, primarily in operating expenses, and to a lesser extent, in both product and service cost of revenues for the full year 2013, in comparison to our 2012 full year levels. See Note 9, Restructuring and Other Charges, in Notes to Consolidated Financial Statements in Item 8 of Part II of this Report, for further discussion of our restructuring activities.

On January 24, 2013, we communicated the following five principles that provide insight on our operating plans for 2013:
• We expect the macroeconomic environment to remain uncertain;

• We expect overall modest growth in the markets we serve;

• We expect to take share in routing and switching and stabilize our share in enterprise security;

• We expect to expand 2013 operating margins over 2012; and

• We expect to continue to generate strong cash flows and prudently allocate capital.

These five principles are based on our management's plans, assumptions, and expectations as of the date of this Report. Although we believe we have been prudent in our plans, expectations, and assumptions, should known or unknown risks or uncertainties materialize or should underlying assumptions prove inaccurate, actual results could vary materially.

Financial Results and Key Performance Metrics Overview

The following table provides an overview of our key financial metrics for the
years ended December 31, 2012, 2011, and 2010 (in millions, except per share
amounts, percentages, day sales outstanding, and book-to-bill):
                                            As of and for the Years Ended December 31,
                         2012          2011          2010           2012 vs. 2011           2011 vs. 2010
                                                                 $ Change    % Change    $ Change    % Change
Net revenues          $ 4,365.4     $ 4,448.7     $ 4,093.3     $  (83.3 )     (2)%     $  355.4        9%

Gross Margin          $ 2,708.8     $ 2,868.6     $ 2,741.8     $ (159.8 )     (6)%     $  126.8        5%
Percentage of net
revenues                   62.1 %        64.5 %        67.0 %

Operating income      $   308.1     $   618.5     $   767.6     $ (310.4 )    (50)%     $ (149.1 )    (19)%
Percentage of net
revenues                    7.1 %        13.9 %        18.8 %
Net income
attributable to
  Juniper Networks    $   186.5     $   425.1     $   618.4     $ (238.6 )    (56)%     $ (193.3 )    (31)%
Percentage of net
revenues                    4.3 %         9.6 %        15.1 %
Net income per share
  attributable to
Juniper Networks
  common
stockholders:
Basic                 $    0.36     $    0.80     $    1.18     $  (0.44 )    (55)%     $  (0.38 )    (32)%
Diluted               $    0.35     $    0.79     $    1.15     $  (0.44 )    (56)%     $  (0.36 )    (31)%

Operating cash flows  $   642.4     $   986.7     $   812.3     $ (344.3 )    (35)%     $  174.4       21%
Deferred revenue      $   923.4     $   967.0     $   884.4     $  (43.6 )     (5)%     $   82.6        9%
Day sales outstanding
("DSO") (*)                  35            46            45          (11 )    (24)%            1        2%
Book-to-bill (*)             >1             1            >1


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• Net Revenues: Our net revenue decreased in our EMEA and APAC regions, offset by an increase in the Americas region in 2012, compared to 2011. By market, we experienced declines in both service provider and enterprise markets in 2012, compared to 2011. The year-over-year decrease in our net revenues during 2012 was primarily due to a decline in sales of our core and edge legacy routing products and firewall products, partially offset by increases in our service revenue, switching products, and high-end SRX products.

• Gross Margin: Our gross margin as a percentage of revenues decreased in 2012, compared to 2011, due to lower product margin from $44.3 million in inventory charges related to component inventory held in excess of forecasted demand and an intangible asset impairment charge of $16.1 million, and to a lesser extent, due to an increase in the size and number of strategic contracts with lower margins, and a shift in product mix to lower margin products. This decrease was partially offset by an increase in service margin.

• Operating Income: Our operating income as a percentage of revenues decreased in 2012, compared to 2011, primarily due to slower revenue growth relative to our sales and marketing and research and development expense, as we continue to invest in our innovative portfolio and bring new products to market. In addition, restructuring and other associated charges of $99.7 million were recorded in 2012, related to workforce reduction activities, facility closures, asset impairment charges, and contract terminations.

