avatar Juniper Networks, Inc. Manufacturing
  • Location: California 
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    TRANSFORMING THE BUSINESS OF N E T WO R K I N G Juniper Networks Annual Report 2002


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    TO T R A N S F O R M THE BUSINESS OF N E T WO R K I N G GET C L E A N S L AT E E N G I N E E R I N G E N J OY SPEED AND INTELLIGENCE DELIVER C U S TO M I Z E D E N D U S E R E X P E R I E N C E G UA R A N T E E L O W E S T TO TA L C O S T O F O W N E R S H I P TA K E C O M F O RT I N F I LT E R I N G A N D S E C U R I T Y S A F E G U A R D S ASSURE A P P L I C AT I O N D E L I V E RY REGAIN N E T W O R K F O U N D AT I O N T R U S T A N D C O N F I D E N C E F I N D C O N N E C TO P I A A place of perfect connectivity Transform


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    Financial Highlights Statements of Operations Data Years ended December 31, 2002 2001 2000 1999 1998 (In thousands, except per share amounts) Net Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 546,547 $887,022 $673,501 $102,606 $ 3,807 Pro forma net income (loss) (i) . . . . . . . . . . . . $ (4,784) $169,947 $184,036 $ (4,748) $(29,736) Pro forma diluted net income (loss) per share (i) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.01) $ 0.50 $ 0.53 $ (0.03) $ (0.40) Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . $(119,650) $ (13,417) $147,916 $ (9,034) $(30,971) Diluted net income (loss) per share . . . . . . . . $ (0.34) $ (0.04) $ 0.43 $ (0.05) $ (0.40) Shares used in computing diluted net income (loss) per share . . . . . . . . . . . . . . . . . . 350,695 319,378 347,858 189,322 77,742 (i) Pro forma net income (loss) excludes the impact of the amortization of goodwill, purchased intangibles and deferred compensation, restructuring and other operating costs, in process R&D, integration costs, losses on equity investments, contract manufacturing charges, charitable contribution charges, gains from debt extinguishment in all applicable periods and the related tax effect, from the net income (loss) calculated using accounting principals generally accepted in the United States. Pro forma amounts are unaudited. All results reflect thee three-for-one- split of common stock effective January 18, 2000 and the two-for-one split of our common stock effective June 16, 2000. Balance Sheet Data As of December 31, 2002 2001 2000 1999 1998 (In thousands) Cash, cash equivalents and short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 578,471 $ 989,642 $1,144,743 $345,958 $20,098 Working Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 438,905 $ 883,829 $1,132,139 $322,170 $14,432 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,614,669 $2,389,588 $2,103,129 $513,378 $36,671 Total stockholders’ equity . . . . . . . . . . . . . . . . . . $1,430,531 $ 997,369 $ 730,002 $457,715 $17,065 The selected consolidated financial data should be read in conjunction with Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the notes thereto in Item 8 “Financial Statements and Supplementary Data” found in our Form 10-K filed on March 11, 2003. Actual results could differ materially from those anticipated in the forward looking statements in this document as a result of certain factors.


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    To Our Valued Stockholders To ensure the best possible performance in 2002, Juniper Networks focused on several primary objectives. I am pleased to report excellent progress against those objectives and will discuss them in more detail below. Though it has become clear that the industry transformation underway has had and will continue to have its share of challenges for us all, it is also clear that there is an incredible opportunity for those companies who remain focused on their objectives. Our objectives and results are as follows: Strengthen and expand our customer base. As part of a major industry transformation, driven in large part by the scalability, performance and reliability of Juniper Networks platforms, we have seen an increase in incumbent service providers’ acceptance of IP. We set a goal to expand our customer position to include the top 25 wireline service providers around the world, measured by their capital spending, as our customers. At the beginning of 2002, we sold to nine of these top 25; at the end of 2002, 23 of the top 25 were Juniper Networks customers. Broaden our existing product portfolio in existing markets. During the year we delivered four major software releases, three new system platforms and 35 new system interfaces, allowing us to offer new capabilities, new levels of performance and better value to our customers. Expand the number of markets we serve. We introduced systems to serve two new and growing markets: wireless and cable. In wireless, we launched new Juniper Networks products, in cooperation with Ericsson, to leverage both companies’ presence in the fast growing wireless data market. To address the rapid expansion of cable, we introduced a series of products to facilitate deployment of high speed data services. We expect to see cable operators provide a significant percentage of the broadband connections to the market in the years ahead and see this as an important opportunity for Juniper Networks. Expand strategically into broadband. Juniper Networks will be everywhere high bandwidth services are being offered. During the year we acquired Unisphere Networks, a leading provider of carrier-class IP infrastructure products to enable data, voice, and rich media services, focused on edge routing and broadband access capabilities. The acquisition exceeded our expectations by becoming accretive ahead of our original targets. Strengthen our international business and balance our global presence. In 2002, we realized approximately half of our revenues from North America and half from international markets. Our global expansion and presence has allowed us not to be dependent upon any one theater, any one country or any single regional economy. Maintain intense focus on our financial disciplines. Financial fundamentals have always been a significant focus for Juniper Networks and we are proud of our adherence to that principle and our repeated demonstration of this commitment, in even the most difficult of markets and times. While achieving our first five goals, we realized positive cash flow from operations in 2002, had high quality receivables, good and improving margins and a strong balance sheet. In the second half of 2002, subsequent to the acquisition, we reduced combined operating expenses by approximately $15M, demonstrating our ability to capture 2


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    the synergy and the efficiencies available through a major acquisition. Through all of these many metrics and achievements, we have maintained our strategic commitment to innovation, with an investment in 2002 of over $160M in product development. In summary, 2002 was a year of balance with bold investment and disciplined execution. We balanced our financial commitments, our customer and overall goals and maintained our investment in innovation to produce growth in our position in the marketplace. More importantly we have enjoyed a growing importance in the eyes of our customers as we focus intensely on developing our customer relationships. The level of strategic discussion we have with our customers increases with each quarter as the importance of IP and the next generation of networks becomes a reality and our customers look to Juniper Networks to transform their business of networking. Juniper Networks increased market share each quarter of 2002, as measured by Gartner Group. We have grown our market position in the service provider marketplace to 38% share in the core, 23% share in the edge and 51% share in broadband. As a result of these efforts and the unparalleled commitment of the people of Juniper Networks, the company is in a strong position as we enter 2003 and we believe this will show itself as the year unfolds. We have three primary goals as we enter 2003. Establish our leadership position in the industry and drive industry transformation. The transformation is underway, it has been tumultuous and it isn’t over. New industry and market segments will become clear and new leaders will take their position at the heads of those new industries. In the category of public network infrastructure and services, Juniper Networks has spent its first six and a half years building our products, our customer base and our global presence to lead this market. Increase our strategic relationships with customers. This network and industry transformation is strategic and fundamental to our customers’ business and they need strategic partners to help them to be successful. This is our opportunity. We are the only supplier in the market structurally aligned with a business model that coincides with our customers’ success. We are working with customers and investing the proceeds to help with the transformation that is needed. Partner strategically with others in our industry. Just as our customers need partners, we need partners as well as we embark upon the transformation of a multi-hundred billion dollar industry that has been fundamentally disrupted. That is not something that any one company can control, or serve appropriately, without strong working partnerships with others who will be important to our common customers and to their customers. I would like to thank and recognize all of our employees, customers, long-term shareholders, business partners and suppliers for their continued commitment and confidence in Juniper Networks. Scott Kriens Chairman, President and CEO 3


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    Juniper Networks: Transforming the Business of Networking Introduction Do you share family photos over the Web? Are your teenagers passionate about interactive gaming with on-line friends worldwide? Is your business using the Internet for commerce and conferencing? Have you considered using distance learning to take a class remotely? For more and more people, these and other scenarios are transforming the network-connected world we live in today. For each of these applications, and hundreds more, fast, dependable, secure networks are the key and Juniper Networks plays a significant role in making those networks work. Whatever the service, whoever the service provider — whether it is a cable operator in Europe, a consortium of universities in North America, or a mobile provider in Asia — Juniper Networks is transforming the business of networking for our customers and for the public. Juniper Networks is a leading provider of networking solutions for top network service providers, cable and mobile operators, government agencies, research and educational institutions and information-intensive enterprises worldwide. Because Juniper Networks supports over 600 networks in 47 countries, including 23 of the 25 largest wireline service provider networks in the world, whenever you access a network, it is highly likely that Juniper Networks equipment is involved in the successful delivery of your service. Vision The world’s expectations of networks have changed considerably over the past few years. While simply sending and receiving email was sufficient a few years ago, consumers now want to download music in seconds, send hundreds of instant messages and visit live web cams halfway across the world. Businesses require instant, clear, video-conferencing, complete connectivity to every part of the world, secure e-commerce and much more. To meet these demands, today’s networks are transforming from best-effort commodities to dependable, secure and highly valuable assets that drive businesses and industries to increased productivity and greater profits. Juniper Networks, with its superior technology and highly scalable, reliable and high performance product portfolio, is uniquely positioned to help its customers transform their business of networking. “The backbone network is our lifeline.” Mr. Masatoshi Ito, Manager, XePhion Business Headquarters and “WAKWAK” Service Department, NTT-ME Corporation 4


