10-Q

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, 2011

OR

[ ]	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	(408) 745-2000
(Address of principal executive offices,	(Registrant's telephone number,
including zip code)	including area code)

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 definition 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 533,069,000 shares of the Company's Common Stock, par value $0.00001, outstanding as of April 29, 2011.

Table of Contents
PART I - FINANCIAL INFORMATION	3
Item 1. Financial Statements	3
Condensed Consolidated Statements of Operations	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	31
Item 3. Quantitative and Qualitative Disclosures About Market Risk	43
Item 4. Controls and Procedures	43
PART II - OTHER INFORMATION	44
Item 1. Legal Proceedings	44
Item 1A. Risk Factors	44
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	55
Item 6. Exhibits	56
SIGNATURES	57

2

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Juniper Networks, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended March 31,
	2011			2010
Net revenues:
Product	$	877,440		$	721,201
Service	224,172			191,417
Total net revenues	1,101,612			912,618
Cost of revenues:
Product	265,746			222,381
Service	99,981			78,216
Total cost of revenues	365,727			300,597
Gross margin	735,885			612,021
Operating expenses:
Research and development	261,979			206,994
Sales and marketing	246,291			192,375
General and administrative	44,924			43,138
Amortization of purchased intangible assets	1,544			1,137
Restructuring	(347		)	8,105
Acquisition-related	4,101			—
Total operating expenses	558,492			451,749
Operating income	177,393			160,272
Other (expense) income, net	(6,462		)	1,459
Income before income taxes and noncontrolling interest	170,931			161,731
Income tax provision (benefit)	41,271			(2,879		)
Consolidated net income	129,660			164,610
Adjust for net loss (income) attributable to noncontrolling interest	90			(1,495		)
Net income attributable to Juniper Networks	$	129,750		$	163,115
Net income per share attributable to Juniper Networks common stockholders:
Basic	$	0.24		$	0.31
Diluted	$	0.24		$	0.30
Shares used in computing net income per share:
Basic	530,789			521,141
Diluted	548,825			536,718

See accompanying Notes to Condensed Consolidated Financial Statements

3

Juniper Networks, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except par values)

	March 31, 2011			December 31, 2010
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	2,944,383		$	1,811,887
Short-term investments	493,557			474,514
Accounts receivable, net of allowances	471,012			596,622
Deferred tax assets, net	160,032			161,535
Prepaid expenses and other current assets	235,443			169,812
Total current assets	4,304,427			3,214,370
Property and equipment, net	516,445			493,881
Long-term investments	645,609			535,178
Restricted cash	102,125			119,346
Purchased intangible assets, net	143,506			121,803
Goodwill	3,927,280			3,927,807
Other long-term assets	54,308			55,466
Total assets	$	9,693,700		$	8,467,851
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	228,275		$	292,270
Accrued compensation	188,736			256,746
Accrued warranty	38,320			35,931
Deferred revenue	733,249			660,264
Income taxes payable	25,651			25,000
Other accrued liabilities	189,513			201,765
Total current liabilities	1,403,744			1,471,976
Long-term debt	998,923			—
Long-term deferred revenue	217,024			224,165
Long-term income tax payable	101,630			103,823
Other long-term liabilities	75,530			59,087
Commitments and Contingencies – See Note 15
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; 534,376 shares and 525,378 shares issued and outstanding at March 31, 2011, and December 31, 2010, respectively	5			5
Additional paid-in capital	9,998,125			9,717,783
Accumulated other comprehensive income (loss)	9,746			(1,251		)
Accumulated deficit	(3,111,537		)	(3,108,337		)
Total Juniper Networks stockholders' equity	6,896,339			6,608,200
Noncontrolling interest	510			600
Total equity	6,896,849			6,608,800
Total liabilities and equity	$	9,693,700		$	8,467,851

See accompanying Notes to Condensed Consolidated Financial Statements

4

Juniper Networks, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Three Months Ended March 31,
	2011			2010
Cash flows from operating activities:
Consolidated net income	$	129,660		$	164,610
Adjustments to reconcile consolidated net income to net cash from operating activities:
Depreciation and amortization	40,758			35,269
Share-based compensation	47,586			40,561
Deferred income taxes	1,503			(12,471		)
Excess tax benefits from share-based compensation	(39,041		)	(20,520		)
Changes in operating assets and liabilities:
Accounts receivable, net	125,610			55,718
Prepaid expenses and other assets	(59,372		)	(11,150		)
Accounts payable	(58,468		)	(14,125		)
Accrued compensation	(66,510		)	(19,847		)
Accrued litigation settlements	—			(169,330		)
Income tax payable	38,099			(1,088		)
Other accrued liabilities	13,981			4,620
Deferred revenue	65,844			36,299
Net cash provided by operating activities	239,650			88,546
Cash flows from investing activities:
Purchases of property and equipment, net	(53,972		)	(37,807		)
Purchases of trading investments	(2,495		)	(1,245		)
Purchases of available-for-sale investments	(437,773		)	(447,716		)
Proceeds from sales of available-for-sale investments	193,301			224,514
Proceeds from maturities of available-for-sale investments	126,260			235,960
Payment for business acquisition, net of cash and cash equivalents acquired	(28,573		)	—
Changes in restricted cash	—			(1,550		)
Purchases of privately-held and other equity investments, net	(5,972		)	(4,773		)
Net cash used in investing activities	(209,224		)	(32,617		)
Cash flows from financing activities:
Proceeds from issuance of common stock	264,113			118,920
Purchases and retirement of common stock	(205,171		)	(76,225		)
Issuance of long-term debt, net	991,556			—
Change in customer financing arrangements	12,531			2,082
Excess tax benefit from share-based compensation	39,041			20,520
Return of capital to noncontrolling interest	—			(2,000		)
Net cash provided by financing activities	1,102,070			63,297
Net increase in cash and cash equivalents	1,132,496			119,226
Cash and cash equivalents at beginning of period	1,811,887			1,604,723
Cash and cash equivalents at end of period	$	2,944,383		$	1,723,949

See accompanying Notes to Condensed Consolidated Financial Statements

5

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 Consolidated Condensed Balance Sheet as of December 31, 2010, is derived from the December 31, 2010, audited consolidated financial statements. 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, 2011, are not necessarily indicative of the results that may be expected for the year ending December 31, 2011, 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, 2010.

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.

As of March 31, 2011, 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.

Note 2. Summary of Significant Accounting Policies

Recent Accounting Pronouncements

In December 2010, the FASB issued ASU No. 2010-28, Topic 350 - Intangibles - Goodwill and Other: When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts (“ASU 2010-28”), which modifies Step 1 of the goodwill impairment test for reporting units with zero or negative amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exist. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2010. The Company's adoption of ASU 2010-28 did not have an impact on its consolidated results of operations or financial condition.

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. Additional information existing as of the acquisition dates but unknown to the Company may become known during the remainder of the measurement period, not to exceed 12 months from the acquisition date, which may result in changes to the amounts and allocations recorded.

During the three months ended March 31, 2011, the Company completed two business combinations for cash of approximately $30.5 million. Total purchase consideration for these acquisitions was allocated as follows (in millions):

	2011 Acquisitions
Net tangible assets acquired	$	1.7
Intangible assets acquired	28.4
Goodwill	0.4
Total	$	30.5

6

Juniper Networks, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

The goodwill recognized is attributable primarily to expected synergies. None of the goodwill is deductible for U.S. federal income tax purposes.

The following table presents details of the intangible assets acquired through the business combinations completed during the three months ended March 31, 2011 (in millions, except years):

	2011 Acquisitions
	Estimated Useful Life (In Years)	Amount
Existing or Core technology	10	$	21.9
Support agreements and related relationships	4	5.1
Patents	5	1.4
Total		$	28.4

The Company recognized $5.1 million of acquisition-related costs in the three months ended March 31, 2011. These costs were expensed in the period incurred and reported in the Company's consolidated statement of operations within cost of revenues and within operating expense as acquisition-related charges. There were no comparable charges incurred in the three months ended March 31, 2010.

Note 4. Net Income per Share

Basic net income per share is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted net income per share is computed giving effect to all dilutive potential shares that were 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 following table presents the calculation of basic and diluted net income per share attributable to Juniper Networks common stockholders (in millions, except per share amounts):

	Three Months Ended March 31,
	2011		2010
Numerator:
Net income attributable to Juniper Networks	$	129.8	$	163.1
Denominator:
Weighted-average shares used to compute basic net income per share	530.8		521.1
Effect of dilutive securities:
Employee stock awards	18.0		15.6
Weighted-average shares used to compute diluted net income per share	548.8		536.7
Net income per share attributable to Juniper Networks common stockholders:
Basic	$	0.24	$	0.31
Diluted	$	0.24	$	0.30

The Company excludes outstanding stock options with exercise prices 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. Employee stock options and PSAs covering approximately 5.8 million and 19.6 million shares of the Company's common stock in the three months ended March 31, 2011, and 2010, respectively, were outstanding, but were not included in the computation of diluted earnings per share.

7

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, 2011		December 31, 2010
Cash:
Demand deposits	$	475.9	$	413.0
Time deposits	400.9		273.3
Total cash	876.8		686.3
Cash equivalents:
U.S. government securities	146.5		76.7
Government-sponsored enterprise obligations	37.8		5.0
Certificates of deposit	5.6		—
Commercial paper	21.0		4.0
Money market funds	1,856.7		1,039.9
Total cash equivalents	2,067.6		1,125.6
Total cash and cash equivalents	$	2,944.4	$	1,811.9

Investments in Available-for-Sale and Trading Securities

The following table summarizes the Company's unrealized gains and losses, and fair value of investments designated as available-for-sale and trading securities, as of March 31, 2011, and December 31, 2010 (in millions):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
As of March 31, 2011:
Fixed income securities:
U.S. government securities	$	172.5	$	0.1	$	—		$	172.6
Government-sponsored enterprise obligations	266.5		0.3		(0.3		)	266.5
Foreign government debt securities	23.7		0.1		—			23.8
Certificates of deposit	35.8		0.1		—			35.9
Commercial paper	31.0		—		—			31.0
Asset-backed securities	112.3		0.1		(0.1		)	112.3
Corporate debt securities	484.7		1.9		(0.3		)	486.3
Total fixed income securities	1,126.5		2.6		(0.7		)	1,128.4
Total available-for-sale securities	1,126.5		2.6		(0.7		)	1,128.4
Trading securities	10.8		—		—			10.8
Total	$	1,137.3	$	2.6	$	(0.7	)	$	1,139.2
Reported as:
Short-term investments	$	492.4	$	1.2	$	—		$	493.6
Long-term investments	644.9		1.4		(0.7		)	645.6
Total	$	1,137.3	$	2.6	$	(0.7	)	$	1,139.2

8

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, 2010:
Fixed income securities:
U.S. government securities	$	158.2	$	0.2	$	—		$	158.4
Government-sponsored enterprise obligations	213.8		0.4		(0.2		)	214.0
Foreign government debt securities	46.8		0.2		—			47.0
Certificates of deposit	20.9		0.1		—			21.0
Commercial paper	9.5		—		—			9.5
Asset-backed securities	90.1		—		(0.1		)	90.0
Corporate debt securities	459.7		2.2		(0.2		)	461.7
Total fixed income securities	999.0		3.1		(0.5		)	1,001.6
Total available-for-sale securities	999.0		3.1		(0.5		)	1,001.6
Trading securities	8.1		—		—			8.1
Total	$	1,007.1	$	3.1	$	(0.5	)	$	1,009.7
Reported as:
Short-term investments	$	473.6	$	0.9	$	—		$	474.5
Long-term investments	533.5		2.2		(0.5		)	535.2
Total	$	1,007.1	$	3.1	$	(0.5	)	$	1,009.7

The following table presents the maturities of the Company's available-for-sale and trading securities, as of March 31, 2011 (in millions):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Due within one year	$	481.6	$	1.2	$	—		$	482.8
Due between one and five years	644.9		1.4		(0.7		)	645.6
No contractual maturity	10.8		—		—			10.8
Total	$	1,137.3	$	2.6	$	(0.7	)	$	1,139.2

The following tables present the Company's trading and available-for sale investments that are in an unrealized loss position as of March 31, 2011, and December 31, 2010 (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, 2011
Corporate debt securities (1)	$	152.5	$	(0.3	)	$	13.8	$	—	$	166.3	$	(0.3	)
U.S. government securities	81.2		—			—		—		81.2		—
Government-sponsored enterprise obligations	185.5		(0.3		)	—		—		185.5		(0.3		)
Asset-backed securities	59.8		(0.1		)	—		—		59.8		(0.1		)
Total	$	479.0	$	(0.7	)	$	13.8	$	—	$	492.8	$	(0.7	)

________________________________

(1) Balance includes investments that were in an immaterial unrealized loss position 12 months or greater as of March 31, 2011.

9

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, 2010
Corporate debt securities (1)	$	104.3	$	(0.2	)	$	28.8	$	—	$	133.1	$	(0.2	)
Government-sponsored enterprise obligations	57.8		(0.2		)	—		—		57.8		(0.2		)
Foreign government debt securities (1)	—		—			6.2		—		6.2		—
Commercial paper	5.0		—			—		—		5.0		—
Asset-backed securities	54.7		(0.1		)	—		—		54.7		(0.1		)
Total	$	221.8	$	(0.5	)	$	35.0	$	—	$	256.8	$	(0.5	)

 ________________________________

(1) Balance includes investments that were in an immaterial unrealized loss position 12 months or greater as of December 31, 2010.

The Company had 109 and 73 investments in unrealized loss positions as of March 31, 2011, and December 31, 2010, respectively. The gross unrealized losses related to these investments were primarily due to changes in interest rates. The contractual terms of fixed income securities do not permit the issuer to settle the securities at a price less than the amortized cost of the investments. 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, 2011, and December 31, 2010. 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

Restricted cash consists of: (i) amounts held in escrow accounts, as required by certain acquisitions completed in 2005 and 2010; (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, 2011, the Company distributed approximately $17.2 million of restricted cash, mainly related to the 2010 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. As of March 31, 2011, the Company expects to release $4.7 million from escrow as these restricted shares vest over the next eighteen months.

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

	As of
	March 31, 2011		December 31, 2010
Restricted cash:
Demand deposits	$	1.7	$	1.7
Total restricted cash	1.7		1.7
Restricted investments:
U.S. government securities	0.6		0.6
Corporate debt securities	1.6		2.7
Mutual funds	1.1		—
Money market funds	97.1		114.3
Total restricted investments	100.4		117.6
Total restricted cash and investments	$	102.1	$	119.3

As of March 31, 2011, and December 31, 2010, the unrealized gains and losses related to restricted investments were immaterial.

10

Juniper Networks, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Other Investments

The Company's minority equity investments in privately-held companies are carried at cost, as the Company does not have a controlling interest or the ability to exercise significant influence over these companies. The Company adjusts its privately-held equity investments for any impairment if the fair value goes below the carrying value of the respective assets.

As of March 31, 2011, and December 31, 2010, the carrying values of the Company’s privately-held and other equity investments of $28.3 million and $22.1 million, respectively, were included in other long-term assets in the condensed consolidated balance sheets. During the three months ended March 31, 2011 and 2010, the Company invested $6.0 million and $4.8 million, respectively, in privately-held and other equity investments. There were no losses from the Company's privately-held and other equity investments during the three months ended March 31, 2011, and 2010.

Juniper Networks, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Note 6. Fair Value Measurements

The Company determines the fair values of its financial instruments based on a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Fair value is defined as the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value assumes that the transaction to sell the asset or transfer the liability occurs in the principal or most advantageous market for the asset or liability and establishes that the fair value of an asset or liability shall be determined based on the assumptions that market participants would use in pricing the asset or liability. The classification of a financial asset or liability within the hierarchy is based upon the lowest level input that is significant to the fair value measurement. The fair value hierarchy prioritizes the inputs into three levels that may be used to measure fair value:

Level 1 – Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. These inputs are valued using market based approaches.

Level 3 – Inputs are unobservable inputs based on the Company’s assumptions. These inputs, if any, are valued using internal financial models.

11

Juniper Networks, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables provide a summary of assets measured at fair value on a recurring basis (in millions):

	Fair Value Measurements at March 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
Available-for-sale debt securities:
U.S. government securities (1)	$	99.2	$	220.5	$	—	$	319.7
Government-sponsored enterprise obligations	236.9		67.4		—		304.3
Foreign government debt securities	—		23.8		—		23.8
Commercial paper	—		52.0		—		52.0
Corporate debt securities (2)	—		487.9		—		487.9
Certificate of deposit	—		41.5		—		41.5
Asset-backed securities	—		112.3		—		112.3
Money market funds (3)	1,953.8		—		—		1,953.8
Total available-for-sale debt securities	2,289.9		1,005.4		—		3,295.3
Total available-for-sale securities	2,289.9		1,005.4		—		3,295.3
Trading securities:
Mutual funds (4)	11.9		—		—		11.9
Total trading securities	11.9		—		—		11.9
Derivative assets:
Foreign exchange contracts	—		2.0		—		2.0
Total derivative assets	—		2.0		—		2.0
Total assets measured at fair value	$	2,301.8	$	1,007.4	$	—	$	3,309.2

________________________________

(1) Balance includes $0.6 million of restricted investments measured at fair market value, related to an acquisition completed in 2005. For additional information regarding the Company's restricted investments, see Note 5, Cash, Cash Equivalents, and Investments, under the heading “Restricted Cash.” Restricted investments are included in the restricted cash balance in the condensed consolidated balance sheet.

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

(3) Balance includes $97.1 million of restricted investments measured at fair market value, related to the Company's D&O trust.

(4) Balance includes $1.1 million of restricted investments measured at fair market value, related to the Company's India Gratuity Trust.

12

Juniper Networks, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

	Fair Value Measurements at December 31, 2010 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 (1)	$	54.9	$	180.8	$	—	$	235.7
Government-sponsored enterprise obligations	208.9		10.1		—		219.0
Foreign government debt securities	21.0		26.0		—		47.0
Commercial paper	—		13.5		—		13.5
Corporate debt securities (2)	2.7		461.7		—		464.4
Certificate of deposit	—		21.0		—		21.0
Asset-backed securities	—		90.0		—		90.0
Money market funds (3)	1,154.2		—		—		1,154.2
Total available-for-sale debt securities	1,441.7		803.1		—		2,244.8
Total available-for-sale securities	1,441.7		803.1		—		2,244.8
Trading securities:
Mutual funds	8.1		—		—		8.1
Total trading securities	8.1		—		—		8.1
Derivative assets:
Foreign exchange contracts	—		0.4		—		0.4
Total derivative assets	—		0.4		—		0.4
Total assets measured at fair value	$	1,449.8	$	803.5	$	—	$	2,253.3

________________________________

(1) Balance includes $0.6 million of restricted investments measured at fair market value, related to an acquisition completed in 2005. For additional information regarding the Company's restricted investments, see Note 5, Cash, Cash Equivalents, and Investments, under the heading “Restricted Cash.” Restricted investments are included in the restricted cash balance in the condensed consolidated balance sheet.

(2) Balance includes $2.7 million of restricted investments measured at fair market value, related to the Company's India Gratuity Trust.

(3) Balance includes $114.3 million of restricted investments measured at fair market value, related to the Company's D&O trust.

The following tables summarizes the Company's assets measured at fair value on a recurring basis as reported in the consolidated balance sheet (in millions):

	Fair Value Measurements at March 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
Reported as:
Cash equivalents	$	1,856.7	$	210.9	$	—	$	2,067.6
Short-term investments	122.4		371.2		—		493.6
Long-term investments	224.5		421.1		—		645.6
Restricted cash	98.2		2.2		—		100.4
Prepaid expenses and other current assets	—		2.0		—		2.0
Total assets measured at fair value	$	2,301.8	$	1,007.4	$	—	$	3,309.2

13

Juniper Networks, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

	Fair Value Measurements at December 31, 2010 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	$	1,039.9	$	85.7	$	—	$	1,125.6
Short-term investments	150.7		323.8		—		474.5
Long-term investments	142.2		393.0		—		535.2
Restricted cash	117.0		0.6		—		117.6
Prepaid expenses and other current assets	—		0.4		—		0.4
Total assets measured at fair value	$	1,449.8	$	803.5	$	—	$	2,253.3

As of March 31, 2011, and December 31, 2010, the Company had $0.1 million and $2.6 million, respectively, of derivative liabilities measured at fair value on a recurring basis. The Company recorded the derivative liabilities, which related to its foreign exchange contracts, within other accrued liabilities in its condensed consolidated balance sheets. These liabilities were measured using significant other observable remaining inputs (Level 2) pursuant to the fair value hierarchy.

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, 2011, and 2010 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, 2011, and December 31, 2010, the Company had no material assets or liabilities measured at fair value on a nonrecurring basis.

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 9, Financing, and was determined using quoted market prices.

Note 7. Goodwill and Purchased Intangible Assets

Goodwill

The following table summarizes the Company's goodwill activities by segment in the three months ended March 31, 2011 (in millions):

	Infrastructure			SLT			Total
Balance as of January 1, 2011
Goodwill	$	1,643.4		$	3,564.4		$	5,207.8
Accumulated impairment losses	—			(1,280.0		)	(1,280.0		)
Carrying value at January 1, 2011	1,643.4			2,284.4			3,927.8
Adjustments to goodwill	(0.9		)	—			(0.9		)
Goodwill acquired during the three months ended March 31, 2011	0.4			—			0.4
Balance as of March 31, 2011
Goodwill	1,642.9			3,564.4			5,207.3
Accumulated impairment losses	—			(1,280.0		)	(1,280.0		)
Carrying value at March 31, 2011	$	1,642.9		$	2,284.4		$	3,927.3

14

Juniper Networks, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

During the three months ended March 31, 2011, the Company recorded an immaterial reduction to goodwill related to the adjustments in net tangible assets assumed from certain businesses acquired in 2010. There were no impairments to goodwill during the three months ended March 31, 2011, and 2010.

