Segments (Notes)

12 Months Ended

Dec. 31, 2012

Segment Reporting [Abstract]

Segments [Text Block]

Segments

The Company’s chief operating decision maker (“CODM”) allocates resources and assesses performance based on financial information of the Company’s divisions. In fiscal 2012, the Company reorganized its operations into two reportable segments principally by product families: PSD and SSD. As a result of the change, product families and services were organized within the two divisions based on homogeneity of products and technology.

To provide improved visibility and comparability, the Company reclassified segment operating results for 2011 and 2010 to conform with the 2012 organizational realignments.

The Company’s 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 from data centers, core, edge, aggregation, campus, Wide Area Networks ("WANs"), branch, and customer premise equipment level. The Company's PSD segment consists of routing, switching, and security/other products and services. Routing includes products and services from the ACX, E, M, MX, PTX and T Series. Switching primarily consists of products and services for EX Series and wireless local area network solutions, as well as QFabric™. Security/other include products and services from the branch SRX, branch firewall, and J Series, as well as the network application platform, Junos® Space.

The Company's SSD segment offers solutions that meet a broad array of our customers’ priorities, from protecting the users, applications and data on the network to providing network services across a distributed infrastructure. The SSD segment primarily consists of security/other and routing products and services. Security/other includes High-End SRX services and vGW Virtual Gateways, High-End Firewall, virtual private network systems and appliances, secure socket layer virtual private network appliances, intrusion detection and prevention appliances, wide area network optimization platforms, and Junos Pulse. Routing primarily consists of Routing Services Software and Mobile Applications (such as MobileNext^TM).

The CODM does not allocate to the Company's business segments certain operating expenses managed separately at the corporate level. Direct costs and operating expenses, such as standard cost of goods sold, research and development, and product marketing expenses, are generally applied to each segment. Indirect costs, such as manufacturing overhead and other cost of revenues, are allocated based on factors including headcount, usage, and revenue. Segment contribution margin provides supplemental data on operational performance and is comprised of these direct costs and operating expenses, as well as these indirect costs. Corporate unallocated expenses includes: sales, marketing, general and administrative costs, share-based compensation, amortization of purchased intangible assets, restructuring and other charges, gains or losses on equity investments, other expense, net, income taxes, and certain other charges. Segment contribution margin excludes these corporate unallocated expenses.

The following table summarizes financial information for each segment used by the CODM (in millions):

	Years Ended December 31,
	2012			2011			2010
PSD product revenues:
Routing	$	1,946.8		$	2,166.0		$	2,034.7
Switching	554.8			495.8			377.7
Security/other	182.5			213.2			211.1
Total PSD product revenues	2,684.1			2,875.0			2,623.5
PSD service revenues	834.3			713.3			603.3
Total PSD revenues	3,518.4			3,588.3			3,226.8
SSD product revenues:
Security/other	493.3			490.6			539.4
Routing	84.7			112.7			95.8
Total SSD product revenues	578.0			603.3			635.2
SSD service revenues	269.0			257.1			231.3
Total SSD revenues	847.0			860.4			866.5
Total net revenues	4,365.4			4,448.7			4,093.3
Segment contribution margin:
PSD	1,409.4			1,586.2			1,477.9
SSD	340.6			345.0			405.0
Total segment contribution margin	1,750.0			1,931.2			1,882.9
Corporate unallocated expenses (1)	(1,068.7		)	(1,013.9		)	(901.2		)
Amortization of purchased intangible assets (2)	(32.3		)	(27.1		)	(8.6		)
Share-based compensation expense	(243.4		)	(222.2		)	(182.0		)
Share-based payroll tax expense	(1.1		)	(9.3		)	(6.4		)
Restructuring and other charges (3)	(99.7		)	(30.6		)	(10.8		)
Acquisition-related charges (4)	(2.0		)	(9.6		)	(6.3		)
Other unallocated expense	5.3			—			—
Total operating income	308.1			618.5			767.6
Other (expense) income, net	(16.6		)	(46.8		)	10.6
Income before income taxes and noncontrolling interest	$	291.5		$	571.7		$	778.2

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⁽¹⁾  Amount includes unallocated costs for global functions such as sales, marketing, and general and administrative.

⁽²⁾  Amount includes amortization expense of purchased intangible assets reported in operating expenses and in cost of revenues.

⁽³⁾  Amount includes restructuring and other charges reported in operating expenses and in cost of revenues.

⁽⁴⁾  Amount includes acquisition-related costs reported in operating expenses and in cost of revenues.

Depreciation expense allocated to the PSD segment was $121.0 million, $109.5 million, $114.8 million and in the years ended December 31, 2012, 2011, and 2010, respectively. The depreciation expense allocated to the SSD segment was $33.7 million, $32.7 million, and $32.0 million in the years ended December 31, 2012, 2011, and 2010, respectively.

The Company attributes revenues to geographic region based on the customer’s ship-to location. The following table shows net revenues by geographic region (in millions):

	Years Ended December 31,
	2012		2011		2010
Americas:
United States	$	2,067.5	$	2,015.8	$	1,890.1
Other	218.4		222.2		205.5
Total Americas	2,285.9		2,238.0		2,095.6
Europe, Middle East, and Africa	1,266.3		1,339.8		1,189.3
Asia Pacific	813.2		870.9		808.4
Total	$	4,365.4	$	4,448.7	$	4,093.3

During the years ended December 31, 2012 and 2010, Verizon accounted for 10.3% and 10.4% of net revenues, respectively, and was reported in the Company's PSD and SSD segments. During the year ended December 31, 2011, no single customer accounted for 10% or more of net revenues.

The Company tracks assets by physical location. The majority of the Company’s assets, excluding cash and cash equivalents and investments, as of December 31, 2012 and December 31, 2011, were attributable to U.S. operations. For the years ended December 31, 2012 and December 31, 2011, gross property and equipment held in the U.S., as a percentage of total property and equipment, was approximately 83% and 80%, respectively. Although management reviews asset information on a corporate level and allocates depreciation expense by segment, the CODM does not review asset information on a segment basis.