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    Juniper Networks vision is built on a holistic networking model for revitalizing existing networking services and for creating and delivering a wide array of new services. The Model for Integrated Network Transformation (MINT) was developed by Juniper Networks to facilitate the rapid creation of innovative value-added services to mass and niche markets while, at the same time, alleviating the capital risks associated with introducing new facilities for each new service. With MINT, cable operators can deliver on-demand content to their customers; universities can perform complex research with applications like advanced digital video and tele-astronomy; mobile operators can deliver wireless Internet services. MINT provides a revenue-driven roadmap to a service-rich, cost-efficient, integrated infrastructure. MINT provides a framework for transforming networks that optimizes costs, layers many services — including all the traditional legacy services we depend on today — on one network based on Internet Protocol (IP) and profitably delivers an assured user experience to an expanded market. Industry Solutions that Transform the Business of Networking The world’s largest service providers use Juniper Networks solutions today. They rely on Juniper Networks highly scalable and reliable networking platforms to deliver a wide range of profitable services and superior customer experiences. Service Providers: Supporting nearly every major service provider network in the world, Juniper Networks industry-leading platforms are designed and built for the scale and dependability that service providers demand. Service providers experience immediate benefits with Juniper Networks solutions by: • Reducing capital and operational costs by running multiple services over the same highly reliable, high density platforms. • Generating additional revenue by offering new services to new market segments based on Juniper Networks sophisticated capabilities. Their services include interactive entertainment and video services over DSL and creating custom packages tailored to the needs of various customer groups. • Benefiting from increased asset longevity and higher return on investments as their networks scale to multi-terabit rates based on the capabilities of Juniper Networks platforms. “The move to a consolidated IP/MPLS network as the foundation for the delivery of enhanced services is a key part of our network transformation strategy. This design enables us to protect and build on our existing investments in ATM and Frame Relay while reducing operating costs. Juniper Networks approach is consistent with our view of the future.” Bill Smith, Chief Product Development and Technology Officer, Bell South 5


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    Mobile Providers: Juniper Networks plays a leadership role as the mobile industry transforms into a business environment in which many interactive voice and data services are supported over a single cost-efficient infrastructure. Mobile providers are transforming existing business models with Juniper Networks by: • Enjoying the lowest cost of ownership and the best operational scale in the industry • Following a practical and attractive path from traditional networks to a single IP network • Reducing implementation costs and timelines through Juniper Networks partnerships with leading system integrators, which deliver integrated total solutions, with full service and support • Creating and delivering new offerings and enhancing the revenue potential of existing services. Cable Providers: Juniper Networks enables cable operators to transform their business model and systems from flat rate Internet access to delivery of rich, pay-per-use content. Two decades ago, the cable industry changed the world of free, antenna-based service to one of content-rich entertainment packages. With Juniper Networks, cable operators are poised to once again lead the industry as it transforms basic broadband access into content-rich premium services over IP. Juniper Networks platforms enable cable customers to enhance profitability by: • Accelerating the upgrade from one-way information broadcast to two-way entertainment and interactive data services • Enabling cable providers to use a single cost-effective network to generate additional revenue and profit in key markets • Increasing customer satisfaction, while lowering costs, by enabling consumers to self-select automatically provisioned service packages that provide the quality, speed and pricing they desire • Enabling Multi-System Operators to profitably package high performance, two-way, high-speed services and network-based security solutions for telecommuters, small businesses and small offices. “As the migration from offering the traditional connectivity services to new value-added IP services continues, we require a platform that scales to multiple 10 Gbps interfaces in a very compact form factor, while also delivering rich, dependable IP service functionality and quality assurance at high speeds.” Mr. Sun Hao, deputy general manager, China Telecom Beijing 6


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    Research and Education: Research and education (R&E) networks push the envelope in networking and applications by continually demanding the most advanced products and technologies while simultaneously helping shape their development. These networks help academic researchers and educators transform their vision into reality with scientific and educational advancements using applications such as telemedicine, 3D visualization and simulation, grid computing and collaborative videoconferencing. Juniper Networks is the vendor of choice in over 125 R&E institutions and networks worldwide and has leveraged its significant success in the R&E market to include state and local government by providing: • High performance, reliable platforms for leading-edge scientific and educational applications • Advanced capabilities including IPv6, multicast and packet filtering while maintaining high performance • Problem-free operations resulting from modular software architecture and robust implementation. Information Enterprises: Juniper Networks designs its platforms and solutions to meet the reliability and scalability demanded by the world’s largest and most advanced networks. For this reason, information intensive enterprises who rely on their networks for the essence of their business use Juniper Networks as a powerful partner in delivering the advanced network capabilities needed for their leading-edge applications by: • Reducing costs through operational efficiencies in implementing and managing the network • Driving down capital expenses with sophisticated network intelligence that is robust, secure and scalable • Providing enterprises with the control necessary to deliver an assured user experience to their customers and internal clients. “Juniper Networks technology and commitment to Internet2 will ensure that Abilene continues to provide leading edge networking for the academic and research community. Juniper Networks participation in Abilene exemplifies the close collaboration between industry and academia that is at the heart of Internet2.” Douglas Van Houweling, president and CEO, Internet2 7


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    Federal Government Juniper Networks delivers “carrier-class” security, dependability and performance to leading federal agencies including The U.S. Department of Energy’s Energy Sciences Network (ESnet) and the National Science Foundation (NSF) TeraGrid Project. Juniper Networks helps the federal government transform its networking infrastructure by: • Delivering best-in-class network security without impacting performance or the ability to turn on additional services • Providing highly dependable (reliable, available and stable) software to ensure that government networks are operational and available • Offering flexible and comprehensive service and support packages designed for federal customers • Working as a business partner for the long term with the optimal combination of flexibility, responsiveness, technical know-how and financial strength. Looking to the Future Juniper Networks is focusing on driving the industry toward a single vision of Connectopia. Our goal is a world beyond basic network connectivity — a place where communication is global yet personal, adaptable yet controlled, secure yet open. Connectopia is a place that only Juniper Networks can take you to. Throughout the world, across industries, Juniper Networks is advancing the transformation of networks from best-effort networks of today to the reliable, secure, high-speed networks demanded by the applications of today and tomorrow. Through innovative technology and an advanced product portfolio, Juniper Networks offers businesses a means to achieve the transformation that is required for success today and in the future. “The goal for our future network is a converged IP/MPLS infrastructure. By consolidating multiple networks to an infrastructure, we are improving operating efficiencies that enable significant cost savings.” Per Björck, Chief Technical Officer, Telenor Business Solutions 8


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    NOTICE OF 2003 ANNUAL MEETING OF STOCKHOLDERS The 2003 Annual Meeting of Stockholders of Juniper Networks, Inc. will be held on Thursday, May 15, 2003 at 9:00 a.m. at The Historic Del Monte Building, 100 South Murphy Street, Third Floor, Sunnyvale, California 94086, to conduct the following business: 1. To elect three directors for three-year terms; 2. To ratify the appointment of Ernst & Young LLP as the Company’s independent auditors for the fiscal year ending December 31, 2003; and 3. To consider such other business as may properly come before the meeting. Stockholders who owned shares of Juniper Networks common stock at the close of business on March 19, 2003 are entitled to attend and vote at the meeting. A complete list of the Company’s stockholders will be available at the Company’s offices at 1194 North Mathilda Avenue, Sunnyvale, California 94089 prior to the meeting. By Order of the Board of Directors Lisa C. Berry Vice President, General Counsel and Secretary This Notice of Meeting, Proxy Statement and accompanying proxy card are being distributed on or about April 11, 2003. As a stockholder of Juniper Networks, Inc. you have a right to vote on certain matters affecting the Company. This proxy statement describes the proposals you are voting on this year. It contains important information for you to consider when deciding how to vote so please read it carefully. Your vote is important.