Purchased Intangible Assets

The following table presents the Company’s purchased intangible assets (in millions):

	Gross		Accumulated Amortization			Additions		Net
As of March 31, 2011:
Intangible assets with finite lives:
Technologies and patents	$	471.1	$	(386.9	)	$	23.3	$	107.5
Other	86.4		(63.4		)	5.1		28.1
Total intangible assets with finite lives	557.5		(450.3		)	28.4		135.6
IPR&D with indefinite lives	7.9		—			—		7.9
Total purchased intangible assets	$	565.4	$	(450.3	)	$	28.4	$	143.5
As of December 31, 2010:
Intangible assets with finite lives:
Technologies and patents	$	380.0	$	(381.4	)	$	91.1	$	89.7
Other	68.9		(62.2		)	17.5		24.2
Total intangible assets with finite lives	448.9		(443.6		)	108.6		113.9
IPR&D with indefinite lives	—		—			7.9		7.9
Total purchased intangible assets	$	448.9	$	(443.6	)	$	116.5	$	121.8

Amortization of purchased intangible assets included in operating expenses and cost of product revenues totaled $6.7 million and $1.1 million for the three months ended March 31, 2011, and 2010, respectively. There were no impairment charges with respect to the purchased intangible assets in the three months ended March 31, 2011, and 2010. The Company recorded $28.4 million of purchased intangible assets as a result of its acquisitions completed in the three months ended March 31, 2011. For further discussion, see Note 3, Business Combinations.

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 finite-lived assets. If the IPR&D project is abandoned, the Company records a charge to earnings in the period it is abandoned.

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

Years Ending December 31,	Amount
2011 (remaining nine months)	$	20.1
2012	26.4
2013	26.1
2014	24.3
2015	19.3
Thereafter	19.4
Total	$	135.6

15

Juniper Networks, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Note 8. Other Financial Information

Warranties

The Company provides for the estimated cost of product warranties 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,
	2011			2010
Beginning balance	$	35.9		$	38.2
Provisions made during the period, net	15.3			12.1
Change in estimate	(0.8		)	(0.5		)
Actual costs incurred during the period	(12.1		)	(12.0		)
Ending balance	$	38.3		$	37.8

Deferred Revenue

Details of the Company's deferred revenue were as follows (in millions):

	As of
	March 31, 2011			December 31, 2010
Deferred product revenue:
Undelivered product commitments and other product deferrals	$	303.1		$	294.1
Distributor inventory and other sell-through items	141.8			143.4
Deferred gross product revenue	444.9			437.5
Deferred cost of product revenue	(143.0		)	(148.8		)
Deferred product revenue, net	301.9			288.7
Deferred service revenue	648.4			595.7
Total	$	950.3		$	884.4
Reported as:
Current	$	733.3		$	660.2
Long-term	217.0			224.2
Total	$	950.3		$	884.4

Deferred product revenue primarily 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 product costs of 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 2009, the Company implemented a restructuring plan (the “2009 Restructuring Plan”) in an effort to better align its business operations with the current market and macroeconomic conditions. The plan included restructuring of certain business functions that resulted in reductions of workforce and facilities. The Company recorded $8.1 million in the three months ended March 31, 2010, associated with the 2009 Restructuring Plan. The Company had no such charges during the three months ended March 31, 2011.

16

Juniper Networks, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

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. The following table provides a summary of changes in the Company’s restructuring liability (in millions):

	Remaining Liability as of December 31, 2010		Charges		Cash payments			Adjustments			Remaining Liability as of March 31, 2011
Facilities	$	7.7	$	—	$	(0.7	)	$	—		$	7.0
Severance, contractual commitments, and other charges	0.2		—		0.3			(0.3		)	0.2
Total	$	7.9	$	—	$	(0.4	)	$	(0.3	)	$	7.2

Other Expense and Income, Net

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

	Three Months Ended March 31,
	2011			2010
Interest income	$	2.4		$	2.5
Interest expense	(6.5		)	(1.6		)
Other income and expense, net	(2.4		)	0.6
Total	$	(6.5	)	$	1.5

Interest income primarily includes interest income from 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, net, primarily includes foreign exchange gains and losses and other miscellaneous expenses.

Juniper Networks, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Note 9. Financing

Long-Term Debt

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

	March 31, 2011
	Amount			Effective Interest Rate
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	(1.1		)
Total	$	998.9

In March 2011, the Company issued $300.0 million aggregate principal amount of 3.10% senior notes due 2016 (the "2016 notes"), $300.0 million aggregate principal amount of 4.60% senior notes due 2021 (the "2021 notes"), and $400.0 million aggregate principal amount of 5.95% senior notes due 2041 (the "2041 notes" and, together with the 2016 notes and the 2021 notes the "notes"). Interest on the notes is payable in cash semiannually. The Company may redeem the notes, at any time in whole or from time to time in part, subject to a make-whole premium, and, in the event of a change in control, the holders of the notes may require us to repurchase for cash all or part of the notes at a purchase price equal to 101% of the aggregate principle amount, plus accrued and unpaid interest, if any. The indenture that governs the notes also contains various covenants, including limitations on the Company's ability to incur liens or enter into sale-leaseback transactions over certain dollar

17

Juniper Networks, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

thresholds.

The effective rates for the notes include the interest on the notes, accretion of the discount, and amortization of issuance costs. At March 31, 2011, the estimated fair value of the notes included in long-term debt was approximately $995.3 million based on quoted market prices. The Company had no such debt at December 31, 2010.

Customer Financing Arrangements

The Company has customer financing arrangements to sell its accounts receivable to a major third-party financing provider. The 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 $174.8 million and $135.6 million during the three months ended March 31, 2011, and 2010, respectively.

During the three months ended March 31, 2011, and 2010, the Company received cash proceeds of $194.3 million and $138.9 million respectively, from the financing provider. The amounts owed by the financing provider recorded as accounts receivable on the Company’s condensed consolidated balance sheets as of March 31, 2011, and December 31, 2010, was $103.6 million and $127.4 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 sheet. As of March 31, 2011, and December 31, 2010, the estimated cash received from the financing provider not recognized as revenue from distributors was $61.6 million and $49.1 million, respectively.

Note 10. 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, 2011		December 31, 2010
Cash flow hedges	$	125.6	$	110.4
Non-designated hedges	148.6		74.4
Total	$	274.2	$	184.8

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 less than one year. 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 operations. 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.

18

Juniper Networks, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

The total fair value of the Company’s derivative assets located in other current assets on the condensed consolidated balance sheet as of March 31, 2011, and December 31, 2010, was $2.0 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, 2011, and December 31, 2010, was nil and $2.6 million , respectively.

During the three months ended March 31, 2011, the Company recognized a gain of $5.2 million in accumulated other comprehensive income for the effective portion of its derivative instruments and reclassified a gain of $0.5 million from other comprehensive income to operating expense in the condensed consolidated statements of operations. The Company recognized a loss of $1.5 million in accumulated other comprehensive loss for the effective portion of its derivative instruments and reclassified a loss of $0.7 million from other comprehensive loss to the condensed consolidated statements of operations during the three months ended March 31, 2010. 

The ineffective portion of the Company's derivative instruments recognized in its condensed consolidated statements of operations was $0.3 million and nil during the three months ended March 31, 2011, and 2010.

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, 2011 and 2010, the Company recognized a loss on non-designated derivative instruments within interest and other income, net, on its condensed consolidated statements of operations of $0.2 million and $0.3 million, respectively.

Note 11. Equity

Stock Repurchase Activities

In February 2010, the Company’s Board of Directors (the “Board”) approved a new 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 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 its 2010 Stock Repurchase Program. The Company repurchased and retired approximately 2.8 million shares of its common stock at an average price of $27.04 per share for an aggregate purchase price of $74.4 million during the three months ended March 31, 2010 under its 2008 Stock Repurchase Program. As of March 31, 2011, there were no remaining authorized funds under the 2008 Stock Repurchase Program and $554.8 million remaining authorized funds under the 2010 Stock Repurchase Program.

19

Juniper Networks, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Comprehensive Income Attributable to Juniper Networks

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

	Three Months Ended March 31,
	2011		2010
Consolidated net income	$	129.7	$	164.6
Other comprehensive income, net of tax:
Change in unrealized gain (loss) on investments, net tax of nil	4.4		(0.4		)
Change in foreign currency translation adjustment, net tax of nil	6.6		(2.7		)
Total other comprehensive income (loss), net of tax	11.0		(3.1		)
Consolidated comprehensive income	140.7		161.5
Adjust for comprehensive income attributable to noncontrolling interest	0.1		(1.5		)
Comprehensive income attributable to Juniper Networks	$	140.8	$	160.0

The following table summarizes equity activity for the three months ended March 31, 2011 (in millions):

	Common Stock & Additional Paid-in-Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Non- controlling Interest			Total Equity
Balance at December 31, 2010	$	9,717.8		$	(1.3	)	$	(3,108.3	)	$	0.6		$	6,608.8
Consolidated net income	—			—			129.8			(0.1		)	129.7
Change in unrealized loss on investments, net tax of nil	—			4.4			—			—			4.4
Change in foreign currency translation adjustment, net tax of nil	—			6.6			—			—			6.6
Issuance of shares in connection with Employee Stock Purchase Plan	23.7			—			—			—			23.7
Exercise of stock options by employees	241.7			—			—			—			241.7
Repurchase and retirement of common stock	(70.3		)	—			(129.9		)	—			(200.2		)
Repurchases related to net issuances	(1.8		)	—			(3.1		)	—			(4.9		)
Share-based compensation expense	47.6			—			—			—			47.6
Adjustment related to tax benefit from employee stock option plans	39.4			—			—			—			39.4
Balance at March 31, 2011	$	9,998.1		$	9.7		$	(3,111.5	)	$	0.5		$	6,896.8

20

Juniper Networks, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

The following table summarizes equity activity for the three months ended March 31, 2010 (in millions):

	Common Stock & Additional Paid-in-Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Non- controlling Interest			Total Equity
Balance at December 31, 2009	$	9,060.1		$	(1.4	)	$	(3,236.5	)	$	2.6		$	5,824.8
Consolidated net income	—			—			163.1			1.5			164.6
Change in unrealized loss on investments, net tax of nil	—			(0.4		)	—			—			(0.4		)
Change in foreign currency translation adjustment, net tax of nil	—			(2.7		)	—			—			(2.7		)
Issuance of shares in connection with Employee Stock Purchase Plan	20.8			—			—			—			20.8
Exercise of stock options by employees	101.2			—			—			—			101.2
Return of capital to noncontrolling interest	—			—			—			(2.0		)	(2.0		)
Repurchase and retirement of common stock	(5.7		)	—			(68.7		)	—			(74.4		)
Repurchases related to net issuances	—			—			(1.8		)	—			(1.8		)
Share-based compensation expense	40.6			—			—			—			40.6
Adjustment related to tax benefit from employee stock option plans	50.6			—			—			—			50.6
Balance at March 31, 2010	$	9,267.6		$	(4.5	)	$	(3,143.9	)	$	2.1		$	6,121.3

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.

As of March 31, 2011, the 2006 Plan had 61.1 million shares subject to currently outstanding equity awards and 12.8 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, 2011, stock options and RSUs covering approximately 1.8 million shares of common stock were outstanding under awards assumed through the Company's past acquisitions.

21

Juniper Networks, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

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, 2011 (in millions, except for per share amounts and years):

	Number of Shares		Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term (In Years)	Aggregate Intrinsic Value
Balance at January 1, 2011	49.4		$	21.90
Options granted	4.2		41.46
Options canceled	(0.5	)	23.17
Options exercised	(11.2	)	21.58
Options expired	(0.1	)	67.10
Balance at March 31, 2011	41.8		$	23.88	4.4	$	764.8
As of March 31, 2011:
Vested or expected-to-vest options	39.0		$	23.41	4.3	$	730.2
Exercisable options	23.9		$	20.98	3.4	$	504.8

Aggregate intrinsic value represents the difference between the Company’s closing stock price on the last trading day of the period, which was $42.08 per share as of March 31, 2011, 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 $211.4 million for the three months ended March 31, 2011. Total fair value of options vested for the three months ended March 31, 2011, was $27.6 million.

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.

22

Juniper Networks, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

The following table summarizes information about the Company’s RSUs and PSAs as of and for the three months ended March 31, 2011 (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, 2011	14.2		$	25.94
RSUs granted	3.7		40.06
PSAs granted (1)	3.6		41.53
RSUs vested	(1.2	)	21.90
PSAs vested	(0.5	)	25.80
RSUs canceled	(0.1	)	25.62
PSAs canceled	(0.4	)	23.82
Balance at March 31, 2011:	19.3		$	31.80	2.1	$	819.7
As of March 31, 2011:
Vested and expected-to-vest RSUs and PSAs	16.0		$	31.34	2.0	$	673.2

________________________________

(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 1.7 million shares. Depending on achievement of such performance goals, the range of shares that could be issued under these awards is 0 to 3.6 million shares.

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 1.0 million shares at an average per share price of $23.89 for the three months ended March 31, 2011. Employees purchased approximately 1.0 million shares of common stock through the 2008 Purchase Plan at an average price of $21.11 per share in the three months ended March 31, 2010.

As of March 31, 2011, approximately 4.6 million shares had been issued and 7.4 million shares remained available for future issuance under the 2008 Purchase Plan.

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, 2011 (in millions):

	Number of Shares
Balance at January 1, 2011	30.7
RSUs and PSAs granted (1)	(15.4	)
Options granted	(4.2	)
RSUs and PSAs canceled (1)	1.1
Options canceled (2)	0.5
Options expired (2)	0.1
Balance at March 31, 2011	12.8

________________________________

(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.

23

Juniper Networks, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Common Stock Reserved for Future Issuance

As of March 31, 2011, the Company had reserved an aggregate of approximately 81.3 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 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, 2011, and 2010 were:

	Three Months Ended March 31,
	2011	2010
Employee Stock Options:
Volatility factor	41% - 42%	37% - 41%
Risk-free interest rate	1.6% - 1.9%	2.1% - 2.2%
Expected life (years)	4.1	4.3
Dividend yield	—	—
Fair value per share	$12.07- $15.22	$9.31 - $9.92
Employee Stock Purchase Plan:
Volatility factor	33%	35%
Risk-free interest rate	1.8%	1.7%
Expected life (years)	0.5	0.5
Dividend yield	—	—
Weighted-average fair value per share	$9.07	$6.19

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.

The Company’s share-based compensation expense associated with stock options, employee stock purchases, RSUs, and PSAs is recorded in the following cost and expense categories for the three months ended March 31, 2011, and 2010 (in millions):

	Three Months Ended March 31,
	2011		2010
Cost of revenues - Product	$	1.0	$	1.1
Cost of revenues - Service	3.9		3.6
Research and development	22.3		17.0
Sales and marketing	13.2		11.7
General and administrative	8.6		7.2
Total	$	49.0	$	40.6

24

Juniper Networks, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

The following table summarizes share-based compensation expense by award type (in millions):

	Three Months Ended March 31,
	2011		2010
Options	$	19.7	$	20.1
RSUs and PSAs	23.4		16.3
Employee stock purchase plan	4.4		4.2
Other acquisition-related compensation	1.5		—
Total	$	49.0	$	40.6

As of March 31, 2011, approximately $137.1 million of unrecognized compensation cost, adjusted for estimated forfeitures, related to unvested stock options will be recognized over a weighted-average period of approximately 2.6 years while approximately $296.3 million of unrecognized compensation cost, adjusted for estimated forfeitures, related to unvested RSUs and PSAs will be recognized over a weighted-average period of approximately 2.6 years.

401(k) Plan

The Company maintains a savings and retirement plan qualified under Section 401(k) of the Internal Revenue Code of 1986, as amended. Employees meeting the eligibility requirements, as defined, may contribute up to the statutory limits of the year. The Company has matched employee contributions since January 1, 2001, currently matching 25% of all eligible employee contributions. All matching contributions vest immediately. The Company’s matching contributions to the plan totaled $5.1 million and $4.2 million in the three months ended March 31, 2011, and 2010, respectively.

Deferred Compensation Plan

The Company’s non-qualified deferred compensation (“NQDC”) plan is an unfunded and unsecured deferred compensation arrangement. Under the NQDC plan, officers and other senior employees may elect to defer a portion of their compensation and contribute such amounts to one or more investment funds. The NQDC plan assets are included within investments, and offsetting obligations are included within accrued compensation on the condensed consolidated balance sheet. The investments are considered trading securities and are reported at fair value. The realized and unrealized holding gains and losses related to these investments are recorded in interest and other income, net, and the offsetting compensation expense are recorded as operating expenses in the condensed consolidated results of operations. The deferred compensation liability under the NQDC plan was approximately $10.8 million and $8.1 million as of March 31, 2011, and December 31, 2010, respectively.

Juniper Networks, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Note 13. Segments

The Company’s chief operating decision maker (“CODM”) allocates resources and assesses performance based on financial information by the Company’s business groups. The Company’s operations are organized into two reportable segments: Infrastructure and Service Layer Technology ("SLT"). The Infrastructure segment consists of routing and switching products and services. Routing includes products and services from the E, M, MX, PTX, and T Series router families, as well as the network application platform, Junos Space. Switching primarily consists of products and services from the EX and QFX Series switching families and wireless local area network solutions. The SLT segment includes SRX services and vGW virtual gateways, Firewall virtual private network systems and appliances, secure socket layer virtual private network appliances, the J Series router product family, intrusion detection and prevention appliances, wide area network optimization platforms, and Junos Pulse.

The primary financial measure used by the CODM in assessing performance of the segments is segment operating income, which includes certain cost of revenues, research and development (“R&D”) expenses, sales and marketing expenses, and general and administrative (“G&A”) expenses. The CODM does not allocate certain miscellaneous expenses to its segments even though such expenses are included in the Company’s management operating income.

For arrangements with both Infrastructure and SLT products and services, revenue is attributed to the segment based on the underlying purchase order, contract, or sell-through report. Direct costs and operating expenses, such as standard costs, R&D, 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 standard costs. Indirect operating expenses, such as sales, marketing, business

25

Juniper Networks, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

development, and G&A expenses are generally allocated to each segment based on factors including headcount, usage, and revenue. The CODM does not allocate share-based compensation, amortization of purchased intangible assets, restructuring and impairment charges, gains or losses on equity investments, other net income and expense, income taxes, or certain other charges to the segments.

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

	Three Months Ended March 31,
	2011			2010
Net revenues:
Infrastructure:
Routers	$	748.9		$	601.5
Switches	105.8			77.2
Total Infrastructure	854.7			678.7
SLT	246.9			233.9
Total net revenues	1,101.6			912.6
Segment operating income:
Infrastructure	209.5			176.5
SLT	36.4			35.1
Total segment operating income	245.9			211.6
Amortization of purchased intangible assets (1)	(6.7		)	(1.1		)
Share-based compensation expense	(49.0		)	(40.6		)
Share-based payroll tax expense	(8.0		)	(1.6		)
Restructuring charges	0.3			(8.1		)
Acquisition-related	(5.1		)	—
Total operating income	177.4			160.2
Other (expense) income, net	(6.5		)	1.5
Income before income taxes and noncontrolling interest	$	170.9		$	161.7

________________________________

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

Depreciation expense allocated to the Infrastructure segment was $25.7 million and $24.7 million in three months ended March 31, 2011, and 2010, respectively. Depreciation expense allocated to the SLT segment was $8.3 million and $9.5 million in the three months ended March 31, 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):

	Three Months Ended March 31,
	2011		2010
Americas:
United States	$	526.0	$	447.0
Other	55.6		41.5
Total Americas	581.6		488.5
Europe, Middle East, and Africa	299.9		264.0
Asia Pacific	220.1		160.1
Total	$	1,101.6	$	912.6

During the three months ended March 31, 2011, no single customer accounted for greater than 10% of net revenues. During the three months ended March 31, 2010, Verizon accounted for 11.2% of net revenues.

26

Juniper Networks, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

The Company tracks assets by physical location. The majority of the Company’s assets, excluding cash and cash equivalents and investments, as of March 31, 2011, and December 31, 2010, were attributable to U.S. operations. As of March 31, 2011, and December 31, 2010, gross property and equipment held in the U.S., as a percentage of total property and equipment, was approximately 80%. 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.

Note 14. Income Taxes

The Company recorded a tax provision of $41.3 million, or an effective tax rate of 24.1%, and a tax benefit of $2.9 million, or effective tax benefit rate of 1.8%, for the three months ended March 31, 2011, and 2010, respectively.

The effective tax rate for the three months ended March 31, 2011, differs from the federal statutory rate of 35% primarily due to the federal R&D credit and the benefit of earnings in foreign jurisdictions, which are subject to lower tax rates.

The effective tax rate for the three months ended March 31, 2010, differs from the federal statutory rate of 35% primarily due to a $54.1 million income tax benefit resulting from a change in the Company's estimate of unrecognized tax benefits related to share-based compensation and the benefit of earnings in foreign jurisdictions, which are subject to lower tax rates.

The gross unrecognized tax benefits decreased by approximately $0.5 million for the three months ended March 31, 2011. Interest and penalties for the same period decreased by approximately $1.5 million. During the quarter ended March 31, 2011, the Company's unrecognized tax benefits, including interest and penalties, decreased by approximately $5.8 million as a result of settlements with taxing authorities.

The Company is currently under examination by the Internal Revenue Service ("IRS") for the 2004 through 2006 tax years, the China tax authorities for the 2009 tax year, and the France tax authorities for the 2007 through 2009 tax years. The Company is also subject to two separate ongoing examinations by the India tax authorities for the 2004 tax year and 2004 through 2008 tax years, respectively. Additionally, the Company has not reached a final resolution with the IRS on an adjustment it proposed for the 1999 and 2000 tax years. The Company is not aware of any other income tax examination by taxing authorities in any other major jurisdictions in which it files income tax returns as of March 31, 2011.

In 2009, as part of the on-going 2004 IRS audit, the Company received a proposed adjustment related to the license of acquired intangibles under an intercompany R&D cost sharing arrangement. In December 2008, the Company received a proposed adjustment from the India tax authorities related to the 2004 tax year.

In July 2009, the India tax authorities commenced a separate investigation of the Company's 2004 through 2008 tax returns and are disputing the Company's determination of taxable income due to the cost basis of certain fixed assets. The Company accrued $4.6 million in penalties and interest in 2009 related to this matter. The Company understands that the India tax authorities may issue an initial assessment that is substantially higher than this amount. As a result, in accordance with the administrative and judicial process in India, the Company may be required to make payments that are substantially higher than the amount accrued in order to ultimately settle this issue. The Company strongly believes that any assessment it may receive in excess of the amount accrued would be inconsistent with applicable India tax laws and intends to defend this position vigorously.