• Net Income Attributable to Juniper Networks and Net Income Per Share Attributable to Juniper Networks Common Stockholders: The decrease in net income attributable to Juniper Networks in 2012, compared to 2011, reflects the lower operating income discussed above.

• Operating Cash Flows: Operating cash flows decreased in 2012, compared to 2011, primarily due to lower net income, higher taxes paid, timing of payments to our vendors, and a decrease in deferred revenue, offset by collections of our outstanding receivables.

• Deferred Revenue: Total deferred revenue decreased $43.6 million to $923.4 million as of December 31, 2012, compared to $967.0 million as of December 31, 2011, due to a decline in deferred service revenue, partially offset by an increase in deferred product revenue.

• DSO: DSO is calculated as the ratio of ending accounts receivable, net of allowances, divided by average daily net sales for the preceding 90 days. DSO for the quarter ended December 31, 2012 decreased by 11 days, or 24% compared to the quarter ended December 31, 2011. The decrease was primarily due to shipment linearity, resulting in a greater proportion of the periods shipments converted to cash by the end of the period and an increase in collections on our outstanding receivables.

• Book-to-Bill: Book-to-bill represents the ratio of product orders booked divided by product revenues during the respective period. Book-to-bill was greater than one for the quarter ended December 31, 2012 and one for the quarter ended December 31, 2011.

• Stock Repurchase Plan Activity: Under our stock repurchase program, we repurchased approximately 35.8 million shares of our common stock at an average price of $18.05 per share for an aggregate purchase price of $645.6 million during the year ended December 31, 2012.

Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with U.S. GAAP 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 2, Significant Accounting Policies, in Notes to Consolidated Financial Statements in Item 8 of Part II of this Report, 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 consolidated results of operations may be affected.

• Inventory Valuation and Contract Manufacturer Liabilities. Inventory consists primarily of component parts to be used in the manufacturing process and is stated at lower of average cost or market. A provision is recorded when inventory is determined to be in excess of anticipated demand or obsolete, to adjust inventory to its estimated realizable value. In determining the provision, we also consider estimated recovery rates based on the nature of the inventory. As of December 31, 2012 and 2011, our inventory balances were $62.5 million and $69.1 million, respectively.

We establish a liability for non-cancelable, non-returnable purchase commitments with our contract manufacturers for carrying charges, quantities in excess of our demand forecasts, or obsolete material charges for components purchased by the contract manufacturers to meet our demand forecasts or customer orders. We also take estimated recoveries of aged inventory into consideration when determining the liability. As of December 31, 2012 and 2011, our contract manufacturer liabilities were $27.7 million and $14.8 million, respectively.

Significant judgment is used in establishing our forecasts of future demand, recovery rates based on the nature and age of inventory, and obsolete material exposures. If the actual component usage and product demand are significantly lower than forecast, which may be caused by factors within and outside of our control, or if there were a higher incidence of inventory obsolescence because of rapidly changing technology and our customer requirements, we may be required to increase our inventory write-downs and contract manufacturer liabilities, which could have an adverse impact on our gross margins and profitability. We regularly evaluate our exposure for inventory write-downs and adequacy of our contract manufacturer liabilities. Inventory and 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.

• Goodwill and Other Long-Lived Assets. We make significant estimates, assumptions, and judgments when valuing goodwill and other intangible assets in connection with the initial purchase price allocation of an acquired entity, as well as when evaluating impairment of goodwill and other intangible assets on an ongoing basis. These estimates are based upon a number of factors, including historical experience, market conditions, and information obtained from the management of the acquired company. Critical estimates in valuing certain intangible assets include, but are not limited to, historical and projected customer retention rates, anticipated growth in revenue from the acquired customer

and product base, and the expected use of the acquired assets. These factors are also considered in determining the useful life of the acquired intangible assets. The amounts and useful lives assigned to identified intangible assets impacts the amount and timing of future amortization expense.