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    PROXY STATEMENT Questions and Answers About the Proxy Materials and the Annual Meeting Q: Who Can Vote At The Annual Meeting? A: Stockholders who owned Juniper Networks common stock on March 19, 2003 may attend and vote at the annual meeting. Each share is entitled to one vote. There were 376,551,260 shares of Juniper Networks common stock outstanding on March 19, 2003. Q: Why Am I Receiving This Proxy Statement? A: This proxy statement describes proposals on which we would like stockholders to vote. It gives you information on these proposals, as well as other information, so that you can make an informed decision. Q: What Am I Voting On? A: We are asking you to vote: ¶ in favor of the election of three directors; and ¶ in favor of the ratification of Ernst & Young LLP as the Company’s independent auditors for the fiscal year ending December 31, 2003. There is additional information appearing later in this proxy statement relating to each of the proposals. Q: How Do I Vote? A: You may vote by any one of the four methods described below. 1. You may vote by mail. You do this by completing and signing your proxy card and mailing it in the enclosed prepaid and addressed envelope. If you mark your voting instructions on the proxy card, your shares will be voted as you instruct. If you do not mark your voting instructions on the proxy card, your shares will be voted: ¶ for the three named nominees for director, and ¶ for the ratification of the appointment of Ernst & Young LLP as the Company’s independent auditors for the fiscal year ending December 31, 2003. 2. You may vote by telephone You do this by following the “Vote by Telephone” instructions that came with this proxy statement. If you vote by telephone, you do not need to mail in your proxy card. 3. You may vote on the Internet You do this by following the “Vote by Internet” instructions that came with this proxy statement. If you vote by Internet, you do not need to mail in your proxy card. 4. You may vote in person at the meeting We will pass out written ballots to anyone who would like to vote at the meeting. However, if you hold your shares in street name, you must request a proxy from your stockbroker in order to vote at the meeting. Holding shares in “street name” means that your shares are held by the broker in its name but in your account. This is not the same as shares that may be described on your brokerage statements as in “safekeeping” – those shares are in fact in your name.


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    Q: What Does It Mean If I Receive More Than One Proxy Card? A: It means that you have multiple accounts at the transfer agent or with stockbrokers. Please complete and return all proxy cards to ensure that all of your shares are voted. Q: What If I Change My Mind After I Return My Proxy? A: You may revoke your proxy and change your vote at any time before the polls close at the meeting. You may do this by: ¶ signing another proxy card with a later date, ¶ voting by telephone or on the Internet (your latest telephone or Internet vote is counted), or ¶ voting at the meeting. Q: Will My Shares Be Voted If I Do Not Return My Proxy Card? A: If your shares are held in street name, your brokerage firm, under certain circumstances, may vote your shares. Brokerage firms have authority to vote clients’ unvoted shares on some “routine” matters. If you do not give a proxy to vote your shares, your brokerage firm may either: ¶ vote your shares on routine matters, or ¶ leave your shares unvoted. When a brokerage firm votes its customers’ unvoted shares on routine matters, these shares are counted to determine if a quorum exists to conduct business at the meeting. A brokerage firm cannot vote customers’ unvoted shares on non-routine matters. These shares are considered not entitled to vote on non-routine matters, rather than as a vote against the matters. We encourage you to provide instructions to your brokerage firm by giving your proxy. This ensures that your shares will be voted at the meeting. You may have granted discretionary voting authority over your account to your stockbroker. Your stockbroker may be able to vote your shares depending on the terms of the agreement you have with your stockbroker. If you hold the shares in your own name, you must vote your shares either by returning a proxy card, voting by telephone or on the Internet or by voting in person at the meeting. If you do not vote your shares by mail, telephone, on the Internet or in person, your shares will not be counted. Q: How Many Shares Must Be Present To Hold The Meeting? A: To hold the meeting and conduct business, a majority of the Company’s outstanding shares as of March 19, 2003 must be present at the meeting. This is called a quorum. Shares are counted as present at the meeting if the stockholder either: ¶ is present and votes in person at the meeting, or ¶ has properly submitted a proxy card, either by mail, telephone or on the Internet. Q: How Many Votes Must The Nominees Have To Be Elected As Directors? A: The three nominees receiving the highest number of “FOR” votes will be elected as directors. This number is called a plurality. 2


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    Q: How Many Votes Must The Ratification Of The Appointment Of The Independent Auditors Receive? A: To pass, the ratification of the independent auditors must receive “FOR” votes from a majority of the shares present at the meeting in person or by proxy. Q: How Are Votes Counted? A: You may either vote “FOR” or “WITHHOLD” your vote for each nominee for director. You may vote “FOR,” “AGAINST” or “ABSTAIN” on the proposal to ratify the appointment of the independent auditors. If you abstain from voting on the ratification of the appointment of the independent auditors, it has the same effect as a vote against. If you give your proxy without voting instructions, your shares will be counted as a vote FOR each nominee and FOR ratification of the appointment of the independent auditors. Q: Who Will Count The Votes? A: Voting results are tabulated and certified by our agent, ADP Investor Communications Services. Q: Is My Vote Confidential? A: Proxies, ballots and voting tabulations identifying stockholders are kept confidential and will not be disclosed except as may be necessary to meet legal requirements. Q: What Happens If Additional Proposals Are Presented At The Meeting? A: The proxy card enables you to grant a proxy to those persons named as proxy holders, Marcel Gani, the Company’s Executive Vice President and Chief Financial Officer and Lisa C. Berry, the Company’s Vice President, General Counsel and Secretary, to vote your shares at the meeting as you have instructed them on the proxy card. If an additional proposal is properly presented for a vote, they will have the discretion to vote your shares on such additional matters. If for some unforeseen reason any of our nominees is not available as a candidate for director, the persons named as proxy holders will vote your proxy for such other candidate or candidates as may be nominated by the Board of Directors. Even if you plan to attend the meeting, it is a good idea to complete and return your proxy card before the meeting date. Q: Where Do I Find Voting Results Of The Meeting? A: We will announce preliminary voting results at the meeting. We will publish the final result in our quarterly report on Form 10-Q for the second quarter of fiscal year 2003. Q: Who Pays For The Cost of Soliciting Proxies? A: The Company is using Skinner & Co., an outside proxy solicitation firm, to solicit proxies this year at a cost of approximately $7,000. The Company is paying the cost of distributing and soliciting proxies. As a part of the process, the Company reimburses brokers, nominees, fiduciaries and other custodians reasonable fees and expenses in forwarding proxy materials to stockholders. Q: How Do I Submit A Proposal To Be Included In The Proxy? A: The deadline to submit a proposal for inclusion in our proxy materials for the 2003 Annual Meeting has passed. If you want us to consider including a proposal in the proxy statement for next year, or if you wish to present a stockholder proposal that is not intended to be included in our proxy statement for next year’s annual meeting, you must deliver it to the Company’s Corporate Secretary at our principal executive offices no later than December 9, 2003. If the date of next year’s annual meeting is moved more than 30 days before or after the anniversary date of this year’s annual meeting, the deadline for such proposals is instead a reasonable time before the Company begins to print and mail its proxy 3


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    materials. If you would like a copy of our bylaws, please contact: Corporate Secretary, Juniper Networks, Inc., 1194 North Mathilda Avenue, Sunnyvale, CA 94089. Q: How Do I Nominate Individuals To Serve As Directors A: You may propose director candidates for consideration by the Board’s Nominating Committee for future meetings. Any such recommendations should be directed to the Corporate Secretary of the Company at the address of our principal executive offices set forth above. In addition, the bylaws of the Company permit stockholders to nominate directors for an annual stockholder meeting. To nominate a director for consideration at the 2004 annual meeting, the stockholder must provide the information required by the Company’s bylaws and give notice to the Corporate Secretary no later than December 9, 2003. STRUCTURE AND COMPENSATION OF THE BOARD OF DIRECTORS Number of Directors and Terms Our Board of Directors consists of nine authorized members. There are currently eight members serving on the Board and there is one vacancy. Information regarding the current members of the Board of Directors is set forth below. Three directors are nominees for election this year. The remaining five directors will continue to serve the terms described below. The structure of our Board of Directors is that of a staggered board. The directors are divided into three classes, Class I, Class II and Class III, with each class being as nearly equal in number as possible and with a three year term for each class. Scott Kriens, Stratton Sclavos and William R. Stensrud are each Class I directors and have been nominated for re-election as described herein. Pradeep Sindhu and Vinod Khosla are each Class II directors and will stand for re-election at the Company’s annual meeting of stockholders to be held in 2004. William R. Hearst III, C. Richard Kramlich and Kenneth Levy are each Class III directors and will stand for re-election at the Company’s annual meeting of stockholders to be held in 2005. Board Of Directors and Committees The Board of Directors held six regular meetings during 2002. Except for Mr. Sclavos, each director attended at least 75% of all board meetings during 2002. The committees of the Board of Directors are described below. The Board of Directors has added a nominating committee; however for the nominations for this year, the Board of Directors acted as a whole on such matters. Audit Committee The Audit Committee of the Board of Directors is comprised of Mr. Hearst, Mr. Kramlich and Mr. Sclavos and held five meetings during 2002. Except for Mr. Sclavos, each member of the Audit Committee attended at least 75% of those meetings. The functions of the Audit Committee include the following: ¶ To assist the Board of Directors in oversight and monitoring of (i) the integrity of the Company’s financial statements, (ii) the Company’s compliance with legal and regulatory requirements, (iii) the independent auditor’s qualifications, independence and performance, (iv) the Company’s internal accounting and financial controls, improvements made or to be made in such controls; and (v) the internal audit function; ¶ To prepare the report required in the annual proxy statement as set forth in the rules of the SEC; ¶ To make such examinations as are necessary to monitor the corporate financial reporting and external audit requirements of the Company; ¶ To provide to the Board of Directors the results of its monitoring and examining and recommendations derived therefrom; 4