The Company is pursuing all available administrative procedures relative to the matters referenced above. The Company believes that it has adequately provided for any reasonably foreseeable outcomes related to these proposed adjustments, and the ultimate resolution of these matters is unlikely to have a material effect on its consolidated financial condition or results of operations; however, there is a possibility that an adverse outcome of these matters could have a material effect on its consolidated financial condition and results of operations. For more information, please see Note 15, Commitments and Contingencies, under the heading “IRS Notices of Proposed Adjustments.”

The Company engages in continuous discussions and negotiations with tax authorities regarding tax matters in various jurisdictions. It is reasonably possible that the balance of the gross unrecognized tax benefits will decrease by approximately $4.6 million within the next twelve months due to lapses of applicable statutes of limitation in multiple jurisdictions that the Company operated in. However, at this time, the Company is unable to make a reasonably reliable estimate of the timing of payments related to the remaining unrecognized tax liabilities due to uncertainties in the timing of tax audit outcomes.

27

Juniper Networks, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Note 15. Commitments and Contingencies

Commitments

The following table summarizes the Company’s future principal contractual obligations as of March 31, 2011 (in millions):

	Total		2011		2012		2013		2014		2015		Thereafter		Other
Operating leases	$	357.3	$	42.5	$	52.3	$	44.8	$	58.2	$	47.3	$	112.2	$	—
Purchase commitments	171.8		171.8		—		—		—		—		—		—
Tax liabilities	101.6		—		—		—		—		—		—		101.6
Long-term debt	1,000.0		—		—		—		—		—		1,000.0		—
Interest payment on long-term debt	900.2		27.1		46.9		46.9		46.9		46.9		685.5		—
Other contractual obligations	75.3		54.3		11.2		4.8		3.0		2.0		—		—
Total	$	2,606.2	$	295.7	$	110.4	$	96.5	$	108.1	$	96.2	$	1,797.7	$	101.6

Operating Leases

The Company leases its facilities under operating leases that expire at various times, the longest of which expires in November 22, 2022. Future minimum payments under the non-cancelable operating leases totaled $357.3 million as of March 31, 2011. Rent expense was $14.8 million and $14.1 million for each of three months ended March 31, 2011, and 2010, respectively.

Purchase Commitments

In order to reduce manufacturing lead times and ensure adequate component supply, contract manufacturers utilized by the Company place non-cancelable, non-returnable (“NCNR”) orders for components based on the Company’s build forecasts. As of March 31, 2011, there were NCNR component orders placed by the contract manufacturers with a value of $171.8 million. The contract manufacturers use the components to build products based on the Company’s forecasts and customer purchase orders received by the Company. Generally, the Company does not own the components and title to the products transfers from the contract manufacturers to the Company and immediately to the Company’s customers upon delivery at a designated shipment location. If the components remain unused or the products remain unsold for specified periods, the Company may incur carrying charges or obsolete materials charges for components that the contract manufacturers purchased to build products to meet the Company’s forecast or customer orders. As of March 31, 2011, the Company had accrued $15.1 million based on its estimate of such charges.

Tax Liabilities

As of March 31, 2011, the Company had $101.6 million included in long-term liabilities in the condensed consolidated balance sheet for unrecognized tax positions. At this time, the Company is unable to make a reasonably reliable estimate of the timing of payments related to the additional $101.6 million in liability due to uncertainties in the timing of tax audit outcomes.

Long-Term Debt

As of March 31, 2011, the Company held long-term debt with a carrying value of $998.9 million. Of these notes, $300.0 million will mature in 2016 and bears interest at a fixed rate of 3.10%, $300.0 million will mature in 2021 and bears interest at a fixed rate of 4.60%, and $400.0 million will mature in 2041 and bears interest at 5.95%. Interest on the notes is payable semiannually. See Note 9, Financing, for further discussion of the Company's long-term debt.

Other Contractual Obligations

As of March 31, 2011, other contractual obligations primarily consisted of $47.7 million in indemnity-related and service related escrows, required by certain acquisitions completed in 2005 and 2010, $10.7 million under a data center hosting agreement that requires payments through the end of April 2013 and $16.9 million for license and service agreements.

28

Juniper Networks, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Guarantees

The Company enters into agreements with customers that contain indemnification provisions relating to potential situations where claims could be alleged that the Company’s products infringe the intellectual property rights of a third-party. Other guarantees or indemnification arrangements include guarantees of product and service performance, guarantees related to third-party customer-financing arrangements, and standby letters of credit for certain lease facilities. As of March 31, 2011, and December 31, 2010, the Company had $22.8 million and $21.6 million, respectively, in guarantees and standby letters of credit.

Legal Proceedings

From time to time, the Company is involved in disputes, litigation, and other legal actions, including the matters described below. The Company is aggressively defending its current litigation matters, however, the outcome of these matters is currently not determinable. There are many uncertainties associated with any litigation, and these actions or other third-party claims against the Company may cause the Company to incur costly litigation and/or substantial settlement charges. In addition, the resolution of any future intellectual property litigation may require the Company to make royalty payments, which could adversely affect gross margins in future periods. If any of those events were to occur, the Company's business, financial condition, results of operations, and cash flows could be adversely affected. The actual liability in any such matters may be materially different from the Company's estimates, which could result in the need to adjust the liability and record additional expenses.

IPO Allocation Case

In December 2001, a class action complaint was filed in the United States District Court for the Southern District of New York against the Goldman Sachs Group, Inc., Credit Suisse First Boston Corporation, FleetBoston Robertson Stephens, Inc., Royal Bank of Canada (Dain Rauscher Wessels), SG Cowen Securities Corporation, UBS Warburg LLC (Warburg Dillon Read LLC), Chase (Hambrecht & Quist LLC), J.P. Morgan Chase & Co., Lehman Brothers, Inc., Salomon Smith Barney, Inc., Merrill Lynch, Pierce, Fenner & Smith, Incorporated (collectively, the “Underwriters”), Juniper Networks and certain of Juniper Networks' officers. This action was brought on behalf of purchasers of the Company's common stock in its initial public offering in June 1999 and the Company's secondary offering in September 1999. Specifically, among other things, this complaint alleged that the prospectus pursuant to which shares of common stock were sold in the Company's initial public offering and the Company's subsequent secondary offering contained certain false and misleading statements or omissions regarding the practices of the Underwriters with respect to their allocation of shares of common stock in these offerings and their receipt of commissions from customers related to such allocations. Various plaintiffs have filed actions asserting similar allegations concerning the initial public offerings of approximately 300 other issuers. These various cases pending in the Southern District of New York have been coordinated for pretrial proceedings as In re Initial Public Offering Securities Litigation, 21 MC 92. In April 2002, the plaintiffs filed a consolidated amended complaint in the action against the Company, alleging violations of the Securities Act of 1933 and the Securities Exchange Act of 1934. The defendants in the coordinated proceeding filed motions to dismiss. On February 19, 2003, the Court granted in part and denied in part the motion to dismiss, but declined to dismiss the claims against the Company.

The parties have reached a global settlement of the litigation. On October 5, 2009, the Court entered an Opinion and Order granting final approval of the settlement. Under the settlement, the insurers are to pay the full amount of settlement share allocated to the Company, and the Company will bear no financial liability. The Company and other defendants will receive complete dismissals from the case. Certain objectors have appealed the Court's October 5, 2009, final order to the Second Circuit Court of Appeals. Plaintiffs have filed motions to dismiss the appeals.

IRS Notices of Proposed Adjustments

In 2007, the IRS opened an examination of the Company's U.S. federal income tax and employment tax returns for the 2004 fiscal year. Subsequently, the IRS extended their examination of the Company's employment tax returns to include fiscal years 2005 and 2006. As of March 31, 2011, the IRS has not yet concluded its examinations of these returns. In September 2008, as part of its ongoing audit of the U.S. federal income tax return, the IRS issued a Notice of Proposed Adjustment (“NOPA”) regarding the Company's business credits. The Company believes that it has adequately provided for any reasonable foreseeable outcome related to this proposed adjustment. In 2009, the Company received a NOPA from the IRS claiming that the Company owes additional taxes, plus interest and possible penalties, for the 2004 tax year based on a transfer pricing transaction related to the license of acquired intangibles under an intercompany R&D cost sharing arrangement. The asserted changes to the Company's 2004 tax year would affect the Company's income tax liabilities in tax years subsequent to 2003.

29

Juniper Networks, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Because of the NOPA, the estimated incremental tax liability would be approximately $807 million, excluding interest and penalties. The Company has filed a protest to the proposed deficiency with the IRS, which has been referred to the Appeals Division of the IRS. An Appeals conference has been scheduled. The Company strongly believes the IRS' position with regard to this matter is inconsistent with applicable tax laws and existing Treasury regulations, and that the Company's previously reported income tax provision for the year in question is appropriate. However, there can be no assurance that this matter will be resolved in the Company's favor. Regardless of whether this matter is resolved in the Company's favor, the final resolution of this matter could be expensive and time-consuming to defend and/or settle. While the Company believes it has provided adequately for this matter, there is still a possibility that an adverse outcome of the matter could have a material effect on its results of operations and financial condition.

The Company has not reached a final resolution with the IRS on an adjustment the IRS proposed for the 1999 and 2000 tax years. The Company is also under routine examination by certain state and non-U.S. tax authorities. The Company believes that it has adequately provided for any reasonably foreseeable outcome related to these audits.

Note 16. Subsequent Events

Stock Repurchases

Subsequent to March 31, 2011, through the filing of this report, the Company repurchased and retired approximately 2.5 million shares of its common stock for approximately $100.0 million under its 2010 Stock Repurchase program at an average purchase price of $39.28 per share. The Company's 2010 Stock Repurchase Program had remaining authorized funds of $454.8 million as of the report filing date. The amount and timing of purchases under the Company's 2010 Stock Repurchase Program depend on various circumstances and will be made from time to time, as advisable under the circumstances, and as permitted by securities laws and other legal requirements. This program may be discontinued at any time.

30

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

Forward-Looking Statements

This Quarterly Report on Form 10-Q (“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. 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 II and elsewhere, and in other reports we file with the SEC, specifically our most recent Annual Report on Form 10-K. 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 unaudited Condensed Consolidated Financial Statements included in Part 1, Item I, of 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 accounting policies and estimates, see Note 2, Summary of Significant Accounting Policies, in Notes to Consolidated Financial Statements in Item 8 of Part II of the Annual Report on Form 10-K for the year ended December 31, 2010, and in the section entitled “Critical Accounting Policies and Estimates” 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 our business and our operating principles. 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 2, our “Risk Factors” section included in Item 1A of Part II, and our unaudited condensed consolidated financial statements and notes included in Item 1 of Part I of this report.

Business and Operating Principles

We design, develop, and sell products and services that together provide our customers with a high-performance network infrastructure that creates responsive and trusted environments for accelerating the deployment of services and applications over a single network. 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 broad product portfolio spans routing, switching, security, application acceleration, identity policy and control, and management to provide customers unmatched performance, greater choice and flexibility while reducing overall total cost of ownership.

Our operations are organized into two reportable segments: Infrastructure and Service Layer Technologies (“SLT”). Our Infrastructure segment primarily offers scalable routing and switching products that are used to control and direct network traffic from the core, through the edge, aggregation, and the customer premise equipment level, as well as a complete wireless local area network ("WLAN") solution that provides high reliability, performance, security, and management for mobile applications. Our SLT segment offers solutions that meet a broad array of our customers' priorities, from protecting the network itself and data on the network, to maximizing existing bandwidth and acceleration of applications across a distributed network.

31

Both segments offer worldwide services, including technical support and professional services, as well as educational and training programs to our customers. 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, and increased performance, reliability, and security to end-users.

Over the past two years we have aligned our organization around a common vision for the new network. We are dedicated to uncovering new ideas and innovations that will serve the exponential demands of the networked world. To do this, we will continue to build solutions that center on simplification, automation, and open innovation. For 2011, we are guided by the following five operating principles:

• Assume macro-economic conditions continue to improve.

• Drive another year of growth as part of our multi-year growth agenda focused on mobile Internet and cloud computing.

• Increase sales and marketing investment as a percent of revenue with intent to drive top line growth.

• Expand operating margins year-over-year on our path to achieve sustainable operating margins of 25% or higher.

• Leverage our balance sheet to complement organic R&D with acquisitions that align with our strategy.

During the first quarter of 2011, we delivered results while adhering to our operating principles. We unveiled several new products aligned with our innovation roadmap, including MobileNext, a suite of mobile packet core software that enables mobile operators to deliver rich media data services rapidly and flexibly; QFabric, our architecture for the data center that will enable customers to scale their networks more efficiently and achieve significant leaps in performance; and a new suite of products designed to deliver the networking industry's first Converged Supercore, which converges the optical and packet layers of the network.

While our business saw very limited impact from the tragedy in Japan during the quarter, we are monitoring business conditions in the region and believe there is some level of uncertainty in the demand environment in Japan over the next couple of quarters. Japan typically accounts for five to eight percent of our revenues.

Executive Overview

Our financial highlights for the three months ended March 31, 2011, and 2010 are as follows (in millions, except per share amounts and percentages):

	Three Months Ended March 31,
	2011			2010			$ Change			%Change
Net revenues	$	1,101.6		$	912.6		$	189.0		21	%
Operating income	$	177.4		$	160.3		$	17.1		11	%
Percentage of net revenues	16.1		%	17.6		%
Net income attributable to Juniper Networks	$	129.8		$	163.1		$	(33.3	)	(20	)%
Percentage of net revenues	11.8		%	17.9		%
Net income per share attributable to Juniper Networks common stock holders:
Basic	$	0.24		$	0.31		$	(0.07	)	(23	)%
Diluted	$	0.24		$	0.30		$	(0.06	)	(20	)%
Operating Cash Flows	$	239.7		$	88.5		$	151.2		171	%

• Net revenues: Our net revenues increased across all three geographic regions in which we do business, the Americas, Europe, Middle East and Africa (“EMEA”), and Asia Pacific (“APAC”), and in both the service provider and enterprise markets in the three months ended March 31, 2011, compared to the same period in 2010. These increases were primarily due to increased sales of our MX Series routers and EX Series products and related services.

• Operating Income: Our operating income increased in the three months ended March 31, 2011, compared to the same period in 2010, primarily due to increased revenues; however operating income as a percentage of revenues decreased in the three months ended March 31, 2011, compared to the same period in 2010, as we increased our investments in Research and Development ("R&D") and Sales and Marketing.

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• Net Income Attributable to Juniper Networks and Net Income Per Share Attributable to Juniper Networks Common Stock Holders: The decrease in net income attributable to Juniper Networks in the three months ended March 31, 2011, compared to the same period in 2010, is largely due to a $54.1 million non-recurring income tax benefit recorded in the first quarter of 2010.

• Operating Cash Flows: Operating cash flows increased $151.2 million to $239.7 million in the three months ended March 31, 2011, compared to the same period in 2010, primarily due to larger cash outflows in the first quarter of 2010 attributable to the litigation settlement payment of $169.3 million.

• Deferred Revenue:Total deferred revenue increased $65.9 million to $950.3 million as of March 31, 2011, compared to $884.4 million as of December 31, 2010, reflecting increases in both deferred product and deferred service revenue.

• Stock Repurchase Plan Activity:Under our stock repurchase program, we repurchased approximately 4.8 million shares of our common stock on the open market 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.

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 condensed consolidated financial statements and the accompanying notes. These estimates and assumptions are based on current facts, historical experience, and various other factors that we believe are reasonable under the circumstances to determine reported amounts of assets, liabilities, revenue and expenses that are not readily apparent from other sources. To the extent there are material differences between our estimates and the actual results, our future consolidated results of operations may be affected.

An accounting policy is considered to be critical if the nature of the estimates or assumptions is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change, and the effect of the estimates and assumptions on financial condition or operating performance is material. The accounting policies we believe to reflect our more significant estimates, judgments and assumptions and are most critical to understanding and evaluating our reported financial results are as follows:  

• Revenue recognition.

• Contract Manufacturer Liabilities.   

• Warranty Costs.   

• Goodwill and Purchased Intangible Assets.    

• Share-Based Compensation.  

• Income Taxes.   

• Loss Contingencies.  

During the first quarter of fiscal 2011, there were no significant changes to our critical accounting policies and estimates. Please refer to Management's Discussion and Analysis of Financial Condition and Results of Operations contained in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2010, for a complete discussion of our critical accounting policies and estimates.

Recent Accounting Pronouncements

See Note 2, Summary of Significant Accounting Policies, in the Notes to Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report on Form 10-Q, for a full description of recent accounting pronouncements, including the actual and expected dates of adoption and estimated effects on our consolidated results of operations and financial condition, which is incorporated herein by reference.

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Results of Operations

The following table presents product and service net revenues (in millions, except percentages):

	Three Months Ended March 31,
	2011			2010			$ Change		% Change
Net revenues:
Product	$	877.4		$	721.2		$	156.2	22	%
Percentage of net revenues	79.6		%	79.0		%
Service	224.2			191.4			32.8		17	%
Percentage of net revenues	20.4		%	21.0		%
Total net revenues	$	1,101.6		$	912.6		$	189.0	21	%
Book-to-bill ratio (1)	<1			<1

_______________________________

(1)     Book-to-bill ratio represents the ratio of product orders booked divided by product revenues during the period.

Product revenues increased across all three geographic regions in which we do business, the Americas, EMEA and APAC, in the three months ended March 31, 2011, compared to the same period in 2010, which was largely attributable to increased sales of our MX Series routers and EX Series switching products to service provider and, to a lesser extent, enterprise customers. Service revenues also increased across all three regions in the three months ended March 31, 2011, compared to the same period in 2010, which was primarily attributable to growth in the installed base and an increase in contract renewals for support services.

Net Revenues by Market and Customer

The following table presents the total net revenues by market (in millions, except percentages):

	Three Months Ended March 31,
	2011			2010			$ Change		% Change
Service Provider	$	742.2		$	593.2		$	149.0	25	%
Percentage of net revenues	67.4		%	65.0		%
Enterprise	359.4			319.4			40.0		13	%
Percentage of net revenues	32.6		%	35.0		%
Total	$	1,101.6		$	912.6		$	189.0	21	%

We sell our high-performance network products and service offerings from our Infrastructure and SLT segments to two primary markets – service provider and enterprise. Determination of which market a particular revenue transaction relates to is based primarily upon the customer's industrial classification code, but may also include judgmental factors such as the intended use of the product. The service provider market generally includes wireline, wireless, and cable operators, as well as major Internet content and application providers, including those that provide social networking and search engine services. The enterprise market generally comprises businesses; federal, state, and local governments; and research and education institutions.

Net revenues from sales to the service provider market increased in absolute dollars and as a percentage of total net revenues in the three months ended March 31, 2011, compared to the same period in 2010, primarily due to our customers' increased investments to support network expansion and scale new services, which had a particular impact on revenues from our edge product portfolio. Net revenues from sales to the enterprise market increased in the three months ended March 31, 2011, compared to the same period in 2010, primarily due to our investments to offer a more comprehensive portfolio to meet the routing, switching, and security needs of the data center. The increase in service provider and enterprise revenues in the three months ended March 31, 2011, was experienced across all three geographic regions.

During the three months ended March 31, 2011, no single customer accounted for greater than 10.0% or more of our net revenues. During the three months ended March 31, 2010, Verizon accounted for 11.2% of our net revenues.

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Net Revenues by Geographic Region

The following table presents the total net revenues by geographic region (in millions, except percentages):

	Three Months Ended March 31,
	2011			2010			$ Change		% Change
Americas:
United States	$	526.0		$	447.0		$	79.0	18	%
Other	55.6			41.5			14.1		34	%
Total Americas	581.6			488.5			93.1		19	%
Percentage of net revenues	52.7		%	53.5		%
Europe, Middle East, and Africa	299.9			264.0			35.9		14	%
Percentage of net revenues	27.2		%	29.0		%
Asia Pacific	220.1			160.1			60.0		38	%
Percentage of net revenues	20.1		%	17.5		%
Total	$	1,101.6		$	912.6		$	189.0	21	%

Net revenue in the Americas increased in the three months ended March 31, 2011, compared to the same period in 2010, primarily due to increased sales in the United States and Canada. The increase was primarily attributable to service provider demand for our MX Series routers and related support services, as well as our EX Series products.

Net revenues in EMEA increased in the three months ended March 31, 2011, compared to the same period in 2010, primarily due to increased sales in France and Hungary. The increase was largely driven by service provider demand for our MX Series routers and related support services, as well as increased enterprise demand for our SRX services gateway products.

Net revenues in APAC increased in the three months ended March 31, 2011, compared to the same period in 2010, primarily due to increased sales in Japan, China, and Australia. The increase was primarily driven by service provider demand for our T Series routers, MX Series routers, and SRX services gateway products, as well as enterprise demand for our MX Series routers.

Gross Margins

The following table presents gross margins (in millions, except percentages):

	Three Months Ended March 31,
	2011			2010			$ Change		% Change
Gross margin:
Product gross margin	$	611.7		$	498.8		$	112.9	23	%
Percentage of product revenues	69.7		%	69.2		%
Service gross margin	124.2			113.2			11.0		10	%
Percentage of service revenues	55.4		%	59.1		%
Total gross margin	$	735.9		$	612.0		$	123.9	20	%
Percentage of net revenues	66.8		%	67.1		%

Product gross margin percentage increased in the three months ended March 31, 2011, compared to the same period in 2010, primarily due to a change in product mix and reductions in manufacturing overhead costs. Service gross margin percentage decreased primarily due to headcount growth of 34% to 1,157 employees as of March 31, 2011, compared to 862 employees as of March 31, 2010. The increase in headcount was primarily related to hiring of resident engineers, service managers, professional services, and call center staff to support our recent product launches.