The value of our goodwill and intangible assets could be impacted by future adverse changes such as, but not limited to: (a) a significant adverse change in legal factors or in the business climate; (b) a substantial decline in our market capitalization, (c) an adverse action or assessment by a regulator; (d) unanticipated competition; (e) loss of key personnel; (f) a more likely-than-not expectation of sale or disposal of a reporting unit or a significant portion thereof; (g) a realignment of our resources or restructuring of our existing businesses in response to changes to industry and market conditions; (h) testing for recoverability of a significant asset group within a reporting unit; or (i) higher discount rate used in the impairment analysis as impacted by an increase in interest rates.

We evaluate goodwill on an annual basis as of November 1st or more frequently if we believe impairment indicators exist. Goodwill is tested for impairment at the reporting unit level, which is one level below our operating segment level, by comparing the reporting unit's carrying value, including goodwill, to the fair value of the reporting unit. The fair values of the reporting units are estimated using significant judgment based on a combination of the income and the market approaches. Under the income approach, we estimate fair value of a reporting unit based on the present value of forecasted future cash flows that the reporting unit is expected to generate over its remaining life. Under the market approach, we estimate fair value of our reporting units based on an analysis that compares the value of the reporting units to values of publicly-traded companies in similar lines of business. If the fair value of the reporting unit does not exceed the carrying value of the net assets assigned to the reporting unit, then we perform the second step of the impairment test in order to determine the implied fair value of the reporting unit's goodwill. When the carrying value of a reporting unit's goodwill exceeds its implied fair value, we record an impairment loss equal to the difference. Determining the fair value of a reporting unit is highly judgmental in nature and involves the use of significant estimates and assumptions. These estimates and assumptions include revenue growth rates and operating margins used to calculate projected future cash flows, operating trends, risk-adjusted discount rates, future economic and market conditions and determination of appropriate market comparables. We base our fair value estimates on assumptions we believe to be reasonable but that are unpredictable and inherently uncertain. Actual future results may differ from those estimates. In addition, we make certain judgments and assumptions in allocated shared assets and liabilities to determine the carrying values for each of our reporting units. As of December 31, 2012, goodwill recorded for our PSD segment and SSD segment was $1,866.3 million and $2,191.5 million, respectively. The fair value of our reporting units, in particular SSD, are sensitive to events or changes in circumstances, such as adverse changes in operating results or macro-economic conditions, changes in management's business strategy, or declines in our stock price. A hypothetical 5% decrease in the estimated fair value of our reporting units would result in the fair value of our SSD segment to be above its carrying value by approximately 1% and the fair value of our PSD segment to be in excess of its carrying value by approximately 80%. See Item 1A of Part I, "Risk Factors," for more information.

We evaluate long-lived assets, such as property, plant and equipment, and purchased intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Such events or changes in circumstances include, but are not limited to, a significant decrease in the fair value of the underlying asset or asset group, a significant decrease in the benefits realized from the acquired assets, difficulty and delays in integrating the business or a significant change in the operations of the acquired assets or use of an asset. A long-lived asset is considered impaired if its carrying amount exceeds the estimated future undiscounted cash flows the asset or asset group is expected to generate. If a long-lived asset is considered to be impaired, the impairment to be recognized is the amount by which the carrying amount of the asset exceeds the fair value of the asset or asset group.

• Warranty Reserves. 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 use judgment and estimates when determining warranty costs as part of our cost of sales based on associated material costs, labor costs for trouble-shooting and repair, 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, if actual product failure rates, use of materials, or service delivery costs differ from estimates, additional warranty costs may be incurred, which could reduce gross margin. As of December 31, 2012 and 2011, our warranty reserves were $29.7 million and $28.3 million, respectively.

• Revenue recognition. Revenue is recognized when all of the following criteria have been met: (1) persuasive evidence of an arrangement exists,
(2) delivery has occurred, (3) sales price is fixed or determinable, and
(4) collectability is reasonably assured. We enter into contracts to sell our products and services, and while some of our sales agreements contain . . .