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    ¶ To nominate independent auditors; ¶ To provide to the Board of Directors such additional information and materials as it may deem necessary to make the Board of Directors aware of significant financial matters that require its attention; and ¶ To undertake those specific duties and responsibilities described in the Committee’s charter as well as such other duties as the Board of Directors may from time to time prescribe. The members of the Audit Committee are independent, as independence is defined in Rule 4200(a)(15) of the National Association of Securities Dealers listing standards, as applicable. The Board of Directors has adopted a written charter for the Audit Committee, a copy of which is attached as an appendix to this Proxy Statement. Audit Fees Fees paid to the independent auditors were $434,000 for the audit of the consolidated financial statements for the fiscal year ended December 31, 2002 and for the review of the consolidated financial statements included in the Company’s quarterly filings on Form 10-Q, $209,000 for audit-related services and $154,000 for non-audit services, which were primarily tax services. Audit related services generally include fees for statutory audits, due diligence relating to business acquisitions, and SEC registration statements. The Audit committee has considered whether, and concluded that, the provision of the non-audit services described above by the independent auditors is compatible with maintaining the principal accountant’s independence. REPORT OF THE AUDIT COMMITTEE The Audit Committee oversees the Company’s financial reporting process on behalf of the Board of Directors. Management has the primary responsibility for the financial statements and the reporting process including the systems of internal controls. The Audit Committee discussed with the Company’s independent auditors the overall scope and plans for the audit. The Audit Committee meets with the independent auditors, with and without management present, to discuss the results of their examinations, their evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting. The Audit Committee held five meetings during fiscal year 2002. In fulfilling its oversight responsibilities, the Audit Committee reviewed with management the audited financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2002, including a discussion of the acceptability and quality of the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements. The Audit Committee reviewed with the independent auditors, who are primarily responsible for expressing an opinion on the conformity of those audited financial statements with generally accepted accounting principles, their judgments as to the acceptability and quality of the Company’s accounting principles and such other matters as are required to be discussed with the Audit Committee under generally accepted auditing standards. The Audit Committee has discussed with the independent auditors their independence from management and the Company (including the matters in the written disclosures required by the Independence Standards Board) and considered the compatibility of non-audit services with the auditors’ independence. In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors (and the Board has approved) that the audited financial statements be included in the Annual Report on Form 10-K for the year ended December 31, 2002 for filing with the Securities and Exchange Commission. The Audit Committee and the Board of Directors have also recommended, subject to ratification by the stockholders, the selection of Ernst & Young LLP as the Company’s independent auditors. MEMBERS OF THE AUDIT COMMITTEE William R. Hearst III C. Richard Kramlich Stratton Sclavos 5


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    Nominating Committee The Nominating Committee of the Board of Directors was newly constituted in October 2002 and is comprised of all of our non-employee directors. The Nominating Committee has not yet held any meetings and for all appointments in 2002 and prior years, the Board of Directors acting as a whole performed the functions delegated to the Nominating Committee this year. Those functions include addressing issues relating to the Board of Directors and Board committees, including size and composition, membership qualifications, determining director independence and committee membership, recommending new and continuing directors and coordinating the recruitment of new directors. Compensation Committee The Compensation Committee of the Board of Directors is comprised of Mr. Khosla and Mr. Stensrud and held two meetings during 2002. Each of the members of the Compensation Committee attended at least 75% of those meetings. The purpose of the Compensation Committee is to discharge the Board’s responsibilities relating to compensation of the Company’s executive officers. The Compensation Committee has overall responsibility for approving and evaluating the executive officer compensation plans, policies and programs of the Company. The functions of the Compensation Committee include the following: ¶ To annually review and approve for the CEO and the executive officers of the Company (i) the annual base salary, (ii) the annual incentive bonus, including the specific goals and amount, (iii) equity compensation, (iv) employment agreements, severance arrangements, and change in control agreements/provisions, and (v) any other benefits, compensation or arrangements; ¶ To make recommendations to the Board of Directors with respect to incentive compensation plans; and ¶ To make regular reports to the Board of Directors. Director Compensation For years beginning in 2003, the Compensation Committee recommended, and the Board of Directors approved, a revised compensation plan for our non-employee directors. As the Company has continued to mature and with the increased responsibility placed on the members, the Board believed it would be necessary to offer a compensation plan commensurate with the responsibilities and that will attract and retain non-employee directors. Pursuant to the compensation plan, non-employee directors will receive a $20,000 annual retainer, payable quarterly. In addition, non-employee directors will be paid $1,000 per regular Board meeting attended in person ($500 if attending by telephone) and $500 per regular committee meeting attended in person ($250 if attending by telephone) as well as reimbursement of expenses incurred in connection with attending the Board or committee meetings. In addition, each newly elected or appointed non-employee member of the Board of Directors will receive a non-qualified stock option grant of 100,000 shares following his or her election or appointment to the Board which shall vest monthly over three years commencing on the date of the grant. Further, beginning in 2004 (on the date of the annual stockholders meeting), each non-employee director will receive a stock option grant for 20,000 shares which shall vest monthly over 12 months commencing on the date of grant. Each option shall be granted pursuant to our Amended and Restated 1996 Stock Plan and shall have a term of not more than ten years; provided however that no option shall continue to vest after a director’s resignation or other termination of service as a board member. All vested options must be exercised within 30 days following the board member’s cessation of service or they will be cancelled. In addition, and in recognition of the increased responsibilities, the Board approved a one-time stock option grant for each of the existing non-employee directors of 100,000 shares which shall vest monthly over three years commencing on the date of grant. 6