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Operating Expenses

The following table presents operating expenses and operating expenses as a percentage of net revenues (in millions, except percentages):

	Three Months Ended March 31,
	2011			2010			$ Change			% Change
Research and development	$	262.0		$	207.0		$	55.0		27	%
Percentage of net revenues	23.8		%	22.7		%
Sales and marketing	246.3			192.4			53.9			28	%
Percentage of net revenues	22.4		%	21.1		%
General and administrative	44.9			43.1			1.8			4	%
Percentage of net revenues	4.1		%	4.7		%
Amortization of purchased intangible assets	1.5			1.1			0.4			36	%
Percentage of net revenues	0.1		%	0.1		%
Restructuring charges	(0.3		)	8.1			(8.4		)	(104	)%
Percentage of net revenues	—		%	0.9		%
Acquisition-related and other charges	4.1			—			4.1			N/M
Percentage of net revenues	0.3		%	—		%
Total operating expenses	$	558.5		$	451.7		$	106.8		24	%
Percentage of net revenues	50.7		%	49.5		%

________________________

N/M = not meaningful

R&D expense increased in the three months ended March 31, 2011, compared to the same period in 2010, as we increased our investments to deliver on our innovation roadmap, including investments in our 3-2-1 data center network architecture, Pulse MMS from the SMobile acquisition, and vGW Virtual Gateway from the Altor acquisition. To support these R&D efforts, we increased our engineering headcount 21% from 3,458 to 4,175 employees at March 31, 2010, and 2011, respectively.

Sales and marketing expenses increased in the three months ended March 31, 2011, compared to the same period in 2010, primarily due to an increase in personnel-related expenses of $36.9 million. This increase reflects a 22% increase in our sales and marketing headcount from 2,152 to 2,628 employees and outside services to support our go-to-market strategic initiatives, and an increase in variable compensation driven by revenue growth. Sales and marketing expenses increased as a percentage of net revenues in the three months ended March 31, 2011, as compared to the same period in 2010. As we continue to execute on our long term growth model and consistent with the operating principles outlined above, sales and marketing expenses as a percentage of net revenues may continue to increase in fiscal year 2011 depending on the amount and timing of such expenses and the amount and timing of net revenue in future periods.

The increase in general and administrative ("G&A") expense in the three months ended March 31, 2011, compared to the same period in 2010, was primarily due to an 8% increase in our worldwide G&A functions from 412 to 443 employees to support current and future growth of our business.

Amortization of purchased intangible assets increased in the three months ended March 31, 2011, compared to the same period in 2010, due to the addition of intangible assets acquired from recent acquisitions.

In the three months ended March 31, 2010, we incurred $8.1 million in restructuring charges related to our 2009 cost reduction initiatives (the "2009 Restructuring Plan"), which was completed as of December 31, 2010. See Note 8, Other Financial Information in the Notes to Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report on Form 10-Q, for further discussion of our restructuring liabilities.

During the three months ended March 31, 2011, the company completed two business combinations and incurred $4.1 million in acquisition-related operating costs. No such costs were incurred for the same period in 2010. See Note 3, Business Combinations in the Notes to Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report on Form 10-Q, for further discussion of these acquisitions.

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Share-Based Compensation

Share-based compensation expense associated with stock options, employee stock purchases, restricted stock units ("RSUs"), and performance share awards ("PSAs") was recorded in the following cost and expense categories (in millions, except percentages):

	Three Months Ended March 31,
	2011		2010		$ Change			% Change
Cost of revenues - Product	$	1.0	$	1.1	$	(0.1	)	(14	)%
Cost of revenues - Service	3.9		3.6		0.3			12	%
Research and development	22.3		17.0		5.3			31	%
Sales and marketing	13.2		11.7		1.5			13	%
General and administrative	8.6		7.2		1.4			19	%
Total	$	49.0	$	40.6	$	8.4		21	%

Share-based compensation expense increased in the three months ended March 31, 2011, compared to the same period in 2010, primarily due to the increase in RSU and PSA grants attributable to headcount growth and a higher fair value of equity awards driven by the increase in common stock market value over the period.

Effect of Foreign Currency

The change in operating expenses, including cost of service revenue, R&D, sales and marketing, and G&A expenses, due to foreign currency fluctuations was immaterial in the three months ended March 31, 2011, and was 2% in the three months ended March 31, 2010.

Other Income and Expense, Net and Income Tax Provision

The following table presents other income and expense, net and income tax provision (in millions, except percentages):

	Three Months Ended March 31,
	2011			2010			$ Change			% Change
Interest income	$	2.4		$	2.5		$	(0.1	)	(4	)%
Interest expense	(6.5		)	(1.6		)	(4.9		)	N/M
Other (expense) income	(2.4		)	0.6			(3.0		)	N/M
Total other (expense) income, net	$	(6.5	)	$	1.5		$	(8.0	)	N/M
Percentage of net revenues	(0.6		)%	0.1		%
Income tax provision (benefit)	$	41.3		$	(2.9	)	$	44.2		N/M
Effective tax rate	24.1		%	1.8		%

Interest expense increased in the three months ended March 31, 2011, compared to the same period in 2010, primarily due to the interest on our recently issued long-term debt and to a lesser extent higher interest on our customer financing arrangements.

The effective tax rate for the three months ended March 31, 2011, differs from the federal statutory rate of 35% primarily due to the federal R&D credit and the benefit of earnings in foreign jurisdictions, which are subject to lower tax rates.

The effective tax rate for the three months ended March 31, 2010, differs from the federal statutory rate of 35% primarily due to a $54.1 million income tax benefit resulting from a realized change in our estimate of unrecognized tax benefits related to share-based compensation and the benefit of earnings in foreign jurisdictions, which are subject to lower tax rates.

For a further explanation of our income tax provision, see Note 14, Income Taxes, in Notes to Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report.

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Segment Information

For a description of the products and services for each segment, See Note 13, Segments, in Notes to Condensed Consolidated Financial Statement in Item I of this Form 10-Q.

Infrastructure

	Three Months Ended March 31,
	2011			2010			$ Change		% Change
	(in millions except percentages and units)
Infrastructure revenues:
Routers - Product	$	609.5		$	482.5		$	127.0	26	%
Routers - Service	139.4			119.0			20.4		17	%
Infrastructure revenue - Routers	748.9			601.5			147.4		25	%
Percentage of net revenues	68.0		%	65.9		%
Switches - Product	99.0			73.6			25.4		35	%
Switches - Service	6.8			3.6			3.2		87	%
Infrastructure revenue - Switches	105.8			77.2			28.6		37	%
Percentage of net revenues	9.6		%	8.5		%
Total Infrastructure segment revenues	$	854.7		$	678.7		$	176.0	26	%
Percentage of net revenues	77.6		%	74.4		%
Infrastructure chassis revenue units (1)	4,631			2,610			2,021		77	%
Infrastructure ports shipped (1)	236,685			111,156			125,529		113	%
Infrastructure operating income (2)	$	209.5		$	176.5		$	33.0	19	%
Percentage of Infrastructure revenues	24.5		%	26.0		%

_______________________________

(1)     Chassis revenue units represent the number of chassis on which revenue was recognized during the period. The number of ports on a module varies widely depending on the functionality and throughput offered by the module. Excludes modular and fixed configuration EX Series Ethernet switching products and circuit-to-packet products.

(2)    A reconciliation of total segment operating income to income before taxes and noncontrolling interest can be found in Note 13, Segments, in Notes to Condensed Consolidated Financial Statement in Item I of this Form 10-Q.

During the three months ended March 31, 2011, Infrastructure products revenue increased in the service provider market across all three regions and in the enterprise market of the APAC region. This increase was primarily attributable to increased sales of our MX Series routers, EX Series switches and WLAN, and E Series routers. Infrastructure chassis revenue units and ports shipped increased in the three months ended March 31, 2011, compared to the same period in 2010, primarily due to an increase in the shipments of MX Series products, which generally contain a higher number of ports per chassis.

The increase in Infrastructure service revenue for the three months ended March 31, 2011, was primarily driven by the increased MX Series router sales and strong contract renewals for support services. From a geographical and market perspective we experienced increased service revenues across all regions and in both the service provider and enterprise markets.

Infrastructure operating income decreased as a percent of Infrastructure revenue in the three months ended March 31, 2011 compared to the same period in 2010, which was attributable to an unfavorable mix shift from our higher margin T and M Series to our lower margin MX Series, and pricing related to our EX Series switches.

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SLT

	Three Months Ended March 31,
	2011			2010			$ Change		% Change
	(in millions, except percentages and units)
SLT segment revenues:
SLT product revenue	$	168.9		$	165.1		$	3.8	2	%
Percentage of net revenues	15.3		%	18.1		%
SLT service revenue	78.0			68.8			9.2		13	%
Percentage of net revenues	7.1		%	7.5		%
Total SLT segment revenues	$	246.9		$	233.9		$	13.0	6	%
Percentage of net revenues	22.4		%	25.6		%
SLT revenue units	59,205			54,508			4,697		9	%
SLT operating income	$	36.4		$	35.1		$	1.3	3	%
Percentage of SLT revenues	14.7		%	15.0		%

_______________________________

(1)     A reconciliation of total segment operating income to income before taxes and noncontrolling interest can be found in Note 13, Segments, in Notes to Condensed Consolidated Financial Statement in Item I of this Form 10-Q.

We experienced an increase in SLT product revenue in the three months ended March 31, 2011, compared to the same period in 2010, primarily due to an increase in revenue from our Junos Pulse SSL VPN and SRX Series for the branch. From a geographical and market perspective, during the three months ended March 31, 2011, we experienced revenue growth primarily in the EMEA and Americas enterprise market. The growth in SLT revenue units was greater than the growth in SLT product revenues in the three months ended March 31, 2011, compared to the same period in 2010, due to the increase in sales of our lower priced branch products.

The increase in SLT service revenue for the three months ended March 31, 2011, was primarily due to an increase in sales of support services, and increased sales of Junos Space. From a market and geographical perspective, the increase in SLT service revenues was primarily driven by increased sales to enterprises across all three geographic regions, and to service providers in the Americas and EMEA regions.

SLT operating income slightly decreased as a percent of revenue in the three months ended March 31, 2011, compared to the same period in 2010, primarily due to increased R&D investments in Pulse MSS from the SMobile acquisition and vGW Virtual Gateway from the Altor acquisition.

39

Liquidity and Capital Resources

Historically, we have funded our business primarily through our operating activities and the issuance of our common stock, and more recently, the issuance of long-term debt. The following table shows our capital resources (in millions, except percentages):

	March 31, 2011			December 31, 2010		Change			% Change
Working capital	$	2,900.7		$	1,742.4	$	1,158.3		66	%
Days sales outstanding	38			40		(2		)	(5	)%
Cash and cash equivalents	$	2,944.4		$	1,811.9	$	1,132.5		63	%
Short-term investments	493.6			474.5		19.1			4	%
Long-term investments	645.6			535.2		110.4			21	%
Total cash, cash equivalents and investments	4,083.6			2,821.6		1,262.0			45	%
Long-term debt	(998.9		)	—		(998.9		)	N/M
Net cash, cash equivalents, and investments	$	3,084.7		$	2,821.6	$	263.1		9	%

The significant components of our working capital are cash and cash equivalents, short-term investments, and accounts receivable, reduced by accounts payable, income tax payable, accrued liabilities, and short-term deferred revenue. Working capital increased by $1,158.3 million in the three months ended March 31, 2011, primarily due to the Company's $1.0 billion debt offering in March 2011.

Summary of Cash Flows

In the three months ended March 31, 2011, cash and cash equivalents increased by $1,132.5 million. This increase was the result of cash generated in our operating and financing activities of $239.7 million and $1,102.1 million, respectively, partially offset by cash used by investing activities of $209.2 million.

Operating Activities

Excluding the impact of the one-time 2010 litigation settlement payment of $169.3 million, cash flows from operations in the three months ended March 31, 2011, was $239.7 million compared to $257.8 million for the same period in 2010. The decrease of $18.1 million in the three months ended March 31, 2011, as compared to the same period in 2010 was primarily due to the timing of payments to our vendors, higher bonus and commission payments to our employees, partially offset by a reduction in accounts receivable driven by improved shipment linearity and higher cash collections.

Investing Activities

For the three months ended March 31, 2011, net cash used by investing activities was $209.2 million compared to $32.6 million in the three months ended March 31, 2010. The change was primarily due to lower proceeds from sales and maturities of our investments, and higher spending on acquisitions and property and equipment in the three months ended March 31, 2011, as compared to the same period a year ago.

Financing Activities

Net cash generated in financing activities was $1,102.1 million for the three months ended March 31, 2011, compared to $63.3 million in the same period for 2010. On March 5, 2011, we issued $300.0 million aggregate principal amount of 3.10% senior notes due 2016 (the 2016 notes"), $300.0 million aggregate principal amount of 4.60% senior notes due 2021 (the "2021 notes"), and $400.0 million aggregate principal amount of 5.95% senior notes due 2041 (the "2041 notes," and together with the 2016 notes and the 2021 notes, the "notes"). The senior notes are unsecured obligations and will rank equally with all of our other existing and future senior unsecured indebtedness. Interest on the notes is payable in cash semiannually. We may redeem the notes, at any time in whole or from time to time in part, subject to a make-whole premium, and, in the event of a change in control, the holders of the notes may require us to repurchase for cash all or part of the notes at a purchase price equal to 101% of the aggregate principle amount, plus accrued and unpaid interest, if any.

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Stock Repurchase Activities

In February 2010, our Board of Directors (the "Board") approved a stock repurchase program (the “2010 Stock Repurchase Program”), which authorized us to repurchase up to $1.0 billion of our 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 us to repurchase up to $1.0 billion of our common stock.

We repurchased and retired approximately 4.8 million shares of our 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 our 2010 Stock Repurchase Program. We repurchased and retired approximately 2.8 million shares of our common stock at an average price of $27.04 per share for an aggregate purchase price of $74.4 million during the three months ended March 31, 2010 under our 2008 Stock Repurchase Program. As of March 31, 2011, there were no remaining authorized funds under the 2008 Stock Repurchase Program and $554.8 million remaining authorized funds under the 2010 Stock Repurchase Program.

Deferred Revenue

The following table summarizes our deferred product and service revenues (in millions):

	As of
	March 31, 2011			December 31, 2010
Deferred product revenue:
Undelivered product commitments and other product deferrals	$	303.1		$	294.1
Distributor inventory and other sell-through items	141.8			143.4
Deferred gross product revenue	444.9			437.5
Deferred cost of product revenue	(143.0		)	(148.8		)
Deferred product revenue, net	301.9			288.7
Deferred service revenue	648.4			595.7
Total	$	950.3		$	884.4

Deferred gross product revenue as of March 31, 2011, increased $7.4 million compared to December 31, 2010, due to an increase in undelivered product commitments and other product deferrals. Total deferred service revenue increased $52.7 million compared to December 31, 2010, largely due to the timing of annual maintenance contract renewals.

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements as of March 31, 2011.

Contractual Obligations

There have been no significant changes during the three months ended March 31, 2011, to the contractual obligations disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operations, set forth in Part II, Item 7, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2010, other than the addition of long-term debt and related interest as follows (in millions):

	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years		Other
Long-term debt	$	1,000.0	$	—	$	—	$	300.0	$	700.0	$	—
Interest payment on long-term debt	900.2		50.6		93.8		93.4		662.4		—

Liquidity and Capital Resource Requirements

Liquidity and capital resources may be impacted by our operating activities as well as acquisitions and investments in strategic relationships that we have made or we may make in the future. Additionally, if we were to repurchase additional shares of our common stock under the 2010 Stock Repurchase Program, our liquidity may be impacted. As of March 31, 2011, 47% of our

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cash and investment balances are held outside of the U.S., which may be subject to U.S. taxes if repatriated.

In August 2010, we filed a $1.5 billion shelf registration with the SEC. In March 2011, we issued the notes under the shelf registration statement. Therefore, while we have no current plans to do so, we may issue up to $500 million in additional securities under the shelf registration statement. The shelf registration is intended to give us flexibility to take advantage of financing opportunities as needed or deemed desirable in light of market conditions. Any additional offerings of securities under the shelf registration statement will be made pursuant to a prospectus.

We have been focused on managing our annual equity usage as a percentage of the common stock outstanding to align with peer group competitive levels and have made changes in recent years to reduce the number of shares underlying the equity awards we grant. Our intention for fiscal year 2011 is to target the number of shares underlying equity awards granted on an annual basis at approximately three percent (3%) of our common stock outstanding. Based upon shares underlying our grants to date of options, RSUs, and PSAs (counting only the on-target measure of such PSAs), we believe we are on track with respect to this goal for 2011.

Based on past performance and current expectations, we believe that our existing cash and cash equivalents, short-term, and long-term investments (which includes the proceeds of the issuance of the notes), together with cash generated from operations as well as cash generated from the exercise of employee stock options and purchases under our employee stock purchase plan will be sufficient to fund our operations and anticipated growth for at least the next 12 months. We believe our working capital is sufficient to meet our liquidity requirements for capital expenditures, commitments, and other liquidity requirements associated with our existing operations during the same period. However, our future liquidity and capital requirements may vary materially from those now planned depending on many factors, including:

• level and mix of our product, sales, and gross profit margins;

• our business, product, capital expenditures and R&D plans;

• repurchases of our common stock;

• incurrence and repayment of debt;

• litigation expenses, settlements, and judgments, or similar items related to resolution of tax audits;

• volume price discounts and customer rebates;

• accounts receivable levels that we maintain;

• acquisitions and/or funding of other businesses, assets, products, or technologies;

• changes in our compensation policies;

• capital improvements for new and existing facilities;

• technological advances;

• our competitors' responses to our products and/or pricing;

• our relationships with supplies, partners, and customers;

• possible future investments in raw material and finished goods inventories;

• expenses related to future restructuring plans, if any;

• tax expense associated with share-based awards;

• issuance of share-based awards and the related payment in cash for withholding taxes in the current year and possibly during future years;

• level of exercises of stock options and stock purchases under our equity incentive plans; and

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• general economic conditions and specific conditions in our industry and markets, including the effects of disruptions in global credit and financial markets, international conflicts, and related uncertainties.

Factors That May Affect Future Results

A description of the risk factors associated with our business is included under “Risk Factors” in Item 1A of Part II of this report.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our exposures to market risk have not changed materially since December 31, 2010. For quantitative and qualitative disclosures about market risk, see Item 7A Quantitative and Qualitative Disclosures About Market Risk, in our Annual Report on Form 10-K for the year ended December 31, 2010.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Attached, as exhibits to this report are certifications of our principal executive officer and principal financial officer, which are required in accordance with Rule 13a-14 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). This “Controls and Procedures” section includes information concerning the controls and related evaluations referred to in the certifications and it should be read in conjunction with the certifications for a more complete understanding of the topics presented.

We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this report, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls

We have initiated a multi-year implementation to upgrade certain key internal systems and processes, including our company-wide human resources management system, customer relationship management (“CRM”) system, and our enterprise resource planning (“ERP”) system. This project is the result of our normal business process to evaluate and upgrade or replace our systems software and related business processes to support our evolving operational needs. There were no changes in our internal control over financial reporting that occurred during the first quarter of 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Our controls and procedures are designed to provide reasonable assurance that our control system’s objective will be met and our CEO and CFO have concluded that our disclosure controls and procedures are effective at the reasonable assurance level. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of these controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with

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policies or procedures.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

The information set forth under “Legal Proceedings” section in Note 15, Commitments and Contingencies, in Notes to Condensed Consolidated Financial Statements in Item 1 Part I of this Quarterly Report on Form 10-Q, is incorporated herein by reference.

Item 1A. Risk Factors

Factors That May Affect Future Results

Investments in our securities involve significant risks. The market price of our stock has historically reflected a higher multiple of earnings than many other companies. Accordingly, even small changes in investor expectations for our future growth and earnings, whether as a result of actual or rumored financial or operating results, changes in the mix of the products and services sold, acquisitions, industry changes, or other factors, could trigger, and have triggered in the past, significant fluctuations in the market price of our common stock. Investors in our securities should carefully consider all of the relevant factors, including, but not limited to, the following factors, that could affect our stock price.

Our quarterly results are unpredictable and subject to substantial fluctuations, and, as a result, we may fail to meet the expectations of securities analysts and investors, which could adversely affect the trading price of our common stock.

Our revenues and operating results may vary significantly from quarter-to-quarter due to a number of factors, many of which are outside of our control and any of which may cause our stock price to fluctuate.

The factors that may cause our quarterly results to be unpredictable include, but are not limited to: limited visibility into customer spending plans, changes in the mix of products and services sold, changes in geographies in which our products and services are sold, changing market conditions, current and potential customer consolidation, competition, customer concentration, long sales and implementation cycles, regional economic and political conditions, and seasonality. For example, many companies in our industry experience adverse seasonal fluctuations in customer spending, particularly in the first and third quarters.

As a result of these risk factors, we believe that quarter-to-quarter comparisons of operating results are not necessarily a good indication of what our future performance will be. It is likely that in some future quarters, our operating results may be below the expectations of securities analysts or investors, in which case the price of our common stock may decline. Such a decline could occur, and has occurred in the past, even when we have met our publicly stated revenues and/or earnings guidance.

Fluctuating economic conditions make it difficult to predict revenues for a particular period and a shortfall in revenues or increase in costs of production may harm our operating results.

Our revenues depend significantly on general economic conditions and the demand for products in the markets in which we compete. Economic weakness, customer financial difficulties, and constrained spending on network expansion and enterprise infrastructure have resulted in certain historical periods, and may in the future result in decreased revenues and earnings and could make it difficult to forecast sales and operating results and could negatively affect our ability to provide forecasts to our contract manufacturers and manage our contract manufacturer relationships and other expenses. In addition, the recent recession and economic weakness, particularly in the United States and Europe, as well as continued turmoil in the geopolitical environment in many parts of the world and the impact of the recent earthquake and tsunami in Japan, may continue to put pressure on global economic conditions, which could lead to reduced demand for our products and/or higher costs of production. Continued economic weakness may also lead to longer collection cycles for payments due from our customers, an increase in customer bad debt, restructuring initiatives and associated expenses, and impairment of investments. Furthermore, the continued weakness and uncertainty in worldwide credit markets may adversely impact the ability of our customers to adequately fund their expected capital expenditures, which could lead to delays or cancellations of planned purchases of our products or services. In addition, our operating expenses are largely based on anticipated revenue trends and a high percentage of our expenses is, and will continue to be, fixed in the short and medium term.

Uncertainty about future economic conditions makes it difficult to forecast operating results and to make decisions about future investments. Future or continued economic weakness, failure of our customers and markets to recover from such weakness,

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customer financial difficulties, increases in costs of production, and reductions in spending on network maintenance and expansion could have a material adverse effect on demand for our products and consequently on our business, financial condition, and results of operations.

