Early Q2 results point to improvement in telecom industry, longer term outlook still cautious

Juniper and Polycom were among some companies reporting their Q2 results yesterday.  The results were in both cases better than Wall Street's consensus but both companies leaned towards caution (perhaps Polycom a bit more so than Juniper, which was more optimistic in the long term).  My quick comments follow below:

Juniper:

Q2 results for Juniper were a solid beat, mainly due to OPEX control (and that is expected to continue, as JNPR guided for FY13 opex to decline by $150mn YoY) and gross margin improvements in services. More importantly, guidance was better than expected and the visibility is much more improved. Juniper's comments on 2nd half 2012 carrier spend was mostly in line with the Street's expectations (modest increase in US CAPEX will be offset by a decline in EMEA spend). Book-to-bill was >1, Verizon represented about 12% of sales versus 15% in Q1. Switching strength (including PTX) helped Enterprise sales (up 13% QoQ). Juniper is still trying to show improvement in Security, with revenues down 5% QoQ but the company announced a new partnership with Riverbed, paying $75m up front to licence Riverbed's ADC technology; longer term it plans integrating RVBD's Steelhead Mobile Tech. into JUNOS pulse.

Polycom:

PLCM had a solid Q2 with revs of $379m (versus consensus estimates of $360m), however the company guidance for the second half of 2012 left some pundits disappointed. The market remains in a stalemate position, given a difficult macro backdrop and software transition. Visibility also continues to be limited, On the positive side, new offerings focused on software, cloud and web video collaboration solutions can drive growth in 2013, Fiscal Q2 results were led by strength in China (51% share) and share gains vs. competition in North America. Gains in areas such as UC Group Devices (+5% QoQ) and UC Platform (+6% QoQ) were partly offset by losses in UC Personal Devices (-5% QoQ). Gross margins of 60.9% implied limited pricing pressure in the quarter, but its not clear whether that will be sustainable in the long run.