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    Executive Officers and Members of the Board of Directors Name Age Position Scott Kriens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 President, Chief Executive Officer and Chairman of the Board Pradeep Sindhu . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Chief Technical Officer and Vice Chairman of the Board Marcel Gani . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Executive Vice President, Chief Financial Officer Lloyd Carney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Executive Vice President of Operations James A. Dolce, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Executive Vice President of Field Operations William R. Hearst III . . . . . . . . . . . . . . . . . . . . . . . . . 53 Director Vinod Khosla . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Director C. Richard Kramlich . . . . . . . . . . . . . . . . . . . . . . . . . . 67 Director Kenneth Levy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Director Stratton Sclavos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Director William R. Stensrud . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Director Scott Kriens Mr. Kriens has served as President, Chief Executive Officer and Chairman of the Board of Directors of Juniper Networks since October 1996. From April 1986 to January 1996, Mr. Kriens served as Vice President of Sales and Vice President of Operations at StrataCom, Inc., a telecommunications equipment company, which he co-founded in 1986. Mr. Kriens holds a BA in Economics from California State University, Hayward. Mr. Kriens also serves on the boards of directors of Equinix, Inc. and VeriSign, Inc. Pradeep Sindhu Dr. Sindhu co-founded Juniper Networks in February 1996 and served as Chief Executive Officer and Chairman of the Board of Directors until September 1996. Since then, Dr. Sindhu has served as Vice Chairman of the Board of Directors and Chief Technical Officer of Juniper Networks. From September 1984 to February 1991, Dr. Sindhu worked as a Member of the Research Staff, and from March 1987 to February 1996, as the Principal Scientist, and from February 1994 to February 1996, as Distinguished Engineer at the Computer Science Lab, Xerox Corporation, Palo Alto Research Center, a technology research center. Dr. Sindhu holds a BSEE from the Indian Institute of Technology in Kanpur, an MSEE from the University of Hawaii and a Masters in Computer Science and PhD in Computer Science from Carnegie- Mellon University. Marcel Gani Mr. Gani joined Juniper Networks as Chief Financial Officer in February 1997. From January 1996 to January 1997, Mr. Gani served as Vice President and Chief Financial Officer of NVIDIA Corporation, a 3D graphic processor company. Mr. Gani also held the positions of Vice President and Chief Financial Officer at Grand Junction Networks, a data networking company acquired by Cisco Systems, Inc., from March 1995 to January 1996, and at Primary Access Corporation, a data networking company acquired by 3Com Corporation, from March 1993 to March 1995. Mr. Gani holds an M.B.A. from the University of Michigan. Mr. Gani also serves on the board of directors of AirFiber, Inc. Lloyd Carney Mr. Carney joined Juniper Networks in January 2002. He serves as Executive Vice President of Operations. From May 2001 until September 2001 he served as the President of the Core IP Division of Nortel Networks. From March 2000 until May 2001, Mr. Carney served as President of the Wireless Internet Division of Nortel Networks. From June 1997 until March 2000 he served as President of the Enterprise Data Division of Nortel Networks. Prior to that, Mr. Carney served as Vice President of Worldwide Customer Service of Nortel Networks. James A. Dolce, Jr. Mr. Dolce joined Juniper Networks as Executive Vice President Field Operations in July 2002 as part of our acquisition of Unisphere Networks, Inc. He served as Chief Executive Officer and a director of Unisphere from July 2000 until July 2002. From January 2000 to July 2000, Mr. Dolce served as President of Unisphere Networks. From April 1999 to January 2000, Mr. Dolce served as Vice President of the Data Products Group of Unisphere. From September 1997 to April 1999, he served as President of Redstone Communications, which he co-founded. From May 1996 to July 1997, Mr. Dolce served as Vice 7


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    President and General Manager of the Remote Access Business Unit of Cascade Communications, a provider of wide area network switches. William R. Hearst III Mr. Hearst is a partner with Kleiner Perkins Caufield & Byers, a venture capital firm located in Menlo Park, California. He has served on the Board of Directors of Juniper Networks since February 1996. From May 1995 to August 1996, he was the Chief Executive Officer of At Home Corporation, a high speed Internet access and consumer online services company. Mr. Hearst was editor and publisher of the San Francisco Examiner from 1984 until 1995. Mr. Hearst serves on the boards of directors of Hearst- Argyle Television, The Hearst Corporation, Oblix, Inc., OnFiber, Applied Minds and Pictos. He is a Fellow of the American Association for the Advancement of Science and a trustee of Carnegie Institution, the Hearst Foundation, Mathematical Sciences Research Institute, the California Academy of Sciences and Grace Cathedral of San Francisco. Mr. Hearst holds an AB degree in Mathematics from Harvard University. Vinod Khosla Mr. Khosla has been a General Partner with the venture capital firm of Kleiner Perkins Caufield & Byers since February 1986. He has served on the Board of Directors of Juniper Networks since February 1996. Mr. Khosla was a co-founder of Daisy Systems Corporation, an electronic design automation company, and the founding Chief Executive Officer of Sun Microsystems, Inc., a computer and data networking company. Mr. Khosla also serves on the boards of directors of Qwest Communications International, Inc., Centrata, Zambeel, Zaplet and SEEC. Mr. Khosla holds a BSEE from the Indian Institute of Technology in New Delhi, an MSE from Carnegie-Mellon University, and an MBA from the Stanford Graduate School of Business. C. Richard Kramlich Mr. Kramlich is the co-founder and has been a General Partner of New Enterprise Associates, L.P., a venture capital fund, since 1978. He has served on the Board of Directors of Juniper Networks since February 1996. He also serves on the boards of directors of Zhone Technologies, Force 10 Networks, Financial Engines, Zambeel, Foveon and Silicon Graphics, Inc. Mr. Kramlich holds a BS in History from Northwestern University and an MBA from Harvard Business School. Kenneth Levy Mr. Levy is a co-founder of KLA Instruments Corporation and since July 1, 1999 has been Chairman of the Board of KLA-Tencor Corporation. He has served on the Board of Directors of Juniper Networks since February 2003. From July 1998 until June 30, 1999, he was Chief Executive Officer and a director of KLA- Tencor Corporation. From April 30, 1997 until June 1998, he was Chairman of the Board. From 1975 until April 30, 1997, he was Chief Executive Officer and Chairman of the Board of KLA Instruments Corporation. He currently serves on the boards of directors of Ultratech Stepper, Inc., SpeedFam-IPEC, Inc., Extreme Networks, Inc., and is a Director Emeritus of SEMI, a semiconductor manufacturing industry trade association. Mr. Levy holds a BS in Electrical Engineering and an MS in Electrical Engineering. Stratton Sclavos Mr. Sclavos has been President and Chief Executive Officer of VeriSign Inc. since July 1995 and Chairman of its board of directors since December 2001. He has served on the Board of Directors of Juniper Networks since May 2000. From October 1993 to June 1995, he was Vice President, Worldwide Marketing and Sales of Taligent, Inc., a software development company that was a joint venture among Apple Computer, Inc., IBM and Hewlett-Packard. Prior to that time, he served in various sales, business development and marketing capacities for GO Corporation, MIPS Computer Systems, Inc. and Megatest Corporation. Mr. Sclavos also serves on the boards of directors of Keynote Systems, Inc., Marimba, Inc., Salesforce.com and Intuit, Inc. Mr. Sclavos received his BS in Electrical and Computer Engineering from the University of California at Davis. William R. Stensrud Mr. Stensrud has been a General Partner with the venture capital firm of Enterprise Partners since January 1997. Mr. Stensrud also currently is the acting Chief Executive Officer of Ensemble Communications, Inc. He has served on the Board of Directors of Juniper Networks since October 1996. Mr. Stensrud was an independent investor and turnaround executive from March 1996 to January 1997. During this period, Mr. Stensrud served as President of Paradyne Corporation and as a director of Paradyne Corporation, GlobeSpan Corporation and Paradyne Partners LLP, all data networking companies. From January 1992 to July 1995, Mr. Stensrud served as President and Chief Executive Officer of Primary Access Corporation, a data networking company acquired by 3Com Corporation. From 1986 to 1992, Mr. Stensrud served as the Marketing 8


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    Vice President of StrataCom, Inc., a telecommunications equipment company, which Mr. Stensrud co-founded. Mr. Stensrud also serves on the boards of directors of Paradyne Corporation, Airfiber, Alvesta, Calient Networks, Ensemble Communications, Inc., LongBoard, Inc. and Novera Optics. He holds a BS degree in Electrical Engineering and Computer Science from Massachusetts Institute of Technology. PROPOSAL ONE ELECTION OF DIRECTORS There are three nominees for election to the Board of Directors this year. The nominees for director this year are Scott Kriens, Stratton Sclavos and William R. Stensrud. Each nominee is presently a director of the Company. Mr. Kriens has served as a director since 1996, Mr. Sclavos has served as a director since 2000, and Mr. Stensrud has served as a director since 1996. Information regarding the business experience of each nominee is provided above. The Company has a classified board of directors and Mr. Kriens, Mr. Sclavos and Mr. Stensrud, if elected, will each serve a three year term until the Company’s annual meeting in 2006 and until their respective successors are elected. Each of the nominees has consented to serve a new three-year term. There are no family relationships among our executive officers and directors. Vote Required The three persons receiving the highest number of votes represented by outstanding shares of common stock present or represented by proxy and entitled to vote will be elected. The Board of Directors recommends a vote FOR the election to the Board of each of the nominees. PROPOSAL TWO RATIFICATION OF INDEPENDENT AUDITORS Subject to ratification by the stockholders, the Board of Directors has reappointed Ernst & Young LLP as independent auditors to audit the financial statements of the Company for the current fiscal year. Representatives of the firm of Ernst & Young LLP are expected to attend the meeting, where they will be available to respond to questions and, if they desire, make a statement. Vote Required Ratification of the appointment of the independent auditors for the 2003 fiscal year requires the vote of a majority of the shares present at the meeting in person or by proxy. The Audit Committee and the Board of Directors recommend a vote FOR ratification of the appointment of Ernst & Young LLP as the Company’s independent auditors for the 2003 fiscal year. 9