A limited number of our customers comprise a significant portion of our revenues and any decrease in revenues from these customers could have an adverse effect on our net revenues and operating results.

A substantial majority of our net revenues depend on sales to a limited number of customers and distribution partners. For example, Verizon accounted for greater than 10% of our net revenues for the year ended December 31, 2010. Changes in the business requirements, vendor selection, financial prospects, capital resources, or purchasing behavior of our key customers could significantly decrease sales to such customers or could lead to delays or cancellations of planned purchases of our products or services, which increases the risk of quarterly fluctuations in our revenues and operating results. Any of these factors could adversely affect our business, financial condition, and results of operations.

In addition, in recent years, there has been consolidation in the telecommunications industry (for example, the acquisitions of Global Crossing and Qwest Communications and the pending acquisition of T-Mobile) and that consolidation trend has continued. If our customers or partners are parties to consolidation transactions they may suspend or indefinitely reduce their purchases of our products or other unforeseen consequences could harm our business, financial condition, and results of operations.

If we receive product orders late in a quarter, we may be unable to recognize revenue for these orders in the same period, which could adversely affect our quarterly revenues.

Generally, our Infrastructure products are not stocked by distributors or resellers due to their cost and complexity and configurations required by our customers, and we generally build such products as orders are received. In recent years, the volume of orders received late in any given fiscal quarter has generally continued to increase but remains unpredictable. If orders for certain products are received late in any quarter, we may not be able to build, ship, and recognize revenue for these orders in the same period, which could adversely affect our ability to meet our expected revenues for such quarter. Additionally, we determine our operating expenses largely on the basis of anticipated revenues and a high percentage of our expenses are fixed in the short and medium term. As a result, a failure or delay in generating or recognizing revenue could cause significant variations in our operating results and operating margin from quarter-to-quarter.

The long sales and implementation cycles for our products, as well as our expectation that some customers will sporadically place large orders with short lead times, may cause our revenues and operating results to vary significantly from quarter-to-quarter.

A customer's decision to purchase certain of our products involves a significant commitment of its resources and a lengthy evaluation and product qualification process. As a result, the sales cycle may be lengthy. In particular, customers making critical decisions regarding the design and implementation of large network deployments may engage in very lengthy procurement processes that may delay or impact expected future orders. Throughout the sales cycle, we may spend considerable time educating and providing information to prospective customers regarding the use and benefits of our products. Even after making the decision to purchase, customers may deploy our products slowly and deliberately. Timing of deployment can vary widely and depends on the skill set of the customer, the size of the network deployment, the complexity of the customer's network environment, and the degree of hardware and operating system configuration necessary to deploy the products. Customers with large networks usually expand their networks in large increments on a periodic basis. Accordingly, we may receive purchase orders for significant dollar amounts on an irregular basis. These long cycles, as well as our expectation that customers will tend to sporadically place large orders with short lead times, may cause revenues and operating results to vary significantly and unexpectedly from quarter-to-quarter.

We face intense competition that could reduce our revenues and adversely affect our business and financial results.

Competition is intense in the markets that we address. The Infrastructure market has historically been dominated by Cisco with competition coming from other companies such as Alcatel-Lucent, Brocade, Extreme Networks, Hewlett Packard Company, and Huawei. In the SLT market, we face intense competition from a broader group of companies such as CheckPoint, Cisco, F5 Networks, and Riverbed. In addition, a number of other small public and private companies have products or have announced plans for new products to address the same challenges and markets that our products address.

In addition, actual or speculated consolidation among competitors, or the acquisition of our partners and/or resellers by competitors, can increase the competitive pressures faced by us as customers may delay spending decisions. In this regard,

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Ericsson acquired Redback in 2007, and Brocade acquired Foundry Networks in 2009. A number of our competitors have substantially greater resources and can offer a wider range of products and services for the overall network equipment market than we do. If we are unable to compete successfully against existing and future competitors on the basis of product offerings or price, we could experience a loss in market share and revenues and/or be required to reduce prices, which could reduce our gross margins, and which could materially and adversely affect our business, financial condition, and results of operations.

We rely on value-added and other resellers, distribution partners, and OEM partners to sell our products, and disruptions to, or our failure to effectively develop and manage our distribution channel and the processes and procedures that support it could adversely affect our ability to generate revenues from the sale of our products.

Our future success is highly dependent upon establishing and maintaining successful relationships with a variety of value-added and other reseller and distribution partners, including our worldwide strategic partners such as Dell, Ericsson, IBM, and NSN. The majority of our revenues are derived through value-added resellers and distributors, most of which also sell our competitors’ products. Our revenues depend in part on the performance of these partners. The loss of or reduction in sales to our value-added resellers or distributors could materially reduce our revenues. For example, in 2006, one of our largest resellers, Lucent, was acquired by Alcatel, a competitor of ours. As a result of the merger, Lucent became a competitor, their resale of our products declined, and we ultimately terminated our reseller agreement with Lucent. Our competitors may in some cases be effective in providing incentives to current or potential resellers and distributors to favor their products or to prevent or reduce sales of our products. If we fail to develop and maintain relationships with our partners, fail to develop new relationships with value-added resellers and distributors in new markets, or expand the number of distributors and resellers in existing markets, fail to manage, train or motivate existing value-added resellers and distributors effectively, or if these partners are not successful in their sales efforts, sales of our products may decrease, and our business, financial condition, and results of operations would suffer.

In addition, we recognize a portion of our revenues based on a sell-through model using information provided by our distributors. If those distributors provide us with inaccurate or untimely information, the amount or timing of our revenues could be adversely impacted.

Further, in order to develop and expand our distribution channel, we must continue to scale and improve our processes and procedures that support it, and those processes and procedures may become increasingly complex and inherently difficult to manage. For example, in 2009, we entered into OEM agreements with Dell and IBM pursuant to which they rebrand and resell our products as part of their product portfolios. These relationships are complex and require additional processes and procedures that may be challenging and costly to implement, maintain and manage. Our failure to successfully manage and develop our distribution channel and the processes and procedures that support it could adversely affect our ability to generate revenues from the sale of our products.

Our ability to process orders and ship products in a timely manner is dependent in part on our business systems and performance of the systems and processes of third parties such as our contract manufacturers, suppliers, or other partners, as well as the interfaces between our systems and the systems of such third parties. If our systems, the systems and processes of those third parties, or the interfaces between them experience delays or fail, our business processes and our ability to build and ship products could be impacted, and our financial results could be harmed.

Some of our business processes depend upon our IT systems, the systems, and processes of third parties, and on the interfaces of our systems with the systems of third parties. For example, our order entry system feeds information into the systems of our contract manufacturers, which enables them to build and ship our products. If those systems fail or are interrupted, our processes may function at a diminished level or not at all. This could negatively impact our ability to ship products or otherwise operate our business, and our financial results could be harmed. For example, although it did not adversely affect our shipments, an earthquake in late December of 2006 disrupted our communications with China, where a significant part of our manufacturing occurs.

We also rely upon the performance of the systems and processes of our contract manufacturers to build and ship our products. If those systems and processes experience interruption or delay, our ability to build and ship our products in a timely manner may be harmed. For example, as we have expanded our contract manufacturing base to China, we have experienced instances where our contract manufacturer was not able to ship products in the time periods expected by us. If we are not able to ship our products or if product shipments are delayed, our ability to recognize revenue in a timely manner for those products would be affected and our financial results could be harmed.

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Upgrades to key internal systems and processes, and problems with the design or implementation of these systems and processes could interfere with, and therefore harm, our business and operations.

We previously initiated a multi-year project to upgrade certain key internal systems and processes, including our company-wide human resources management system, our customer relationship management (“CRM”) system and enterprise resource planning (“ERP”) system. In the first quarter of 2010, we implemented a major upgrade of our CRM system. We have invested, and will continue to invest, significant capital and human resources in the design and implementation of these systems and processes. Any disruptions or delays in the design and implementation of the new systems or processes, particularly any disruptions or delays that impact our operations, could adversely affect our ability to process customer orders, ship products, provide service and support to our customers, bill and track our customers, fulfill contractual obligations, record and transfer information in a timely and accurate manner, file SEC reports in a timely manner, or otherwise run our business. Even if we do not encounter these adverse effects, the design and implementation of these new systems and processes may be much more costly than we anticipated. If we are unable to successfully design and implement these new systems and processes as planned, or if the implementation of these systems and processes is more costly than anticipated, our business, financial condition, and results of operations could be negatively impacted.

We expect our gross margins to vary over time, and our recent level of product gross margin may not be sustainable.

We expect our product gross margins to vary from quarter-to-quarter, and the gross margins we have recently achieved may not be sustainable and may be adversely affected in the future by numerous factors, including product mix shifts, increased price competition in one or more of the markets in which we compete, increases in material or labor costs, excess product component or obsolescence charges from our contract manufacturers, increased costs due to changes in component pricing or charges incurred due to component holding periods if we do not accurately forecast product demand, warranty related issues, or our introduction of new products or entry into new markets with different pricing and cost structures.

We are dependent on sole source and limited source suppliers for several key components, which makes us susceptible to shortages or price fluctuations in our supply chain, and we may face increased challenges in supply chain management in the future.

During periods of high demand for electronic products, component shortages are possible, and the predictability of the availability of such components may be limited. Any future growth in our business and the economy is likely to create greater pressures on us and our suppliers to accurately forecast overall component demand and to establish optimal component levels. If shortages or delays persist, the price of these components may increase, or the components may not be available at all. We may not be able to secure enough components at reasonable prices or of acceptable quality to build new products in a timely manner, and our revenues and gross margins could suffer until other sources can be developed. For example, from time to time, including the first quarter of 2008, we experienced component shortages that resulted in delays of product shipments. We currently purchase numerous key components, including ASICs, from single or limited sources. The development of alternate sources for those components is time-consuming, difficult, and costly. In addition, the lead times associated with certain components are lengthy and preclude rapid changes in quantities and delivery schedules. In the event of a component shortage or supply interruption from these suppliers, we may not be able to develop alternate or second sources in a timely manner. If we are unable to buy these components in quantities sufficient to meet our requirements on a timely basis, we will not be able to deliver product to our customers, which would seriously affect present and future sales, which would, in turn, adversely affect our business, financial condition, and results of operations.

In addition, the development, licensing, or acquisition of new products in the future may increase the complexity of supply chain management. Failure to effectively manage the supply of key components and products would adversely affect our business.

A number of raw materials or parts used in our products are supplied by companies in Japan. It is possible that the March 2011 earthquake and tsunami will adversely and unpredictably affect the availability of power or shipping capacity or otherwise impact their capacity or that of their own suppliers for an undeterminable period. Although we have taken various actions to minimize any adverse impact on our business, any delays, shortages or increased costs relating to those raw materials and parts could result in capacity restrictions, increased costs or shipment or delays in our product shipments. As a result, our business, results of operations or financial condition could be adversely affected.

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Governmental regulations affecting the import or export of products or affecting products containing encryption capabilities could negatively affect our revenues.

The United States and various foreign governments have imposed controls, export license requirements, and restrictions on the import or export of some technologies, especially encryption technology. In addition, from time to time, governmental agencies have proposed additional regulation of encryption technology, such as requiring certification, notifications, review of source code, or the escrow and governmental recovery of private encryption keys. For example, Russia and China recently have implemented new requirements relating to products containing encryption and India has imposed special warranty and other obligations associated with technology deemed critical. Governmental regulation of encryption technology and regulation of imports or exports, or our failure to obtain required import or export approval for our products, could harm our international and domestic sales and adversely affect our revenues. In addition, failure to comply with such regulations could result in penalties, costs, and restrictions on import or export privileges or adversely affect sales to government agencies or government funded projects.

If we do not successfully anticipate market needs and opportunities, and develop products and product enhancements that meet those needs and opportunities, or if those products are not made available in a timely manner or do not gain market acceptance, we may not be able to compete effectively and our ability to generate revenues will suffer.

We cannot guarantee that we will be able to anticipate future market needs and opportunities or be able to develop new products or product enhancements to meet such needs or opportunities in a timely manner or at all. If we fail to anticipate market requirements or fail to develop and introduce new products or product enhancements to meet those needs in a timely manner, it could cause us to lose customers and such failure could substantially decrease or delay market acceptance and sales of our present and future products, which would significantly harm our business, financial condition, and results of operations. Even if we are able to anticipate, develop, and commercially introduce new products and enhancements, there can be no assurance that new products or enhancements will achieve widespread market acceptance.

For example, in connection with the acquisitions of Altor and Trapeze in 2010, we are now offering a virtualization security product and a WLAN product. Additionally, in 2011, we announced our new data center product, the QFabric™ solution, our mobility solutions with our MobileNext software and our Converged Supercore product, which converges the optical and packet layers of the network. If these or other new products do not gain market acceptance at a sufficient rate of growth, our ability to meet future financial targets may be adversely affected. In addition, if we fail to achieve market acceptance at a sufficient rate of growth, our ability to meet future financial targets and aspirations may be adversely affected. In addition, if we fail to deliver new or announced products to the market in a timely manner, it could adversely affect the market acceptance of those products and harm our competitive position and our business and financial results.

Changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our results.

Our future effective tax rates could be subject to volatility or adversely affected by: earnings being lower than anticipated in countries where we have lower statutory rates and higher than anticipated earnings in countries where we have higher statutory rates; changes in the valuation of our deferred tax assets and liabilities; expiration of, or lapses in, the R&D tax credit laws applicable to us; transfer pricing adjustments related to certain acquisitions, including the license of acquired intangibles under our intercompany R&D cost sharing arrangement; tax effects of share-based compensation; costs related to intercompany restructurings; or changes in tax laws, regulations, accounting principles, or interpretations thereof. In addition, we are subject to the continuous examination of our income tax returns by the Internal Revenue Service (“IRS”) and other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. There can be no assurance that the outcomes from these continuous examinations will not have an adverse effect on our business, financial condition, and results of operations.

From time to time, we receive notices of proposed adjustments from the IRS claiming that we owe additional taxes, plus interest and possible penalties. For example, we received two such notices in 2011 and one in 2009 for previous years based on transfer pricing transactions related to the license of acquired intangibles under an intercompany R&D cost sharing arrangement. We are assessing the notices we received in 2011, but we do not believe they are material. As a result of the proposed adjustment we received in 2009, the incremental tax liability would be approximately $807 million excluding interest and penalties. We believe the IRS' position with regard to these matters is inconsistent with applicable tax laws and existing Treasury regulations, and that our previously reported income tax provisions for the years in question are appropriate. However, there can be no assurance that these matters will be resolved in our favor. Regardless of whether these matters are resolved in our favor, the final resolution of these matters could be expensive and time-consuming to defend and/or settle. While we believe we have provided adequately for these matters, there is a possibility that an adverse outcome of these matters

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individually or in the aggregate could have a material effect on our results of operations and financial condition.

Telecommunications companies and our other large customers generally require more onerous terms and conditions in our contracts with them. As we seek to sell more products to such customers, we may be required to agree to terms and conditions that could have an adverse effect on our business or ability to recognize revenues.

Telecommunications service provider companies and other large companies, because of their size, generally have greater purchasing power and, accordingly, have requested and received more favorable terms, which often translate into more onerous terms and conditions from us. As we seek to sell more products to this class of customer, we may be required to agree to such terms and conditions, which may include terms that affect the timing of our ability to recognize revenue and have an adverse effect on our business, financial condition, and results of operations. Consolidation among such large customers can further increase their buying power and ability to require onerous terms.

For example, customers in this class have purchased products from other vendors who promised but failed to deliver certain functionality and/or had products that caused problems or outages in the networks of these customers. As a result, this class of customers may request additional features from us and require substantial penalties for failure to deliver such features or may require substantial penalties for any network outages that may be caused by our products. These additional requests and penalties, if we are required to agree to them, may require us to defer revenue recognition from such sales, which may negatively affect our business, financial condition, and results of operations.

If we fail to accurately predict our manufacturing requirements, we could incur additional costs or experience manufacturing delays, which would harm our business.

We provide demand forecasts to our contract manufacturers and the manufacturers order components and plan capacity based on these forecasts. If we overestimate our requirements, our contract manufacturers may assess charges, or we may have liabilities for excess inventory, each of which could negatively affect our gross margins. Conversely, because lead times for required materials and components vary significantly and depend on factors such as the specific supplier, contract terms, and the demand for each component at a given time, if we underestimate our requirements, as we did in the third quarter of 2010 with respect to certain components, our contract manufacturers may have inadequate time, materials, and/or components required to produce our products, which could increase costs or could delay or interrupt manufacturing of our products and result in delays in shipments and deferral or loss of revenues.

We are dependent on contract manufacturers with whom we do not have long-term supply contracts, and changes to those relationships, expected or unexpected, may result in delays or disruptions that could cause us to lose revenues and damage our customer relationships.

We depend on independent contract manufacturers (each of which is a third-party manufacturer for numerous companies) to manufacture our products. Although we have contracts with our contract manufacturers, these contracts do not require them to manufacture our products on a long-term basis in any specific quantity or at any specific price. In addition, it is time-consuming and costly to qualify and implement additional contract manufacturer relationships. Therefore, if we fail to effectively manage our contract manufacturer relationships or if one or more of them experiences delays, disruptions, or quality control problems in our manufacturing operations, or if we had to change or add additional contract manufacturers or contract manufacturing sites, our ability to ship products to our customers could be delayed. Also, the addition of manufacturing locations or contract manufacturers would increase the complexity of our supply chain management. Moreover, an increasing portion of our manufacturing is performed in China and other countries and is therefore subject to risks associated with doing business in other countries. Each of these factors could adversely affect our business, financial condition, and results of operations.

Integration of acquisitions could disrupt our business and harm our financial condition and stock price and may dilute the ownership of our stockholders.

We have made, and may continue to make, acquisitions in order to enhance our business. For example, in December 2010 we acquired Altor and Trapeze, in July 2010 we acquired SMobile, and in April 2010 we acquired Ankeena. Acquisitions involve numerous risks, including problems combining the purchased operations, technologies or products, unanticipated costs, diversion of management's attention from our core businesses, adverse effects on existing business relationships with suppliers and customers, risks associated with entering markets in which we have no or limited prior experience, and potential loss of key employees. There can be no assurance that we will be able to integrate successfully any businesses, products, technologies, or personnel that we might acquire. The integration of businesses that we may acquire is likely to be a complex, time-consuming, and expensive process and we may not realize the anticipated revenues or other benefits associated with our

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acquisitions if we fail to successfully manage and operate the acquired business. If we fail in any acquisition integration efforts and are unable to efficiently operate as a combined organization utilizing common information and communication systems, operating procedures, financial controls, and human resources practices, our business, financial condition, and results of operations may be adversely affected.

Acquisitions may also require us to issue common stock or assume equity awards that dilute the ownership of our current stockholders, assume liabilities, record goodwill and amortizable intangible assets that will be subject to impairment testing on a regular basis and potential periodic impairment charges, incur amortization expenses related to certain intangible assets, and incur large and immediate write-offs and restructuring and other related expenses, all of which could harm our financial condition and results of operations.

Our ability to develop, market, and sell products could be harmed if we are unable to retain or hire key personnel.

Our future success depends upon our ability to recruit and retain the services of executive, engineering, sales and marketing, and support personnel. The supply of highly qualified individuals, in particular engineers in very specialized technical areas, or sales people specializing in the service provider and enterprise markets, is limited and competition for such individuals is intense. None of our officers or key employees is bound by an employment agreement for any specific term. The loss of the services of any of our key employees, the inability to attract or retain personnel in the future or delays in hiring required personnel, particularly engineers and sales people, and the complexity and time involved in replacing or training new employees, could delay the development and introduction of new products, and negatively impact our ability to market, sell, or support our products.

We are a party to lawsuits, which are costly to defend and, if determined adversely to us, could require us to pay damages or prevent us from taking certain actions, any or all of which could harm our business, financial condition, and results of operations.

We, and certain of our current and former officers and current and former members of our Board of Directors, are subject to various lawsuits. We have been served with lawsuits related to employment matters, commercial transactions and patent infringement as well as securities laws, a description of one of the securities lawsuits can be found in Note 15, Commitments and Contingencies, in Notes to Consolidated Financial Statements of this Quarterly Report on Form 10-Q, under the heading “Legal Proceedings.” There can be no assurance that these or any actions that have been or may in the future be brought against us, our officers, and our directors will be resolved favorably or that tentative settlements will become final. Regardless of whether they are resolved, these lawsuits are, and any future lawsuits or threatened legal proceedings to which we, our officers, or our directors may become a party will likely be, expensive and time-consuming to defend, settle, and/or resolve. Legal proceedings, threatened legal proceedings or investigations, regardless of their ultimate outcome, could harm our reputation. Costs of defense, as well as any losses resulting from these claims or settlement of these claims, could significantly increase our expenses and could harm our business, financial condition, and results of operations.

Litigation or claims regarding intellectual property rights may be time-consuming, expensive, and require a significant amount of resources to prosecute, defend, or make our products non-infringing.

Third parties have asserted and may in the future assert claims or initiate litigation related to patent, copyright, trademark, and other intellectual property rights to technologies and related standards that are relevant to our products. The asserted claims and/or initiated litigation may include claims against us or our manufacturers, suppliers, partners, or customers, alleging that our products or services infringe proprietary rights. Regardless of the merit of these claims, they have been and can be time-consuming, result in costly litigation, and may require us to develop non-infringing technologies or enter into license agreements. Furthermore, because of the potential for high awards of damages or injunctive relief that are not necessarily predictable, even arguably unmeritorious claims may be settled for significant amounts of money. If any infringement or other intellectual property claim made against us by any third-party is successful, if we are required to settle litigation for significant amounts of money, or if we fail to develop non-infringing technology or license required proprietary rights on commercially reasonable terms and conditions, our business, financial condition, and results of operations could be materially and adversely affected.

Our success depends upon our ability to effectively plan and manage our resources and restructure our business through rapidly fluctuating economic and market conditions.