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    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Security Ownership of Certain Beneficial Owners The following table sets forth information known to the Company as of March 19, 2003 concerning each beneficial owner of more than 5% of the Company’s common stock. The number of shares beneficially owned is determined under the rules of the Securities and Exchange Commission and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which such owner has the sole or shared voting power or investment power and also any shares that such owner has the right to acquire as of May 18, 2003 (within 60 days of March 19, 2003) through the exercise of any stock option or other right. Unless otherwise indicated, each person has sole investment and voting power with respect to the shares set forth in the following table. Amount and Nature of Percentage Name and Address of Beneficial Owner Beneficial Ownership of Class AXA Financial, Inc. 1290 Avenue of the Americas New York, N.Y. 10104 . . . . . . . . . . . . . . . . . . . . . . . . 75,071,958 shares (1) 20.2% (1) Oak Associates, Ltd. 3875 Embassy Parkway Akron, Ohio 44333 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,395,000 shares (2) 6.29% (2) Siemens Corporation 153 East 53rd Street New York, N.Y. 10022 . . . . . . . . . . . . . . . . . . . . . . . . . 35,815,206 shares (3) 9.7% (3) (1) Based on information reported on Schedule 13G filed with the SEC on February 12, 2003. AXA Financial, Inc. is the parent holding company for several entities that hold our common stock as investment advisors, including Alliance Capital Management L.P. which holds 73,773,634 shares on behalf of client discretionary investment advisory accounts. (2) Based on information reported on Schedule 13G filed with the SEC on February 11, 2003. (3) Based on information reported on Schedule 13G filed with the SEC on July 10, 2002. Siemens Corporation acquired the shares in connection with the Company’s acquisition of Unisphere Networks, Inc. 10


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    Security Ownership of Management The following table sets forth information as of March 19, 2003 concerning the ownership by the executive officers and directors of the Company’s common stock. The number of shares beneficially owned is determined under the rules of the Securities and Exchange Commission and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which such owner has the sole or shared voting power or investment power and also any shares that such owner has the right to acquire as of May 18, 2003 (within 60 days of March 19, 2003) through the exercise of any stock option or other right. Unless otherwise indicated, each person has sole investment and voting power (or shares such powers with his spouse) with respect to the shares set forth in the following table. Amount and Nature of Percentage Name and Address of Beneficial Owner (1) Beneficial Ownership of Class (2) Scott Kriens (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,189,959 shares 4.55% Chairman, Chief Executive Officer and President Pradeep Sindhu (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,586,460 shares 3.60% Vice Chairman, Chief Technical Officer Marcel Gani (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,260,184 shares * Executive Vice President, Chief Financial Officer Lloyd Carney (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500,000 shares * Executive Vice President of Operations James A. Dolce, Jr. (7) . . . . . . . . . . . . . . . . . . . . . . . 2,942,643 shares * Executive Vice President of Field Operations William R. Hearst III (8) . . . . . . . . . . . . . . . . . . . . . 1,142,685 shares * Director c/o Kleiner Perkins Caufield & Byers 2750 Sand Hill Road Menlo Park, CA 94025 Vinod Khosla (9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,714,297 shares * Director c/o Kleiner Perkins Caufield & Byers 2750 Sand Hill Road Menlo Park, CA 94025 C. Richard Kramlich (10) . . . . . . . . . . . . . . . . . . . . . 3,469,548 shares * Director c/o New Enterprise Associates 2490 Sand Hill Road Menlo Park, CA 94025 Kenneth Levy (11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,333 shares * Director c/o KLA-Tencor Corporation One Technology Drive Milpitas, CA 95035 Stratton Sclavos (12) . . . . . . . . . . . . . . . . . . . . . . . . . . 56,333 shares * Director VeriSign, Inc. 1350 Charleston Road Mountain View, CA 94303 11


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    Amount and Nature of Percentage Name and Address of Beneficial Owner (1) Beneficial Ownership of Class (2) William R. Stensrud (13) . . . . . . . . . . . . . . . . . . . . . 1,609,085 shares * Director c/o Enterprise Partners 2223 Avenida de la Playa, Suite 300 La Jolla, CA 92037 All Directors and Executive Officers as a group (11 persons) (14) . . . . . . . . . . . . . . . . . . . . 44,471,194 shares 11.62% * Represents less than 1% of the outstanding shares of common stock. (1) Unless otherwise noted above, the address for each of the officers and directors is c/o Juniper Networks, Inc., 1194 North Mathilda Avenue, Sunnyvale, CA 94089. (2) The percentages are calculated using 376,551,260 outstanding shares of the Company’s common stock on March 19, 2003 as adjusted for each individual pursuant to Rule 13d-3(d)(1)(i). (3) Includes 11,856,672 shares held by the Kriens 1996 Trust, of which Mr. Kriens and his spouse are the trustees, 4,000,000 shares held by Saratoga Investments, L.P., of which Mr. Kriens is the General Partner, 27,037 shares held by the Kriens Family Foundation over which Mr. Kriens and his spouse exercise voting and investment control and 1,306,250 shares which are subject to options that may be exercised within 60 days of March 19, 2003. (4) Includes 360,000 shares held in custody for Dr. Sindhu’s children pursuant to the California Uniform Transfers to Minors Act, 1,130,534 shares held in trusts for the benefit of Dr. Sindhu and his spouse, 9,369,655 shares held by the Sindhu Family Trust, 6,867 shares held by Dr. Sindhu’s spouse and 1,130,781 shares which are subject to options that may be exercised within 60 days of March 19, 2003. (5) Includes 909,426 shares held in the name of the Marcel Gani 2002 Living Trust Dated June 6, 2002 of which Mr. Gani is the trustee and 344,375 shares which are subject to options that may be exercised within 60 days of March 19, 2003. (6) Consists of shares which are subject to options that may be exercised within 60 days of March 19, 2003. (7) Includes 35,156 shares that, as of March 19, 2003, are subject to a right of repurchase by the Company and 2,777,552 shares which are subject to options that may be exercised within 60 days of March 19, 2003. (8) Includes 11,667 shares which are subject to options that may be exercised within 60 days of March 19, 2003. (9) Includes 1,300,106 shares held in trust for the benefit of Mr. Khosla’s children and 8,333 shares which are subject to options that may be exercised within 60 days of March 19, 2003. (10) Includes 3,000,000 shares which are held in the name of New Enterprise Associates and of which Mr. Kramlich disclaims ownership and 11,667 shares which are subject to options that may be exercised within 60 days of March 19, 2003. (11) Consists of shares which are subject to options that may be exercised within 60 days of March 19, 2003. (12) Includes 48,333 shares which are subject to options that may be exercised within 60 days of March 19, 2003. (13) Includes 1,394,352 shares held in a trust as community property and 28,333 shares which are subject to options that may be exercised within 60 days of March 19, 2003. (14) Includes all shares referenced in Notes 3 through 13 above. 12


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    EXECUTIVE COMPENSATION The following table shows, for the last three fiscal years, compensation information for the Company’s Chief Executive Officer and the other most highly compensated executive officers. These officers are referred to herein as Named Executive Officers. Summary Compensation Table Long-Term Compensation Annual Compensation Awards Other Restricted Securities All Annual Stock Underlying Other Name and Principal Position Year Salary Bonus Compensation Award(s) Options Compensation Scott Kriens . . . . . . . . . . . . . . . 2002 $275,000 $ 0 —(1) NA 2,750,000(3) $ — Chairman, Chief Executive 2001 275,000 157,960 —(1) NA -0-(2) — Officer and President 2000 250,000 114,000 —(1) NA 400,000(2) — Pradeep Sindhu . . . . . . . . . . . . 2002 $195,000 $ 0 —(1) NA 400,000(4) $ — Vice Chairman and 2001 185,000 62,600 —(1) NA -0-(2) — Chief Technical Officer 2000 170,000 48,936 —(1) NA 100,000(2) — Marcel Gani . . . . . . . . . . . . . . . 2002 $200,000 $ 0 —(1) NA 1,080,000(5) $ — Executive Vice President, 2001 185,000 90,806 —(1) NA -0-(2) — Chief Financial Officer 2000 170,000 77,781 —(1) NA 100,000(2) — Lloyd Carney . . . . . . . . . . . . . . 2002 $379,000 $ 0 —(1) NA 2,000,000(6) $253,000(7) Executive Vice 2001(8) NA NA NA NA NA NA President Operations 2000(8) NA NA NA NA NA NA James A. Dolce, Jr. . . . . . . . . . 2002(9) $120,000 $ 0 —(1) NA 0 $ 26,634(10) Executive Vice 2001(11) NA NA NA NA NA NA President Field Operations 2000(11) NA NA NA NA NA NA (1) Consists of the standard employee benefit portion paid by the Company for all employees for premiums for term life insurance. No amounts are reported because they are less than the lesser of: (a) $50,000 or (b) 10% of the total salary and bonus for each of the Named Executive Officers. (2) In October 2001, the Company commenced a tender offer for certain of the stock options held by its employees that had an exercise price in excess of $10 per share. On November 26, 2001, the tender offer period expired and any options exchanged were cancelled effective on that date. In accordance with the requirements of the Financial Accounting Standards Board, if an employee participated in the option exchange program he or she could not receive any stock option grants for a minimum of six months and one day after the date of cancellation. Our executive officers, but not our non-employee directors, were entitled to participate in the exchange program. Mr. Kriens elected to participate and accordingly, effective November 26, 2001, the options listed on the above chart for the year 2000 were cancelled. Dr. Sindhu elected to participate as to those options granted to him in 2000 and accordingly, effective November 26, 2001, those options listed on the above chart for the year 2000 were cancelled. Mr. Gani elected to participate and accordingly, effective November 26, 2001, those options listed on the above chart for the year 2000 were cancelled. No options were granted to the Named Executive Officers in 2001. (3) Mr. Kriens was granted an exchange option on May 28, 2002 for 2,200,000 shares at an exercise price of $10.31 per share. In connection with the acquisition of Unisphere Networks and in recognition of the additional responsibility associated therewith, on July 1, 2002 an additional option for 550,000 shares was granted at an exercise price of $5.69 per share. (4) Dr. Sindhu was granted an exchange option on May 28, 2002 for 100,000 shares at an exercise price of $10.31 per share. In connection with the acquisition of Unisphere Networks and in recognition of the additional responsibility associated therewith, on July 1, 2002 an additional option for 300,000 shares was granted at an exercise price of $5.69 per share. 13