Our ability to successfully offer our products and services in a rapidly evolving market requires an effective planning, forecasting, and management process to enable us to effectively scale and adjust our business in response to fluctuating market opportunities and conditions. In periods of market expansion, we have increased investment in our business by, for example,

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increasing headcount and increasing our investment in R&D, sales and marketing, and other parts of our business as we have in the 2010 fiscal year and in the first quarter of 2011. Conversely, during 2009, in response to downward trending industry and market conditions, we restructured our business, rebalanced our workforce, and reduced our real estate portfolio. Many of our expenses, such as real estate expenses, cannot be rapidly or easily adjusted because of fluctuations in our business or numbers of employees. Moreover, rapid changes in the size of our workforce could adversely affect our ability to develop and deliver products and services as planned or impair our ability to realize our current or future business objectives.

Regulation of the telecommunications industry could harm our operating results and future prospects.

The traditional telecommunications industry is highly regulated, and our business and financial condition could be adversely affected by changes in regulations relating to the Internet telecommunications industry. Currently, there are few laws or regulations that apply directly to access to or commerce on IP networks. We could be adversely affected by regulation of IP networks and commerce in any country where we market equipment and services to service or content providers. Regulations governing the range of services and business models that can be offered by service providers or content providers could adversely affect those customers' needs for products designed to enable a wide range of such services or business models. For instance, the U.S. Federal Communications Commission has issued regulations governing aspects of fixed broadband networks and wireless networks; these regulations might impact service provider and content provider business models and as such, providers' needs for Internet telecommunications equipment and services.

In addition, environmental regulations relevant to electronic equipment manufacturing or operations may impact our business and financial condition adversely. For instance, the European Union has adopted WEEE, ROHS and REACH regulations. In addition, some governments have regulations prohibiting government entities from purchasing security products that do not meet specified indigenous certification criteria even though those criteria may be in conflict with accepted international standards. Similar regulations are in effect or under consideration in several jurisdictions where we do business. The adoption and implementation of such regulations could decrease demand for our products, increase the cost of building and selling our products and impact our ability to ship products into affected areas and recognize revenue in a timely manner. Any of these impacts could have a material adverse effect on our business, financial condition, and results of operations.

A breach of network security could harm public perception of our security products, which could cause us to lose revenues.

If an actual or perceived breach of network security occurs in our network or in the network of a customer of our security products, regardless of whether the breach is attributable to our products, the market perception of the effectiveness of our products could be harmed. Because the techniques used by computer hackers to access or sabotage networks change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques. This could cause us to lose current and potential end-customers or cause us to lose current and potential value-added resellers and distributors.

We are subject to risks arising from our international operations, which may adversely affect our business, financial condition, and results of operations.

We derive a majority of our revenues from our international operations, and we plan to continue expanding our business in international markets in the future. We conduct significant sales and customer support operations directly and indirectly through our distributors and value-added resellers in countries throughout the world and depend on the operations of our contract manufacturers and suppliers that are located outside of the United States. In addition, a portion of our R&D and our general and administrative operations are conducted outside the United States. In some countries, we may experience reduced intellectual property protection.

As a result of our international operations, we are affected by economic, regulatory, social, and political conditions in foreign countries, including changes in general IT spending, the imposition of government controls, changes or limitations in trade protection laws, other regulatory requirements, which may affect our ability to import or export our products from various countries, service provider and government spending patterns affected by political considerations, unfavorable changes in tax treaties or laws, natural disasters, epidemic disease, labor unrest, earnings expatriation restrictions, misappropriation of intellectual property, military actions, acts of terrorism, political and social unrest and difficulties in staffing and managing international operations. For example, revenue attributable to our customers in Japan generally accounts for five percent to eight percent of our revenue. Although we did not experience a significant negative impact to our revenue during first quarter of fiscal year 2011, the March 2011 earthquake and tsunami in Japan may adversely and unpredictably affect our customers and spending patterns in Japan in the short term. Any or all of these factors could have a material adverse impact on our business, financial condition, and results of operations.

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Moreover, local laws and customs in many countries differ significantly from those in the United States. In many foreign countries, particularly in those with developing economies, it is common for others to engage in business practices that are prohibited by our internal policies and procedures or United States regulations applicable to us. There can be no assurance that our employees, contractors, and agents will not take actions in violation of our policies and procedures, which are designed to ensure compliance with U.S. and foreign laws and policies. Violations of laws or key control policies by our employees, contractors, or agents could result in financial reporting problems, fines, penalties, or prohibition on the importation or exportation of our products, and could have a material adverse effect on our business, financial condition and results of operations.

We are exposed to fluctuations in currency exchange rates, which could negatively affect our financial condition and results of operations.

Because a majority of our business is conducted outside the United States, we face exposure to adverse movements in non-U.S. currency exchange rates. These exposures may change over time as business practices evolve and could have a material adverse impact on our financial condition and results of operations.

The majority of our revenues and expenses are transacted in U.S. Dollars. We also have some transactions that are denominated in foreign currencies, primarily the British Pound, Euro, Indian Rupee, and Japanese Yen related to our sales and service operations outside of the United States. An increase in the value of the U.S. Dollar could increase the real cost to our customers of our products in those markets outside the United States in which we sell in U.S. Dollars, and a weakened U.S. Dollar could increase the cost of local operating expenses and procurement of raw materials to the extent we must purchase components in foreign currencies.

Currently, we hedge only those currency exposures associated with certain assets and liabilities denominated in nonfunctional currencies and periodically hedge anticipated foreign currency cash flows. The hedging activities undertaken by us are intended to offset the impact of currency fluctuations on certain nonfunctional currency assets and liabilities. However, no amount of hedging can be effective against all circumstances, including long-term declines in the value of the U.S. Dollar. If our attempts to hedge against these risks are not successful, or if long-term declines in the value of the U.S. Dollar persist, our financial condition and results of operations could be adversely impacted.

If we fail to adequately evolve our financial and managerial control and reporting systems and processes, our ability to manage and grow our business will be negatively affected.

Our ability to successfully offer our products and implement our business plan in a rapidly evolving market depends upon an effective planning and management process. We will need to continue to improve our financial and managerial control and our reporting systems and procedures in order to manage our business effectively in the future. If we fail to continue to implement improved systems and processes, our ability to manage our business, financial condition, and results of operations may be negatively affected.

We sell our products to customers that use those products to build networks and IP infrastructure, and if the demand for network and IP systems does not continue to grow, then our business, financial condition, and results of operations could be adversely affected.

A substantial portion of our business and revenues depends on the growth of secure IP infrastructure and on the deployment of our products by customers that depend on the continued growth of IP services. As a result of changes in the economy capital spending or the building of network capacity in excess of demand, all of which have in the past particularly affected telecommunications service providers, spending on IP infrastructure can vary, which could have a material adverse effect on our business, financial condition, and results of operations. In addition, a number of our existing customers are evaluating the build out of their next generation networks. During the decision-making period when the customers are determining the design of those networks and the selection of the equipment they will use in those networks, such customers may greatly reduce or suspend their spending on secure IP infrastructure. Such delays in purchases can make it more difficult to predict revenues from such customers, can cause fluctuations in the level of spending by these customers and, even where our products are ultimately selected, can have a material adverse effect on our business, financial condition, and results of operations.

Our products are highly technical and if they contain undetected errors, our business could be adversely affected, and we may need to defend lawsuits or pay damages in connection with any alleged or actual failure of our products and services.

Our products are highly technical and complex, are critical to the operation of many networks, and, in the case of our security products, provide and monitor network security and may protect valuable information. Our products have contained and may

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contain one or more undetected errors, defects, or security vulnerabilities. Some errors in our products may only be discovered after a product has been installed and used by end-customers. Any errors, defects, or security vulnerabilities discovered in our products after commercial release could result in loss of revenues or delay in revenue recognition, loss of customers, loss of future business and reputation, and increased service and warranty cost, any of which could adversely affect our business, financial condition, and results of operations. In addition, in the event an error, defect, or vulnerability is attributable to a component supplied by a third-party vendor, we may not be able to recover from the vendor all of the costs of remediation that we may incur. In addition, we could face claims for product liability, tort, or breach of warranty. Defending a lawsuit, regardless of its merit, is costly and may divert management’s attention. In addition, if our business liability insurance coverage is inadequate, or future coverage is unavailable on acceptable terms or at all, our financial condition and results of operations could be harmed.

If our products do not interoperate with our customers’ networks, installations will be delayed or cancelled and could harm our business.

Our products are designed to interface with our customers’ existing networks, each of which have different specifications and utilize multiple protocol standards and products from other vendors. Many of our customers’ networks contain multiple generations of products that have been added over time as these networks have grown and evolved. Our products must interoperate with many or all of the products within these networks as well as future products in order to meet our customers’ requirements. If we find errors in the existing software or defects in the hardware used in our customers’ networks, we may need to modify our software or hardware to fix or overcome these errors so that our products will interoperate and scale with the existing software and hardware, which could be costly and could negatively affect our business, financial condition, and results of operations. In addition, if our products do not interoperate with those of our customers’ networks, demand for our products could be adversely affected or orders for our products could be cancelled. This could hurt our operating results, damage our reputation, and seriously harm our business and prospects.

Our products incorporate and rely upon licensed third-party technology, and if licenses of third-party technology do not continue to be available to us or become very expensive, our revenues and ability to develop and introduce new products could be adversely affected.

We integrate licensed third-party technology into certain of our products. From time to time, we may be required to license additional technology from third-parties to develop new products or product enhancements. Third-party licenses may not be available or continue to be available to us on commercially reasonable terms. The failure to comply with the terms of any license may result in our inability to continue to use such license. Our inability to maintain or re-license any third-party licenses required in our products or our inability to obtain third-party licenses necessary to develop new products and product enhancements, could require us, if possible, to develop substitute technology or obtain substitute technology of lower quality or performance standards or at a greater cost, any of which could delay or prevent product shipment and harm our business, financial condition, and results of operations.

Our financial condition and results of operations could suffer if there is an additional impairment of goodwill or other intangible assets with indefinite lives.

We are required to test annually and review on an interim basis, our goodwill and intangible assets with indefinite lives, including the goodwill associated with past acquisitions and any future acquisitions, to determine if impairment has occurred. As of March 31, 2011, our goodwill was $3,927.3 million. If such assets are deemed impaired, an impairment loss equal to the amount by which the carrying amount exceeds the fair value of the assets would be recognized. This would result in incremental expenses for that quarter, which would reduce any earnings or increase any loss for the period in which the impairment was determined to have occurred. For example, such impairment could occur if the market value of our common stock falls below certain levels for a sustained period, or if the portions of our business related to companies we have acquired fail to grow at expected rates or decline. In the second quarter of 2006, our impairment evaluation resulted in a reduction of $1,280.0 million to the carrying value of goodwill on our balance sheet for the SLT operating segment, primarily due to the decline in our market capitalization that occurred over a period of approximately nine months prior to the impairment review and, to a lesser extent, a decrease in forecasted future cash flows. In recent years, economic weakness contributed to extreme price and volume fluctuations in global stock markets that reduced the market price of many technology company stocks, including ours. Future declines in our stock price, as well as any marked decline in our level of revenues or gross margins, increase the risk that goodwill and intangible assets may become impaired in future periods. We cannot accurately predict the amount and timing of any impairment of assets.

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While we believe that we currently have adequate internal control over financial reporting, we are exposed to risks from legislation requiring companies to evaluate those internal controls.

Section 404 of the Sarbanes-Oxley Act of 2002 requires our management to report on, and our independent auditors to attest to, the effectiveness of our internal control over financial reporting. We have an ongoing program to perform the system and process evaluation and testing necessary to comply with these requirements. We have and will continue to incur significant expenses and devote management resources to Section 404 compliance on an ongoing basis. In the event that our Chief Executive Officer, Chief Financial Officer, or independent registered public accounting firm determine in the future that, our internal controls over financial reporting are not effective as defined under Section 404, investor perceptions may be adversely affected if our financial statements are not reliable and could cause a decline in the market price of our stock and otherwise negatively affect our liquidity and financial condition.

The investment of our cash balance and our investments in government and corporate debt securities are subject to risks, which may cause losses and affect the liquidity of these investments.

At March 31, 2011, we had $2,944.4 million in cash and cash equivalents and $1,139.2 million in short- and long-term investments. We have invested these amounts primarily in U.S. government securities, government-sponsored enterprise obligations, foreign government debt securities, corporate notes and bonds, commercial paper, and money market funds meeting certain criteria. Certain of these investments are subject to general credit, liquidity, market, and interest rate risks, which may be exacerbated by U.S. sub-prime mortgage defaults that have affected various sectors of the financial markets and caused credit and liquidity issues at many financial institutions. These market risks associated with our investment portfolio may have a negative adverse effect on our liquidity, financial condition, and results of operations.

We may be unable to generate the cash flow to service our debt obligations, including the Senior Notes.

In March2011, we issued senior unsecured notes for an aggregate principle amount of $1.0 billion. We may not be able to generate sufficient cash flow to enable us to service our indebtedness, including the notes, or to make anticipated capital expenditures. Our ability to pay our expenses and satisfy our debt obligations, refinance our debt obligations and fund planned capital expenditures will depend on our future performance, which will be affected by general economic, financial, competitive, legislative, regulatory and other factors beyond our control. Based upon current levels of operations, we believe cash flow from operations and available cash will be adequate for the foreseeable future to meet our anticipated requirements for working capital, capital expenditures and scheduled payments of principal and interest on our indebtedness, including the senior notes. However, if we are unable to generate sufficient cash flow from operations or to borrow sufficient funds in the future to service our debt, we may be required to sell assets, reduce capital expenditures, refinance all or a portion of our existing debt (including the senior notes) or obtain additional financing. There is no assurance that we will be able to refinance our debt, sell assets or borrow more money on terms acceptable to us, or at all.

The indenture that governs the senior notes also contains various covenants that limit our ability and the ability of our subsidiaries to, among other things:

• incur liens;

• incur sale and leaseback transactions; and

• consolidate or merge with or into, or sell substantially all of our assets to, another person

As a result of these covenants, we are limited in the manner in which we can conduct our business, and we may be unable to engage in favorable business activities or finance future operations or capital needs. Accordingly, these restrictions may limit our ability to successfully operate our business. A failure to comply with these restrictions could lead to an event of default, which could result in an acceleration of the indebtedness. Our future operating results may not be sufficient to enable compliance with these covenants to remedy any such default. In addition, in the event of an acceleration, we may not have or be able to obtain sufficient funds to make any accelerated payments, including those under the senior notes.

Uninsured losses could harm our operating results.

We self-insure against many business risks and expenses, such as intellectual property litigation and our medical benefit programs, where we believe we can adequately self-insure against the anticipated exposure and risk or where insurance is either not deemed cost-effective or is not available. We also maintain a program of insurance coverage for various types of property,

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casualty, and other risks. We place our insurance coverage with various carriers in numerous jurisdictions. The types and amounts of insurance that we obtain vary from time to time and from location to location, depending on availability, cost, and our decisions with respect to risk retention. The policies are subject to deductibles, policy limits, and exclusions that result in our retention of a level of risk on a self-insurance basis. Losses not covered by insurance could be substantial and unpredictable and could adversely affect our financial condition and results of operations.

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

There were no unregistered sales of equity securities during the period covered by this report.

(c) Issuer Purchases of Equity Securities

Period	Total Number of Shares Purchased (2)	Average Price Paid per Share (2)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)
January 1 - January 31, 2011	840	$	36.28	—	$	755,072,731
February 1 - February 28, 2011	4,820,158	42.12		4,751,237	554,834,330
March 1 - March 31, 2011	52,246	40.54		—	554,834,330
Total	4,873,244	$	42.10	4,751,237

________________________________

(1) In February 2010, the Board approved a stock repurchase program (the “2010 Stock Repurchase Program”), which authorized the Company to purchase up to an additional $1.0 billion of the Company's common stock. During the three months ended March 31, 2011, the Company repurchased and retired an aggregate of 4,751,237 shares of common stock at an average price of $42.14 per share under the 2010 Stock Repurchase Program. Future share repurchases under the Company's 2010 Stock Repurchase Program will be subject to a review of the circumstances in place at that time and will be made from time to time in private transactions or open market purchases as permitted by securities laws and other legal requirements. This program may be discontinued at any time. As of March 31, 2011, the 2010 Stock Repurchase Program had $554,834,330 remaining authorized funds available for future stock repurchases.

(2) Amounts include repurchases under the Company's stock repurchase program and repurchases of the Company's common stock from its employees in connection with net issuance of shares to satisfy the employee tax withholding obligations for the vesting of certain restricted stock units and performance share awards. We repurchased 0.1 million shares of common stock from our employees in connection with net issuances during the three months ended March 31, 2011, at an average price of $40.43 per share. All shares of common stock that have been repurchased under the Company's stock repurchase programs and from its employees in connection with net issuances have been retired.

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Item 6. Exhibits

Exhibit Number	Description of Document
3.1	Juniper Networks, Inc. Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 27, 2001)
3.2	Amended and Restated Bylaws of Juniper Networks, Inc. (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on September 3, 2010)
4.1	Indenture, dated March 3, 2011, by and between Juniper Networks, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on March 4, 2011)
4.8	First Supplemental Indenture, dated March 3, 2011, by and between Juniper Networks, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee
4.9	Form of Note for Juniper Networks, Inc.'s 3.100% Senior Notes due 2016 (incorporated by reference to Exhibit 4.8 hereto)
4.10	Form of Note for Juniper Networks, Inc.'s 4.600% Senior Notes due 2021 (incorporated by reference to Exhibit 4.8 hereto)
4.11	Form of Note for Juniper Networks, Inc.'s 5.950% Senior Notes due 2041 (incorporated by reference to Exhibit 4.8 hereto)
10.1	Juniper Networks, Inc. 2006 Equity Incentive Plan, as amended February 9, 2011*
10.2	Description of Named Executive Officer Salary Increases (incorporated by reference to Item 5.02 of the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on February 15, 2011)
10.3	Description of the 2011 Executive Annual Incentive Plan (incorporated by reference to Item 5.02 of the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on February 15, 2011)
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934*
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934*
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
101	The following materials from Juniper Network Inc.'s Quarterly Report on Form 10-Q for the quarter ended March 31, 2011, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Statements of Operations, (ii) the Condensed Consolidated Balance Sheets, and (iii) the Condensed Consolidated Statements of Cash Flows, and (iv) Notes to Condensed Consolidated Financial Statements**
101.INS	XBRL Instance Document**
101.SCH	XBRL Taxonomy Extension Schema Document**
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document**
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document**
101.LAB	XBRL Taxonomy Extension Label Linkbase Document**
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document**

*Filed herewith.

** XBRL (Extensible Business Reporting Language) information is furnished and not filed herewith, is not a part of a registration statement or Prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant had duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Juniper Networks, Inc.
May 6, 2011	By:	/s/ Robyn M. Denholm
		Robyn M. Denholm
		Executive Vice President and Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer)
May 6, 2011	By:	/s/ Gene Zamiska
		Gene Zamiska
		Vice President, Finance and Corporate Controller (Duly Authorized Officer and Principal Accounting Officer)

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Exhibit Index

Exhibit Number	Description of Document
3.1	Juniper Networks, Inc. Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 27, 2001)
3.2	Amended and Restated Bylaws of Juniper Networks, Inc. (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on September 3, 2010)
4.1	Indenture, dated March 3, 2011, by and between Juniper Networks, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on March 4, 2011)
4.8	First Supplemental Indenture, dated March 3, 2011, by and between Juniper Networks, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee
4.9	Form of Note for Juniper Networks, Inc.'s 3.100% Senior Notes due 2016 (incorporated by reference to Exhibit 4.8 hereto)
4.10	Form of Note for Juniper Networks, Inc.'s 4.600% Senior Notes due 2021 (incorporated by reference to Exhibit 4.8 hereto)
4.11	Form of Note for Juniper Networks, Inc.'s 5.950% Senior Notes due 2041 (incorporated by reference to Exhibit 4.8 hereto)
10.1	Juniper Networks, Inc. 2006 Equity Incentive Plan, as amended February 9, 2011*
10.2	Description of Named Executive Officer Salary Increases (incorporated by reference to Item 5.02 of the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on February 15, 2011)
10.3	Description of the 2011 Executive Annual Incentive Plan (incorporated by reference to Item 5.02 of the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on February 15, 2011)
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934*
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934*
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
101	The following materials from Juniper Network Inc.'s Quarterly Report on Form 10-Q for the quarter ended March 31, 2011, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Statements of Operations, (ii) the Condensed Consolidated Balance Sheets, and (iii) the Condensed Consolidated Statements of Cash Flows, and (iv) Notes to Condensed Consolidated Financial Statements**
101.INS	XBRL Instance Document**
101.SCH	XBRL Taxonomy Extension Schema Document**
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document**
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document**
101.LAB	XBRL Taxonomy Extension Label Linkbase Document**
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document**

*Filed herewith.

** XBRL (Extensible Business Reporting Language) information is furnished and not filed herewith, is not a part of a registration statement or Prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

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EX-10.1

JUNIPER NETWORKS, INC.

2006 EQUITY INCENTIVE PLAN

As amended February 9, 2011

1.Purposes of the Plan. The purposes of this Equity Incentive Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to Service Providers and Outside Directors and to promote the success of the Company's business.

Awards to Service Providers granted hereunder may be Incentive Stock Options, Nonstatutory Stock Options, Restricted Stock, Restricted Stock Units, Stock Appreciation Rights, Performance Shares, Performance Units, Deferred Stock Units or Dividend Equivalents, at the discretion of the Administrator and as reflected in the terms of the written option agreement. This Equity Incentive Plan also provides for the automatic, non-discretionary award of Nonstatutory Stock Options to Outside Directors.

2. Definitions. As used herein, the following definitions shall apply:

(a)“Administrator” shall mean the Board or any of its Committees as shall be administering the Plan, in accordance with Section 4 of the Plan.

(b)“Annual Revenue” shall mean the Company's or a business unit's net sales for the Fiscal Year, determined in accordance with generally accepted accounting principles.

(c)“Applicable Laws” shall mean the legal requirements relating to the administration of equity incentive plans under California corporate and securities laws and the Code.

(d)“Award” shall mean, individually or collectively, a grant under the Plan of Incentive Stock Options, Nonstatutory Stock Options, Restricted Stock, Restricted Stock Units, Stock Appreciation Rights, Performance Shares, Performance Units, Deferred Stock Units or Dividend Equivalents.

(e)“Award Agreement” shall mean the written or electronic agreement setting forth the terms and provisions applicable to each Award granted under the Plan. The Award Agreement is subject to the terms and conditions of the Plan.

(f)“Awarded Stock” shall mean the Common Stock subject to an Award.

(g)“Board” shall mean the Board of Directors of the Company.

(h)“Cash Position” shall mean the Company's level of cash and cash equivalents.

(i)“Code” shall mean the Internal Revenue Code of 1986, as amended.

(j)“Common Stock” shall mean the Common Stock of the Company.

(k)“Committee” shall mean the Committee appointed by the Board of Directors or a sub-committee appointed by the Board's designated committee in accordance with Section 4(a) of the Plan, if one is appointed.

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(l)“Company” shall mean Juniper Networks, Inc.

(m)“Consultant” shall mean any person, including an advisor, engaged by the Company or a Parent or Subsidiary to render services and who is compensated for such services; provided, however, that the term “Consultant” shall not include Outside Directors, unless such Outside Directors are compensated for services to the Company other than through payment of director's fees and Option grants under Section 11 hereof.

(n)“Continuous Status as a Director” means that the Director relationship is not interrupted or terminated.

(o)“Deferred Stock Unit” means a deferred stock unit Award granted to a Participant pursuant to Section 16.

(p)“Director” shall mean a member of the Board.

(q)“Disability” means total and permanent disability as defined in Section 22(e)(3) of the Code.

(r)“Dividend Equivalent” shall mean a credit, payable in cash, made at the discretion of the Administrator, to the account of a Participant in an amount equal to the cash dividends paid on one Share for each Share represented by an Award held by such Participant. Dividend Equivalents may be subject to the same vesting restrictions as the related Shares subject to an Award, at the discretion of the Administrator.

(s)“Employee” shall mean any person, including Officers and Directors, employed by the Company or any Parent or Subsidiary of the Company. An Employee shall not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company, its Parent, any Subsidiary, or any successor. For purposes of Incentive Stock Options, no such leave may exceed ninety days, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, then three (3) months following the 91^st day of such leave any Incentive Stock Option held by the Participant shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory Stock Option.

(t)“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

(u)“Fair Market Value” shall mean, as of any date, the value of Common Stock determined as follows:

(i)If the Common Stock is listed on a stock exchange, the fair market value per Share shall be the closing price on such exchange, as reported in the Wall Street Journal on the date of determination or, if the date of determination is not a trading day, the immediately preceding trading day;

(ii)If there is a public market for the Common Stock, the fair market value per Share shall be the mean of the bid and asked prices, or closing price in the event quotations for the Common Stock are reported on the National Market System, of the Common Stock on the date of determination, as reported in the Wall Street Journal (or, if not so reported, as otherwise reported by the National Association of Securities Dealers Automated Quotation (NASDAQ) System); or

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(iii)In the absence of an established market for the Common Stock, the Fair Market Value shall be determined in good faith by the Administrator.

(v)“Fiscal Year” shall mean a fiscal year of the Company.

(w)“Full Value Award” shall mean a grant of Restricted Stock, a Restricted Stock Unit, a Performance Share or a Deferred Stock Unit hereunder.

(x)“Incentive Stock Option” shall mean an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code.

(y)“Nonstatutory Stock Option” shall mean an Option not intended to qualify as an Incentive Stock Option.

(z)“Officer” shall mean a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

(aa)“Option” shall mean a stock option granted pursuant to the Plan.

(bb)    “Optioned Stock” shall mean the Common Stock subject to an Option.

(cc)    “Outside Director” means a Director who is not an Employee or Consultant.

(dd)    “Parent” shall mean a “parent corporation”, whether now or hereafter existing, as defined in Section 424(e) of the Code.

(ee)    “Participant” shall mean an Employee or Consultant who receives an Award.

(ff)    “Performance Goals” shall mean the goal(s) (or combined goal(s)) determined by the Administrator (in its discretion) to be applicable to a Participant with respect to an Award. As determined by the Administrator, the performance measures for any performance period will be any one or more of the following objective performance criteria, applied to either the Company as a whole or, except with respect to stockholder return metrics, to a region, business unit, affiliate or business segment, and measured either on an absolute basis or relative to a pre-established target, to a previous period's results or to a designated comparison group, and, with respect to financial metrics, which may be determined in accordance with United States Generally Accepted Accounting Principles ("GAAP"), in accordance with accounting principles established by the International Accounting Standards Board (“IASB Principles”) or which may be adjusted when established to exclude any items otherwise includable under GAAP or under IASB Principles: (i) cash flow (including operating cash flow or free cash flow), (ii) cash position, (iii) revenue (on an absolute basis or adjusted for currency effects), (iv) revenue growth, (v) contribution margin, (vi) gross margin, (vii) operating margin (viii) operating expenses or operating expenses as a percentage of revenue, (ix) earnings (which may include earnings before interest and taxes, earnings before taxes and net earnings), (x) earnings per share, (xi) operating income, (xii) net income, (xiii) stock price, (xiv) return on equity, (xv) total stockholder return, (xvi) growth in stockholder value relative to a specified publicly reported index (such as the S&P 500 Index), (xvii) return on capital, (xviii) return on assets or net assets, (xix) return on investment, (xx) economic value added, (xxi) operating profit or net operating profit, (xxii) operating margin, (xxiii) market share, (xxiv) contract awards or backlog, (xxv) overhead or other expense reduction, (xxvi) credit rating, (xxvii) objective customer indicators, (xxviii) new product invention or innovation, (xxix) attainment of research and development milestones, (xxx) improvements in productivity,

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(xxxi) attainment of objective operating goals, and (xxxii) objective employee metrics. The Performance Goals may differ from Participant to Participant and from Award to Award. In particular, the Administrator may appropriately adjust any evaluation of performance under a Performance Goal to exclude (a) any extraordinary non-recurring items, (b) the affect of any merger, acquisition, or other business combination or divestiture or (ii) the effect of any changes in accounting principles affecting the Company's or a business units', region's, affiliate's or business segment's reported results.

(gg)    “Performance Share” shall mean a performance share Award granted to a Participant pursuant to Section 14.

(hh)    “Performance Unit”means a performance unit Award granted to a Participant pursuant to Section 15.

(ii)    “Plan” shall mean this 2006 Equity Incentive Plan, as amended.

(jj)    “Plan Minimum Vesting Requirements” shall mean the minimum vesting requirements for Full Value Awards under Plan Section 4(b)(vi) hereunder.

(kk)    “Restricted Stock” shall mean a restricted stock Award granted to a Participant pursuant to Section 11.

(ll)    “Restricted Stock Unit” shall mean a bookkeeping entry representing an amount equal to the Fair Market Value of one Share, granted pursuant to Section 13. Each Restricted Stock Unit represents an unfunded and unsecured obligation of the Company.

(mm)    “Rule 16b-3” shall mean Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect when discretion is being exercised with respect to the Plan.

(nn)    “Section 16(b)” shall mean Section 16(b) of the Exchange Act.

(oo)    “Service Provider” means an Employee or Consultant.

(pp)    “Share” shall mean a share of the Common Stock, as adjusted in accordance with Section 21 of the Plan.

(qq)    “Stock Appreciation Right” or “SAR” shall mean a stock appreciation right granted pursuant to Section 9 below.

(rr)    “Subsidiary” shall mean a “subsidiary corporation”, whether now or hereafter existing, as defined in Section 424(f) of the Code.

3.Stock Subject to the Plan. Subject to the provisions of Section 21 of the Plan, the maximum aggregate number of shares which may be optioned and sold under the Plan is 94,500,000 shares of Common Stockplus any Shares subject to anyoptions under the Company's 2000 Nonstatutory Stock Option Plan and 1996 Stock Incentive Plan that are outstanding on the date this Plan becomes effective and that subsequently expire unexercised, up to a maximum of an additional 75,000,000 Shares. All of the shares issuable under the Plan may be authorized, but unissued, or reacquired Common Stock.

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Any Shares subject to Options or SARs shall be counted against the numerical limits of this Section 3 as one Share for every Share subject thereto. Any Shares subject to Performance Shares, Restricted Stock or Restricted Stock Units with a per share or unit purchase price lower than 100% of Fair Market Value on the date of grant shall be counted against the numerical limits of this Section 3 as two and one-tenth Shares for every one Share subject thereto. To the extent that a Share that was subject to an Award that counted as two and one-tenth Shares against the Plan reserve pursuant to the preceding sentence is recycled back into the Plan under the next paragraph of this Section 3, the Plan shall be credited with two and one-tenth Shares.

If an Award expires or becomes unexercisable without having been exercised in full, or, with respect to Restricted Stock, Performance Shares or Restricted Stock Units, is forfeited to or repurchased by the Company at its original purchase price due to such Award failing to vest, the unpurchased Shares (or for Awards other than Options and SARs, the forfeited or repurchased shares) which were subject thereto shall become available for future grant or sale under the Plan (unless the Plan has terminated). With respect to SARs, when an SAR is exercised, the shares subject to a SAR grant agreement shall be counted against the numerical limits of Section 3 above, as one share for every share subject thereto, regardless of the number of shares used to settle the SAR upon exercise (i.e., shares withheld to satisfy the exercise price of an SAR shall not remain available for issuance under the Plan). Shares that have actually been issued under the Plan under any Award shall not be returned to the Plan and shall not become available for future distribution under the Plan; provided, however, that if Shares of Restricted Stock, Performance Shares or Restricted Stock Units are repurchased by the Company at their original purchase price or are forfeited to the Company due to such Awards failing to vest, such Shares shall become available for future grant under the Plan. Shares used to pay the exercise price of an Option shall not become available for future grant or sale under the Plan. Shares used to satisfy tax withholding obligations shall not become available for future grant or sale under the Plan. To the extent an Award under the Plan is paid out in cash rather than stock, such cash payment shall not reduce the number of Shares available for issuance under the Plan. Any payout of Dividend Equivalents or Performance Units, because they are payable only in cash, shall not reduce the number of Shares available for issuance under the Plan. Conversely, any forfeiture of Dividend Equivalents or Performance Units shall not increase the number of Shares available for issuance under the Plan.

4. Administration of the Plan.

(a)Procedure.

(i)Multiple Administrative Bodies. If permitted by Applicable Laws, the Plan may be administered by different bodies with respect to Directors, Officers who are not Directors, and Employees who are neither Directors nor Officers.

(ii)Section 162(m). To the extent that the Administrator determines it to be desirable to qualify Awards granted hereunder as “performance-based compensation” within the meaning of Section 162(m) of the Code, the Plan shall be administered by a Committee consisting solely of two or more “outside directors” within the meaning of Section 162(m) of the Code.

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(iii)Administration With Respect to Officers Subject to Section 16(b). With respect to Option grants made to Employees who are also Officers subject to Section 16(b) of the Exchange Act, the Plan shall be administered by (A) the Board, if the Board may administer the Plan in compliance with Rule 16b-3, or (B) a committee designated by the Board to administer the Plan, which committee shall be constituted to comply with Rule 16b-3. Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. From time to time the Board may increase the size of the Committee and appoint additional members, remove members (with or without cause) and substitute new members, fill vacancies (however caused), and remove all members of the Committee and thereafter directly administer the Plan, all to the extent permitted by Rule 16b-3.

(iv)Administration With Respect to Other Persons. With respect to Award grants made to Employees or Consultants who are not Officers of the Company, the Plan shall be administered by (A) the Board, (B) a committee designated by the Board, or (C) a sub-committee designated by the designated committee, which committee or sub-committee shall be constituted to satisfy Applicable Laws. Once appointed, such Committee shall serve in its designated capacity until otherwise directed by the Board. The Board may increase the size of the Committee and appoint additional members, remove members (with or without cause) and substitute new members, fill vacancies (however caused), and remove all members of the Committee and thereafter directly administer the Plan, all to the extent permitted by Applicable Laws.

(v)Administration With Respect to Automatic Grants to Outside Directors. Automatic Grants to Outside Directors shall be pursuant to a non-discretionary formula as set forth in Section 11 hereof and therefore shall not be subject to any discretionary administration.

(b)Powers of the Administrator. Subject to the provisions of the Plan (including the non-discretionary automatic grant to Outside Director provisions of Section 11), and in the case of a Committee, subject to the specific duties delegated by the Board to such Committee, the Administrator shall have the authority, in its discretion:

(i)to determine the Fair Market Value in accordance with Section 2(v) of the Plan;

(ii)to select the Service Providers to whom Awards may be granted hereunder;

(iii)to determine whether and to what extent Awards are granted hereunder;

(iv)to determine the number of shares of Common Stock to be covered by each Award granted hereunder;

(v)to approve forms of agreement for use under the Plan;

(vi)to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Awards vest or may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions (subject to compliance with applicable laws, including Code Section 409A), and any restriction or limitation regarding any Award or the shares of Common Stock relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine; provided, however, that with respect to Full Value Awards vesting solely based on continuing as a Service Provider, they will vest in full no earlier (except if accelerated pursuant to Section 21 hereof or pursuant to

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change of control severance agreements entered into by and between the Company and any Service Provider) than the three (3) year anniversary of the grant date; provided, further, that if vesting is not solely based on continuing as a Service Provider, they will vest in full no earlier (except if accelerated pursuant to Section 21 hereof or pursuant to change of control severance agreements entered into by and between the Company and any Service Provider) than the one (1) year anniversary of the grant date;

(vii)to construe and interpret the terms of the Plan and Awards granted pursuant to the Plan;

(viii)to prescribe, amend and rescind rules and regulations relating to the Plan;

(ix)to modify or amend each Award (subject to Section 7 and Section 24(c) of the Plan);

(x)to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Award previously granted by the Administrator;

(xi)to determine the terms and restrictions applicable to Awards;

(xii)to determine whether Awards will be adjusted for Dividend Equivalents and whether such Dividend Equivalents shall be subject to vesting; and

(xiii)to make all other determinations deemed necessary or advisable for administering the Plan.

(c)Effect of Administrator's Decision. All decisions, determinations and interpretations of the Administrator shall be final and binding on all Participants and any other holders of any Awards granted under the Plan.

(d)Exception to Plan Minimum Vesting Requirements.

(i)Full Value Awards that result in issuing up to 5% of the maximum aggregate number of shares of Stock authorized for issuance under the Plan (the “5% Limit”) may be granted to any one or more employees or Non-employee Directors without respect to the Plan Minimum Vesting Requirements.

(ii)All Full Value Awards that have their vesting discretionarily accelerated, and all Options and SARs that have their vesting discretionarily accelerated 100%, other than, in either case, pursuant to (A) a merger or asset sale transaction described in Section 21(c) hereof (including vesting acceleration in connection with employment termination following such event), (B) a Participant's death, or (C) a Participant's Disability, are subject to the 5% Limit.

(iii)Notwithstanding the foregoing, the Administrator may accelerate the vesting of Full Value Awards such that the Plan Minimum Vesting Requirements are still satisfied, without such vesting acceleration counting toward the 5% Limit.

(iv)The 5% Limit applies in the aggregate to Full Value Award grants that do not satisfy Plan minimum vesting requirements and to the discretionary vesting acceleration of Awards.

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5.Eligibility. Awards may be granted only to Service Providers. Incentive Stock Options may be granted only to Employees. A Service Provider who has been granted an Award may, if he or she is otherwise eligible, be granted an additional Award or Awards. Outside Directors may only be granted Awards as specified in Section 11 hereof.

6.Code Section 162(m) Provisions.

(a)Option and SAR Annual Share Limit. Subject to Section 7 below, no Participant shall be granted, in any Fiscal Year, Options and Stock Appreciation Rights to purchase more than 2,000,000 Shares; provided, however, that such limit shall be 4,000,000 Shares in the Participant's first Fiscal Year of Company service.

(b)Restricted Stock, Performance Share and Restricted Stock Unit Annual Limit. No Participant shall be granted, in any Fiscal Year, more than 1,000,000 Shares in the aggregate of the following: (i) Restricted Stock, (ii) Performance Shares, or (iii) Restricted Stock Units; provided, however, that such limit shall be 2,000,000 Shares in the Participant's first Fiscal Year of Company service.

(c)Performance Units Annual Limit. No Participant shall receive Performance Units, in any Fiscal Year, having an initial value greater than $2,000,000, provided, however, that such limit shall be $4,000,000 in the Participant's first Fiscal Year of Company service.

(d)Section 162(m) Performance Restrictions. For purposes of qualifying grants of Restricted Stock, Performance Shares, Performance Units or Restricted Stock Units as “performance-based compensation” under Section 162(m) of the Code, the Administrator, in its discretion, may set restrictions based upon the achievement of Performance Goals. The Performance Goals shall be set by the Administrator on or before the latest date permissible to enable the Restricted Stock, Performance Shares, Performance Units or Restricted Stock Units to qualify as “performance-based compensation” under Section 162(m) of the Code. In granting Restricted Stock, Performance Shares, Performance Units or Restricted Stock Units which are intended to qualify under Section 162(m) of the Code, the Administrator shall follow any procedures determined by it from time to time to be necessary or appropriate to ensure qualification of the Award under Section 162(m) of the Code (e.g., in determining the Performance Goals).

(e)Changes in Capitalization. The numerical limitations in Sections 6(a) and (b) shall be adjusted proportionately in connection with any change in the Company's capitalization as described in Section 16(a).

7.No Repricing. The exercise price for an Option or SAR may not be reduced without the consent of the Company's stockholders. This shall include, without limitation, a repricing of the Option or SAR as well as an Option or SAR exchange program whereby the Participant agrees to cancel an existing Option in exchange for an Option, SAR or other Award. If an Option or SAR is cancelled in the same Fiscal Year in which it was granted (other than in connection with a transaction described in Section 14), the cancelled Option or SAR as well as any replacement Option or SAR will be counted against the limits set forth in section 6(a) above.  Moreover, if the exercise price of an Option or SAR is reduced, the transaction will be treated as a cancellation of the Option or SAR and the grant of a new Option or SAR.

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8.Stock Options.

(a)Type of Option. Each Option shall be designated in the Award Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designations, to the extent that the aggregate Fair Market Value of Shares subject to a Participant's incentive stock options granted by the Company, any Parent or Subsidiary, that become exercisable for the first time during any calendar year (under all plans of the Company or any Parent or Subsidiary) exceeds $100,000, such excess Options shall be treated as Nonstatutory Stock Options. For purposes of this Section 8(a), incentive stock options shall be taken into account in the order in which they were granted, and the Fair Market Value of the Shares shall be determined as of the time of grant.

(b)Term of Option. The term of each Option shall be stated in the Notice of Grant; provided, however, that the term shall be seven (7) years from the date of grant or such shorter term as may be provided in the Notice of Grant. Moreover, in the case of an Incentive Stock Option granted to a Participant who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Incentive Stock Option shall be five (5) years from the date of grant or such shorter term as may be provided in the Notice of Grant.

(c)Exercise Price and Consideration.

(i)The per Share exercise price for the Shares to be issued pursuant to exercise of an Option shall be such price as is determined by the Administrator, but shall be subject to the following:

(A)In the case of an Incentive Stock Option

(1)granted to an Employee who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant.

(2)granted to any Employee, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant.

(B)In the case of a Nonstatutory Stock Option, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant.

(ii)Except with respect to automatic stock option grants to Outside Directors, the consideration to be paid for the Shares to be issued upon exercise of an Option, including the method of payment, shall be determined by the Administrator and may consist entirely of cash; check; delivery of a properly executed exercise notice together with such other documentation as the Committee and the broker, if applicable, shall require to effect an exercise of the option and delivery to the Company of the sale proceeds required; or any combination of such methods of payment, or such other consideration and method of payment for the issuance of Shares to the extent permitted under Applicable Law.

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9.Stock Appreciation Rights.

(a)Grant of SARs. Subject to the terms and conditions of the Plan, SARs may be granted to Participants at any time and from time to time as shall be determined by the Administrator, in its sole discretion. Subject to Section 6(a) hereof, the Administrator shall have complete discretion to determine the number of SARs granted to any Participant.

(b)Exercise Price and other Terms. The per share exercise price for the Shares to be issued pursuant to exercise of an SAR shall be determined by the Administrator and shall be no less than 100% of the Fair Market Value per share on the date of grant. Otherwise, subject to Section 6(a) of the Plan, the Administrator, subject to the provisions of the Plan, shall have complete discretion to determine the terms and conditions of SARs granted under the Plan; provided, however, that no SAR may have a term of more than seven(=7) years from the date of grant.

(c)Payment of SAR Amount. Upon exercise of a SAR, a Participant shall be entitled to receive payment from the Company in an amount determined by multiplying:

(i)The difference between the Fair Market Value of a Share on the date of exercise over the exercise price; times

(ii)The number of Shares with respect to which the SAR is exercised.

(d)Payment upon Exercise of SAR. At the discretion of the Administrator, but only as specified in the Award Agreement, payment for a SAR may be in cash, Shares or a combination thereof. If the Award Agreement is silent as to the form of payment, payment of the SAR may only be in Shares.

(e)SAR Agreement. Each SAR grant shall be evidenced by an Award Agreement that shall specify the exercise price, the term of the SAR, the conditions of exercise, whether it may be settled in cash, Shares or a combination thereof, and such other terms and conditions as the Administrator, in its sole discretion, shall determine.

(f)Expiration of SARs. A SAR granted under the Plan shall expire upon the date determined by the Administrator, in its sole discretion, and set forth in the Award Agreement.

10.Exercise of Option or SAR.

(a)Procedure for Exercise; Rights as a Shareholder. Any Option or SAR granted hereunder shall be exercisable at such times and under such conditions as determined by the Administrator, including performance criteria with respect to the Company and/or the Participant, and as shall be permissible under the terms of the Plan.

An Option or SAR may not be exercised for a fraction of a Share.

An Option or SAR shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Option or SAR by the person entitled to exercise the Option or SAR and, with respect to Options only, full payment for the Shares with respect to which the Option is exercised has been received by the Company. With respect to Options only, full payment may, as authorized by the Administrator, consist of any consideration and method of payment allowable under

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Section 8(d) of the Plan. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the stock certificate evidencing such Shares, no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Section 21 of the Plan.