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    (5) Mr. Gani was granted an exchange option on May 28, 2002 for 580,000 shares at an exercise price of $10.31 per share. In connection with the acquisition of Unisphere Networks and in recognition of the additional responsibility associated therewith, on July 1, 2002 an additional option for 500,000 shares was granted at an exercise price of $5.69 per share. (6) Mr. Carney was granted an option for 1,500,000 shares upon his employment with the Company at an exercise price of $9.32 per share. In connection with the acquisition of Unisphere Networks and in recognition of the additional responsibility associated therewith, on July 1, 2002 an additional option for 500,000 shares was granted at an exercise price of $5.69 per share. (7) Consists of amounts received by Mr. Carney in connection with his relocation to California. (8) Mr. Carney joined the Company and was elected an executive officer in 2002 and accordingly, there is no data applicable for prior years. (9) Mr. Dolce was elected a named executive officer upon the closing of the acquisition of Unisphere Networks, Inc. on July 1, 2002. The data shown in the Summary Compensation Table only reflects compensation for 2002 paid by the Company to Mr. Dolce following such acquisition and does not include prior compensation paid by Unisphere Networks to Mr. Dolce. (10) This amount reflects commissions paid on or after July 1, 2002. (11) Mr. Dolce joined the Company and was elected an executive officer on July 1, 2002 and accordingly, there is no data for prior years. STOCK OPTION GRANTS AND EXERCISES The following tables set forth the stock options granted to the Named Executive Officers under the Company’s stock option plans and the options exercised by such Named Executive Officers during the fiscal year ended December 31, 2002. Option/SAR Grants in Last Fiscal Year The Option/SAR Grant Table sets forth hypothetical gains or “option spreads” for the options at the end of their respective ten-year terms, as calculated in accordance with the rules of the Securities and Exchange Commission. Percent of Potential Realizable Total Options Value at Assumed No. of Securities Granted Annual Rates of Underlying to Employees Exercise Stock Appreciation Options During Price Expiration for Option Term ($) Name Granted Period Per Share (1) Date 5% 10% Scott Kriens . . . . . . . . . . . . . . . . 2,200,000 4.68 $10.31 05/28/12 14,264,588 36,149,266 550,000 1.17 $ 5.69 07/01/12 1,968,126 4,987,617 Pradeep Sindhu . . . . . . . . . . . . . 100,000 0.21 $10.31 05/28/12 648,390 1,643,148 300,000 0.64 $ 5.69 07/01/12 1,073,523 2,720,518 Marcel Gani . . . . . . . . . . . . . . . . 580,000 1.23 $10.31 05/28/12 3,760,664 9,530,261 500,000 1.06 $ 5.69 07/01/12 1,789,205 4,534,197 Lloyd Carney . . . . . . . . . . . . . . . 1,500,000 3.19 $ 9.32 02/28/12 8,791,947 22,280,520 500,000 1.06 $ 5.69 07/01/12 1,789,205 4,534,197 James A. Dolce, Jr. (2) . . . . . 0 — — — — — (1) The grants at $10.31 per share are the exchange grants associated with the Exchange Program the Company initiated in 2001 but that could not be granted for at least six months following the cancellation of the original grants. (2) Mr. Dolce did not receive any option grants from the Company during 2002; he became and an executive officer of the Company upon the effective date of the acquisition of Unisphere Networks by the Company on July 1, 2002. 14


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    Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values The following table shows stock option exercises and the value of unexercised stock options held by the Named Executive Officers during the last fiscal year. Number of Securities Value of Unexercised Shares Underlying Unexercised In-the-Money Options at Acquired on Value Options at December 31, 2002 December 31, 2002 ($)(1) Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable Scott Kriens . . . . . . . . . . . . . . . . 0 — 1,031,250 1,718,750 — 610,500 Pradeep Sindhu . . . . . . . . . . . . . 0 — 1,091,406 388,594 — 333,000 Marcel Gani . . . . . . . . . . . . . . . . 0 — 271,875 808,125 — 555,000 Lloyd Carney . . . . . . . . . . . . . . . 0 343,750 1,656,250 — 555,000 James A. Dolce, Jr. . . . . . . . . . 0 — 2,535,608 1,141,968 2,915,949 1,313,263 (1) The value of in-the-money options is based on the closing price of the Company’s common stock on December 31, 2002 of $6.80 per share, minus the per share exercise price, multiplied by the number of shares underlying the option. Description of Stock Option Exchange Program On October 25, 2001, the Company announced a voluntary stock option exchange program for its employees (the “Exchange Program”). Under the terms of the Exchange Program, all employees (including executive officers) were given the opportunity, if they chose, to cancel certain outstanding stock options previously granted to them with an exercise price equal to or greater than $10.00 in exchange for an equal number of replacement options to be granted at a future date, at least six months and one day from the cancellation date, which was November 26, 2001. Each employee electing to participate in the Exchange Program was required to exchange all eligible options granted to such employee during the six-month period prior to the cancellation date. On the date that the replacement options were granted, each participant employee received one replacement option for each eligible option included in the exchange. The replacement options were granted with an exercise price of $10.31 per share, the closing price of our common stock as reported on Nasdaq on the date of grant which was May 28, 2002. The Compensation Committee advocated and the Board of Directors approved the above program because of the decline in the price of the Company’s common stock in prior months. The Company recognized that the exercise prices of the majority of our employees’ outstanding options to purchase the Company’s common stock were higher than the then-current price of our common stock. This development reduced the potential value of those options and our stock option program to employees. By offering employees the ability to participate in the Exchange Program described above, the Company intended to provide our employees with the benefit of holding options that over time may have a greater potential to increase in value, thereby creating better incentives for employees to remain with the Company and contribute to the attainment of the Company’s business and financial objectives and the creation of value for all of the Company’s stockholders. Members of the Compensation Committee Vinod Khosla William R. Stensrud 15