(b)Termination of Status as a Service Provider. If an Employee or Consultant ceases to serve as a Service Provider, he or she may, but only within 90 days (or such other period of time as is determined by the Administrator and as set forth in the Option or SAR Agreement) after the date he or she ceases to be a Service Provider, exercise his or her Option or SAR to the extent that he or she was entitled to exercise it at the date of such termination. To the extent that he or she was not entitled to exercise the Option or SAR at the date of such termination, or if he or she does not exercise such Option or SAR (which he or she was entitled to exercise) within the time specified herein, the Option or SAR shall terminate.

(c)Disability. If a Participant ceases to be a Service Provider as a result of the Participant's Disability, the Participant may exercise his or her Option or SAR within such period of time as is specified in the Award Agreement to the extent the Option or SAR is vested on the date of termination (but in no event later than the expiration of the term of such Option or SAR as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the Option or SAR shall remain exercisable for twelve (12) months following the Participant's termination. If, on the date of termination, the Participant is not vested as to his or her entire Option or SAR, the Shares covered by the unvested portion of the Option or SAR shall revert to the Plan. If, after termination, the Participant does not exercise his or her Option or SAR within the time specified herein, the Option shall terminate, and the Shares covered by such Option or SAR shall revert to the Plan.

(d)Death of Participant. If a Participant dies while a Service Provider, the Option or SAR may be exercised following the Participant's death within such period of time as is specified in the Award Agreement (but in no event may the option be exercised later than the expiration of the term set forth in the Award Agreement), by the Participant's designated beneficiary, provided such beneficiary has been designated prior to Participant's death in a form acceptable to the Administrator. If no such beneficiary has been designated by the Participant, then such Option or SAR may be exercised by the personal representative of the Participant's estate or by the person(s) to whom the Option or SAR is transferred pursuant to the Participant's will or in accordance with the laws of descent and distribution. In the absence of a specified time in the Award Agreement, the Option or SAR shall remain exercisable for twelve (12) months following Participant's death. If the Option or SAR is not so exercised within the time specified herein, the Option or SAR shall terminate, and the Shares covered by such Option or SAR shall revert to the Plan.

11.Automatic Stock Option Grants to Outside Directors.

(a)Procedure for Grants. All grants of Options to Outside Directors under this Plan shall be automatic and non-discretionary and shall be made strictly in accordance with the following provisions:

(i)No person shall have any discretion to select which Outside Directors shall be granted Options or Restricted Stock Units or to determine the number of Shares to be covered by Options or Restricted Stock Units granted to Outside Directors.

(ii)Each Outside Director shall be automatically granted an Option to purchase 50,000 Shares (the “First Option”) upon the date on which such person first becomes a Director, whether through

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election by the stockholders of the Company or appointment by the Board of Directors to fill a vacancy.

(iii)At each of the Company's annual stockholder meetings (A) each Outside Director who was an Outside Director on the date of the prior year's annual stockholder meeting shall be automatically granted Restricted Stock Units for a number of Shares equal to the Annual Value, and (B) each Outside Director who was not an Outside Director on the date of the prior year's annual stockholder meeting shall receive a Restricted Stock Unit for a number of Shares determined by multiplying the Annual Value by a fraction, the numerator of which is the number of days since the Outside Director received their First Option (or, in the case of a Director who has transitioned from an employee director to an Outside Director and did not receive a First Option, the date the Director became an Outside Director), and the denominator of which is 365, rounded down to the nearest whole Share. Each award specified in A and B are generically referred to as an “Annual Award”. The Annual Value means the number equal to $125,000 divided by the average daily closing price over the six month period ending on the last day of the fiscal year preceding the date of grant (for example, the period from July1, 2008 - December 31, 2008 for Annual Awards granted in May 2009).

(iv)Notwithstanding the provisions of subsections (ii) and (iii) hereof, in the event that an automatic grant hereunder would cause the number of Shares subject to outstanding Options and Restricted Stock Units plus the number of Shares previously purchased upon exercise of Options or issued upon vesting of Restricted Stock Units to exceed the number of Shares available for issuance under the Plan, then each such automatic grant shall be for that number of Shares determined by dividing the total number of Shares remaining available for grant by the number of Outside Directors on the automatic grant date. Any further grants shall then be deferred until such time, if any, as additional Shares become available for grant under the Plan.

(v)The terms of an Option granted hereunder shall be as follows:

(A)the term of the Option shall be seven (7) years.

(B)the Option shall be exercisable only while the Outside Director remains a Director of the Company, except as set forth in subsection (c) hereof.

(C)the exercise price per Share shall be 100% of the Fair Market Value on the date of grant of the Option.

(D)the First Option shall vest and become exercisable as to 1/36^th of the covered Shares each month following the grant date, with the last 1/36^th vesting on the day prior to the Company's annual stockholder meeting in the third calendar year following the date of grant, so as to become 100% vested on the approximately three-year anniversary of the grant date, subject to the Participant maintaining Continuous Status as a Director on each vesting date.

(E)the Annual Award shall become 100% vested on the one year anniversary of the grant date, subject to the Participant maintaining Continuous Status as a Director on each vesting date.

(b)Consideration for Exercising Outside Director Stock Options. The consideration to be paid for the Shares to be issued upon exercise of an automatic Outside Director Option shall consist entirely of cash, check, and to the extent permitted by Applicable Laws, delivery of a properly executed exercise notice together with such other documentation as the Administrator and the broker, if applicable, shall require to effect an exercise of the Option and delivery to the Company of the sale proceeds required to pay the exercise

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price, or any combination of such methods of payment.

(c)Post-Directorship Exercisability. If an Outside Director ceases to serve as a Director, (including pursuant to his or her death or Disability) he or she may, but only within 90 days, after the date he or she ceases to be a Director of the Company, exercise his or her Option to the extent that he or she was entitled to exercise it at the date of such termination. To the extent that he or she was not entitled to exercise an Option at the date of such termination, or if he or she does not exercise such Option (which he was entitled to exercise) within the time specified herein, the Option shall terminate.

12.Restricted Stock.

(a)Grant of Restricted Stock. Subject to the terms and conditions of the Plan, Restricted Stock may be granted to Participants at any time as shall be determined by the Administrator, in its sole discretion. Subject to Section 6(b) hereof as well as the Plan Minimum Vesting Requirements set forth in Sections 4(b)(vi) and 4(d) hereof, the Administrator shall have complete discretion to determine (i) the number of Shares subject to a Restricted Stock award granted to any Participant, and (ii) the conditions that must be satisfied, which typically will be based principally or solely on continued provision of services but may include a performance-based component, upon which is conditioned the grant, vesting or issuance of Restricted Stock.

(b)Other Terms. The Administrator, subject to the provisions of the Plan, shall have complete discretion to determine the terms and conditions of Restricted Stock granted under the Plan; provided that Restricted Stock may only be issued in the form of Shares. Restricted Stock grants shall be subject to the terms, conditions, and restrictions determined by the Administrator at the time the stock or the restricted stock unit is awarded. The Administrator may require the recipient to sign a Restricted Stock Award agreement as a condition of the award. Any certificates representing the Shares of stock awarded shall bear such legends as shall be determined by the Administrator.

(c)Restricted Stock Award Agreement. Each Restricted Stock grant shall be evidenced by an agreement that shall specify the purchase price (if any) and such other terms and conditions as the Administrator, in its sole discretion, shall determine; provided; however, that if the Restricted Stock grant has a purchase price, such purchase price must be paid no more than seven (7) years following the date of grant.

13.Restricted Stock Units.

(a)Grant. Restricted Stock Units may be granted at any time and from time to time as determined by the Administrator. After the Administrator determines that it will grant Restricted Stock Units under the Plan, it shall advise the Participant in writing or electronically of the terms, conditions, and restrictions related to the grant, including the number of Restricted Stock Units and the form of payout, which, subject to Section 6(b) hereof, may be left to the discretion of the Administrator.

(b)Vesting Criteria and Other Terms. Subject to the Plan Minimum Vesting Requirements set forth in Sections 4(b)(vi) and 4(d) hereof, the Administrator shall set vesting criteria in its discretion, which, depending on the extent to which the criteria are met, will determine the number of Restricted Stock Units that will be paid out to the Participant. The Administrator may set vesting criteria based upon the achievement of Company-wide, business unit, or individual goals (including, but not limited to, continued employment), or any other basis determined by the Administrator in its discretion.

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(c)Earning Restricted Stock Units. Upon meeting the applicable vesting criteria, the Participant shall be entitled to receive a payout as specified in the Restricted Stock Unit Award Agreement. Notwithstanding the foregoing, at any time after the grant of Restricted Stock Units, the Administrator, in its sole discretion, may reduce or waive any vesting criteria that must be met to receive a payout.

(d)Form and Timing of Payment. Payment of earned Restricted Stock Units shall be made as soon as practicable after the date(s) set forth in the Restricted Stock Unit Award Agreement. The Administrator, in its sole discretion, but only as specified in the Award Agreement, may pay earned Restricted Stock Units in cash, Shares, or a combination thereof. If the Award Agreement is silent as to the form of payment, payment of the Restricted Stock Units may only be in Shares.

(e)Cancellation. On the date set forth in the Restricted Stock Unit Award Agreement, all unearned Restricted Stock Units shall be forfeited to the Company.

14.Performance Shares.

(a)Grant of Performance Shares. Subject to the terms and conditions of the Plan, Performance Shares may be granted to Participants at any time as shall be determined by the Administrator, in its sole discretion. Subject to Section 6(b) hereof as well as the Plan Minimum Vesting Requirements set forth in Sections 4(b)(vi) and 4(d) hereof, the Administrator shall have complete discretion to determine (i) the number of Shares subject to a Performance Share award granted to any Participant, and (ii) the conditions that must be satisfied, which typically will be based principally or solely on achievement of performance milestones but may include a service-based component, upon which is conditioned the grant or vesting of Performance Shares. Performance Shares shall be granted in the form of units to acquire Shares. Each such unit shall be the equivalent of one Share for purposes of determining the number of Shares subject to an Award. Until the Shares are issued, no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the units to acquire Shares.

(b)Other Terms. The Administrator, subject to the provisions of the Plan, shall have complete discretion to determine the terms and conditions of Performance Shares granted under the Plan. Performance Share grants shall be subject to the terms, conditions, and restrictions determined by the Administrator at the time the stock is awarded, which may include such performance-based milestones as are determined appropriate by the Administrator. The Administrator may require the recipient to sign a Performance Shares Award Agreement as a condition of the award. Any certificates representing the Shares of stock awarded shall bear such legends as shall be determined by the Administrator.

(c)Performance Share Award Agreement. Each Performance Share grant shall be evidenced by an Award Agreement that shall specify such other terms and conditions as the Administrator, in its sole discretion, shall determine.

15.Performance Units.

(a)Grant of Performance Units. Performance Units are similar to Performance Shares, except that they shall be settled in a cash equivalent to the Fair Market Value of the underlying Shares, determined as of the vesting date. Subject to the terms and conditions of the Plan, Performance Units may be granted to Participants at any time and from time to time as shall be determined by the Administrator, in its sole discretion. The Administrator shall have complete discretion to determine the conditions that must be satisfied, which typically will be based principally or solely on achievement of performance milestones but

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may include a service-based component, upon which is conditioned the grant or vesting of Performance Units. Performance Units shall be granted in the form of units to acquire Shares. Each such unit shall be the cash equivalent of one Share of Common Stock. No right to vote or receive dividends or any other rights as a stockholder shall exist with respect to Performance Units or the cash payable thereunder.

(b)Number of Performance Units. Subject to Section 6(c) hereof, the Administrator will have complete discretion in determining the number of Performance Units granted to any Participant.

(c)Other Terms. The Administrator, subject to the provisions of the Plan, shall have complete discretion to determine the terms and conditions of Performance Units granted under the Plan. Performance Unit grants shall be subject to the terms, conditions, and restrictions determined by the Administrator at the time the grant is awarded, which may include such performance-based milestones as are determined appropriate by the Administrator. The Administrator may require the recipient to sign a Performance Unit agreement as a condition of the award. Any certificates representing the units awarded shall bear such legends as shall be determined by the Administrator.

(d)Performance Unit Award Agreement. Each Performance Unit grant shall be evidenced by an agreement that shall specify such terms and conditions as the Administrator, in its sole discretion, shall determine.

16.Deferred Stock Units.

(a)Description. Deferred Stock Units shall consist of a Restricted Stock, Restricted Stock Unit, Performance Share or Performance Unit Award that the Administrator, in its sole discretion permits to be paid out in installments or on a deferred basis, in accordance with rules and procedures established by the Administrator, subject to the Plan Minimum Vesting Requirements set forth in Sections 4(b)(vi) and 4(d) hereof. Deferred Stock Units shall remain subject to the claims of the Company's general creditors until distributed to the Participant.

(b)162(m) Limits. Deferred Stock Units shall be subject to the annual 162(m) limits applicable to the underlying Restricted Stock, Restricted Stock Unit, Performance Share or Performance Unit Award as set forth in Section 6 hereof.

17.Leaves of Absence. If as a condition to be granted an unpaid leave of absence by the Company, a Participant agrees that vesting shall be suspended during all or a portion of such leave of absence, (except as otherwise required by Applicable Laws) vesting of Awards granted hereunder shall cease during such agreed upon portion of the unpaid leave of absence and shall only recommence upon return to active service.

18.Part-Time Service. Unless otherwise required by Applicable Laws, if as a condition to being permitted to work on a less than full-time basis, the Participant agrees that any service-based vesting of Awards granted hereunder shall be extended on a proportionate basis in connection with such transition to a less than a full-time basis, vesting shall be adjusted in accordance with such agreement. Such vesting shall be proportionately re-adjusted prospectively in the event that the Employee subsequently becomes regularly scheduled to work additional hours of service.

19.Non-Transferability of Awards. Except as determined otherwise by the Administrator in its sole discretion (but never a transfer in exchange for value), Awards may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Participant, only by the Participant, without the

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prior written consent of the Administrator.

20.Stock Withholding to Satisfy Withholding Tax Obligations. When a Participant incurs tax liability in connection with the exercise, vesting or payout, as applicable, of an Award, which tax liability is subject to tax withholding under applicable tax laws, and the Participant is obligated to pay the Company an amount required to be withheld under applicable tax laws, the Participant may satisfy the withholding tax obligation by electing to have the Company withhold from the Shares to be issued upon exercise of the Option or SAR or the Shares to be issued upon payout or vesting of the other Award, if any, that number of Shares having a Fair Market Value equal to the amount required to be withheld. The Fair Market Value of the Shares to be withheld shall be determined on the date that the amount of tax to be withheld is to be determined (the “Tax Date”).

All elections by a Participant to have Shares withheld for this purpose shall be made in writing in a form acceptable to the Administrator and shall be subject to the following restrictions:

(a)the election must be made on or prior to the applicable Tax Date; and

(b)all elections shall be subject to the consent or disapproval of the Administrator.

In the event the election to have Shares subject to an Award withheld is made by a Participant and the Tax Date is deferred under Section 83 of the Code because no election is filed under Section 83(b) of the Code, the Participant shall receive the full number of Shares with respect to which the Option or SAR is exercised or other Award is vested but such Participant shall be unconditionally obligated to tender back to the Company the proper number of Shares on the Tax Date.

21. Adjustments Upon Changes in Capitalization, Dissolution, Merger or Asset Sale.

(a)Changes in Capitalization. Subject to any required action by the shareholders of the Company, the number of shares of Common Stock covered by each outstanding Award, and the number of shares of Common Stock which have been authorized for issuance under the Plan but as to which no Awards have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Award, as well as the price per share of Common Stock covered by each such outstanding Award, the annual share limitations under Sections 6(a) and (b) hereof, and the number of Shares subject to ongoing automatic First Option and Annual Award grants to Outside Directors under Section 11 hereof shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Award.

(b)Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Administrator shall notify each Participant as soon as practicable prior to the effective date of such proposed transaction. The Administrator in its discretion (but not with respect to Options granted to Outside Directors) may provide for a Participant to have the right to exercise his or her Option or SAR until ten (10) days prior to such transaction as to all of the Awarded Stock covered thereby, including Shares as

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to which the Award would not otherwise be exercisable. In addition, the Administrator may provide that any Company repurchase option or forfeiture rights applicable to any Award shall lapse 100%, and that any Award vesting shall accelerate 100%, provided the proposed dissolution or liquidation takes place at the time and in the manner contemplated. To the extent it has not been previously exercised (with respect to Options and SARs) or vested (with respect to other Awards), an Award will terminate immediately prior to the consummation of such proposed action.

(c)Merger or Asset Sale.

(i)Stock Options and SARs. In the event of a merger of the Company with or into another corporation, or the sale of substantially all of the assets of the Company, each outstanding Option and SAR shall be assumed or an equivalent option or SAR substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or substitute for the Option or SAR, the Participant shall fully vest in and have the right to exercise the Option or SAR as to all of the Awarded Stock, including Shares as to which it would not otherwise be vested or exercisable. If an Option or SAR becomes fully vested and exercisable in lieu of assumption or substitution in the event of a merger or asset sale, the Administrator shall notify the Participant in writing or electronically that the Option or SAR shall be fully vested and exercisable for a period of thirty (30) days from the date of such notice, and the Option or SAR shall terminate upon the expiration of such period. With respect to Options granted to Outside Directors, in the event that the Outside Director is required to terminate his or her position as an Outside Director at the request of the acquiring entity within 12 months following such merger or asset sale, each outstanding Option held by such Outside Director shall become fully vested and exercisable, including as to Shares as to which it would not otherwise be exercisable, unless the Board, in its discretion, determines otherwise.

(ii)Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units, Deferred Stock Units and Dividend Equivalents. In the event of a merger of the Company with or into another corporation, or the sale of substantially all of the assets of the Company, each outstanding Restricted Stock, Restricted Stock Unit, Performance Share, Performance Unit, Dividend Equivalent and Deferred Stock Unit award (and any related Dividend Equivalent) shall be assumed or an equivalent Restricted Stock, Restricted Stock Unit, Performance Share, Performance Unit, Dividend Equivalent and Deferred Stock Unit award (and any related Dividend Equivalent) substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or substitute for the Restricted Stock, Restricted Stock Unit, Performance Share, Performance Unit, Dividend Equivalent and Deferred Stock Unit award (and any related Dividend Equivalent), the Participant shall fully vest in the Restricted Stock, Restricted Stock Unit, Performance Share, Performance Unit, Dividend Equivalent and Deferred Stock Unit award (and any related Dividend Equivalent), including as to Shares (or with respect to Dividend Equivalents and Performance Units, the cash equivalent thereof) which would not otherwise be vested. For the purposes of this paragraph, a Restricted Stock, Restricted Stock Unit, Performance Share, Performance Unit, Dividend Equivalent and Deferred Stock Unit award (and any related Dividend Equivalent) shall be considered assumed if, following the merger or asset sale, the award confers the right to purchase or receive, for each Share (or with respect to Dividend Equivalents and Performance Units, the cash equivalent thereof) subject to the Award immediately prior to the merger or asset sale, the consideration (whether stock, cash, or other securities or property) received in the merger or asset sale by holders of the Company's common stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the merger or asset sale is not solely common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received, for each Share and each unit/right to acquire a Share subject to

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the Award (other than Dividend Equivalents and Performance Units) to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of the Company's common stock in the merger or asset sale.

22.Time of Granting Awards. The date of grant of an Award shall, for all purposes, be the date on which the Administrator makes the determination granting such Award. Notice of the determination shall be given to each Employee or Consultant to whom an Award is so granted within a reasonable time after the date of such grant.

23.Term of Plan. The Plan shall continue in effect until March 1, 2016.

24.Amendment and Termination of the Plan.

(a)Amendment and Termination. The Board may at any time amend, alter, suspend or terminate the Plan.

(b)Shareholder Approval. The Company shall obtain shareholder approval of any Plan amendment to the extent necessary and desirable to comply with Rule 16b-3 or with Section 422 of the Code (or any successor rule or statute or other applicable law, rule or regulation, including the requirements of any exchange or quotation system on which the Common Stock is listed or quoted). Such shareholder approval, if required, shall be obtained in such a manner and to such a degree as is required by the applicable law, rule or regulation.

(c)Effect of Amendment or Termination. No amendment, alteration, suspension or termination of the Plan shall impair the rights of any Participant, unless mutually agreed otherwise between the Participant and the Administrator, which agreement must be in writing and signed by the Participant and the Company.

25.Conditions Upon Issuance of Shares. Shares shall not be issued pursuant to the exercise of an Option unless the exercise of such Option and the issuance and delivery of such Shares pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act, the Exchange Act, the rules and regulations promulgated thereunder, state securities laws, and the requirements of any stock exchange upon which the Shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance.

As a condition to the exercise or payout, as applicable, of an Award, the Company may require the person exercising such Option or SAR, or in the case of another Award (other than a Dividend Equivalent or Performance Unit), the person receiving the Shares upon vesting, to render to the Company a written statement containing such representations and warranties as, in the opinion of counsel for the Company, may be required to ensure compliance with any of the aforementioned relevant provisions of law, including a representation that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares, if, in the opinion of counsel for the Company, such a representation is required.

26.Reservation of Shares. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan. Inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

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EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Kevin R. Johnson, certify that:

1.    I have reviewed this quarterly report on Form 10-Q of Juniper Networks, Inc.;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.    The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)    Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)    Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.    The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and

(b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 6, 2011

/s/ Kevin R. Johnson

Kevin R. Johnson

Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Robyn M. Denholm, certify that:

1.    I have reviewed this quarterly report on Form 10-Q of Juniper Networks, Inc.;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.    The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)    Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)    Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.    The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and

(b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 6, 2011

/s/ Robyn M. Denholm

Robyn M. Denholm

Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification of Chief Executive Officer

Pursuant to 18 U.S.C. Section 1350 As Adopted

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, Kevin R. Johnson, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Juniper Networks, Inc. on Form 10-Q for the three months ended March 31, 2011, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Juniper Networks, Inc.

/s/ Kevin R. Johnson

Kevin R. Johnson

Chief Executive Officer

May 6, 2011

EX-32.2

Exhibit 32.2

Certification of Chief Financial Officer

Pursuant to 18 U.S.C. Section 1350 As Adopted

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, Robyn M. Denholm, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Juniper Networks, Inc. on Form 10-Q for the three months ended March 31, 2011, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Juniper Networks, Inc.

/s/ Robyn M. Denholm

Robyn M. Denholm

Executive Vice President and Chief Financial Officer

May 6, 2011