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    Ten Year Repricing Table The following table sets forth certain information regarding all repricings of options held by any executive officer during the period that the Company has been subject to Exchange Act reporting requirements (which period is less than 10 years): Date No. of Original Securities Market Price Exercise Date Expiration Stock Underlying at Time of Price at Exchange New Date of Options Options Cancellation Time of Options Exercise Original Name Canceled Exchanged (1) Cancellation Granted Price Option Scott Kriens . . . . . . . . . . . . . . . 11/26/01 1,800,000 $26.30 $30.3542 05/28/02 $10.31 10/04/09 11/26/01 400,000 $26.30 $93.9375 05/28/02 $10.31 12/21/10 Pradeep Sindhu . . . . . . . . . . . . 11/26/01 100,000 $26.30 $93.9375 05/28/02 $10.31 12/21/10 Marcel Gani . . . . . . . . . . . . . . . 11/26/01 480,000 $26.30 $30.3542 05/28/02 $10.31 10/04/09 11/26/01 100,000 $26.30 $93.9375 05/28/02 $10.31 12/21/10 Peter Wexler . . . . . . . . . . . . . . . 11/26/01 100,000 $26.30 $93.9375 05/28/02 $10.31 12/21/10 (1) Market price of Common Stock at time of cancellation was the closing price of our common stock on the date of cancellation, November 26, 2001. EMPLOYMENT AGREEMENTS The Company entered into a change of control agreement with Mr. Kriens on October 1, 1996, which provides that he will be entitled to base compensation and benefit payments for a period of three months in the event that his employment is terminated in connection with a change of control of Juniper Networks. Further, Mr. Kriens’ restricted stock would be released from any repurchase option and his stock options would become vested and exercisable as to an additional amount equal to that amount which would have vested and become exercisable had Mr. Kriens remained employed for a period of 18 months following the change of control. If his employment continues following a change of control, his stock options will be vested and exercisable at a rate 1.5 times the rate otherwise set forth in the stock option agreement for a period of twelve months following the change of control. Under the employment agreement, Mr. Kriens is entitled to receive three months’ base compensation and benefits, regardless of whether there is a change of control, in the event that his employment is involuntarily terminated. Upon involuntary termination, and regardless of whether there has been a change of control, Mr. Kriens’ restricted stock and stock options would become immediately vested and exercisable as to an additional amount equal to the number of stock options which would have become vested and exercisable during the three-month period following the involuntary termination had Mr. Kriens remained employed by the Company. The Company entered into a change of control agreement with Mr. Gani in February 1997, which provides that he will be entitled to receive base compensation and benefits for a period of three months, in the event of involuntary termination. In the event of a change of control at Juniper Networks, the vesting of Mr. Gani’s stock options will accelerate as to that number of options equal to the number of shares that would vest over the next 30 months in accordance with the Company’s standard vesting schedule or the balance of his unvested stock, whichever amount is less. BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION Compensation Committee The Compensation Committee is comprised of two of the independent, non-employee members of the Board of Directors, neither of whom have interlocking relationships as defined by the Securities and Exchange Commission. The Compensation Committee is responsible for setting and administering the policies governing annual compensation of executive officers, considers their performance and makes recommendations regarding their cash compensation and stock options to the full Board of Directors. The Compensation Committee, 16


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    pursuant to its charter, periodically reviews the approach to executive compensation and makes changes as competitive conditions and other circumstances warrant. Compensation Philosophy The Company’s executive compensation structure currently reflects two categories of executives. The first is an executive that came to work at the Company prior to the Company going public and the second is an executive that came to work at the Company subsequent to that time. Although the Compensation Committee recognizes that the compensation structure needs to change to reflect the maturation of the Company, the Compensation Committee believes now and has believed in the past that any such changes would have to be made slowly in a fiscally sound manner. The economic downturn beginning in 2001 in both the economy in general and in our industry in particular has slowed that process further. The Compensation Committee recognizes that in order for the Company to develop new products and continue to grow and scale the business, the ability to attract, retain and reward executive officers who will be able to operate effectively in a high growth, complex environment is vital. In that regard, the Company must offer compensation that (a) is competitive in the industry; (b) motivates executive officers to achieve the Company’s strategic business objectives; and (c) aligns the interests of executive officers with the long-term interests of stockholders. In that regard, during 2002, the Compensation Committee made minor adjustments in the cash compensation of the executive officers (excluding the Chief Executive Officer) and recommended additional stock options to the executive officers (including the Chief Executive Officer) to reflect the increased responsibility assumed by the executive officers in connection with the acquisition by the Company of Unisphere Networks. The Company uses salary, a management incentive plan and stock options to meet the requirements of attracting and retaining senior management. For incentive-based compensation, the Compensation Committee considers the desirability of structuring such compensation arrangements so as to qualify for deductibility under Section 162(m) of the Internal Revenue Code. As the Compensation Committee applies this compensation philosophy in determining appropriate executive compensation levels and other compensation factors, the Compensation Committee reaches its decisions with a view towards the Company’s overall performance. Executive Officer Compensation The Compensation Committee’s approach is predicated upon the philosophy that a substantial portion of aggregate annual compensation for executive officers should be contingent upon the Company’s performance and an individual’s contribution to the Company’s success in meeting certain critical objectives. In addition, the Compensation Committee strives to align the interests of the Company’s executive officers with the long- term interests of stockholders through stock option grants such that grants of stock options should relate the performance of the executive to the market perception of the performance of the Company. The Company provides its executive officers with a compensation package consisting of base salary, variable incentive pay and participation in benefit plans generally available to other employees. The Compensation Committee considers market information from published survey data provided to the Compensation Committee by the Company’s human resources staff. The market data consists primarily of base salary and total cash compensation rates, as well as incentive bonus and stock programs of other companies considered by the Compensation Committee to be peers in the Company’s industry. Base Salary. The Compensation Committee, in reviewing compensation at the end of 2002 determined that although the plan to continue normalizing the compensation structure is important for the long term growth of the executive team and the Company, it accepted management’s recommendation for no increases to base salary for the upcoming fiscal year. Management’s recommendation and agreement by the Compensation Committee was based on the current business environment. Management Incentive Plan. The Company has an incentive bonus plan which is a percentage of base salary measured against the performance of the Company relative to certain goals for profitability and 17


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    performance of certain key strategic objectives related to the Company’s market share, expansion of the business into new growth area and individual performance of the executive officers. Stock Option Grants. Grants of stock options to executive officers are based upon each executive officer’s relative position, responsibilities, historical and expected contributions to the Company, and the executive officer’s existing stock ownership and previous option grants. Stock options are granted at the fair market value on the date of grant and will provide value to the executive officers only when the price of the Company’s Common Stock increases over the exercise price. Chief Executive Officer Compensation Effective for fiscal year 2003, the base salary of Mr. Kriens remains at $275,000 with a target bonus percentage of 100% of base salary. Mr. Kriens received an option grant for 550,000 shares in 2002. Members of the Compensation Committee Vinod Khosla William R. Stensrud COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION No member of the Compensation Committee serves as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of the Company’s Board of Directors or Compensation Committee. 18


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    STOCK PERFORMANCE GRAPH The following performance graph shows the cumulative total stockholder return assuming the investment of $100 on June 25, 1999 (the date of the Company’s initial public offering) in each of Juniper Networks common stock, the Nasdaq Composite Index and the Nasdaq Telecommunications Index. The performance shown is not necessarily indicative of future performance. COMPARISON OF CUMULATIVE TOTAL RETURN AMONG JUNIPER NETWORKS, INC., THE NASDAQ COMPOSITE INDEX AND THE NASDAQ TELECOMMUNICATIONS INDEX $1,400 $1,200 $1,000 $800 $600 $400 $200 $- Mar-31-00 Mar-30-01 Mar-28-02 Mar-21-03 Jun-25-99 Sep-30-99 Dec-31-99 Jun-30-00 Sep-29-00 Dec-29-00 Jun-29-01 Sep-28-01 Dec-31-01 Jun-28-02 Sep-30-02 Dec-31-02 JNPR NASDAQ TELECOM CERTAIN TRANSACTIONS In connection with our acquisition of Unisphere Networks, Inc. in July 2002, Siemens Corporation acquired 35,815,206 shares of our common stock. We have also entered into a worldwide distribution agreement with Siemens Aktiengesellschaft, the parent company of Siemens Corporation, pursuant to which Siemens Aktiengesellschaft and its regional subsidiaries purchase our products in arm’s-length transactions for resale to their respective customers. 19


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    Section 16(A) Beneficial Ownership Reporting Compliance Juniper Networks believes that during 2002, all filings with the SEC by its officers, directors and 10% stockholders complied with requirements for reporting ownership and changes in ownership of Juniper Networks common stock under Section 16(a) of the Securities Exchange Act of 1934, as amended. OTHER MATTERS The Board of Directors knows of no other matters to be submitted to the meeting. If any other matters properly come before the meeting, it is the intention of the persons named in the enclosed form of proxy to vote the shares they represent as the Board of Directors may recommend. THE BOARD OF DIRECTORS April 11, 2003 20


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    Appendix A AUDIT COMMITTEE CHARTER OF THE BOARD OF DIRECTORS OF JUNIPER NETWORKS, INC. PURPOSE The purpose for the Audit Committee of the Board of Directors of Juniper Networks, Inc. shall be: (a) To assist the Board of Directors in oversight and monitoring of (i) the integrity of the Company’s financial statements, (ii) the Company’s compliance with legal and regulatory requirements, (iii) the independent auditor’s qualifications, independence and performance, (iv) the Company’s internal accounting and financial controls, improvements made or to be made in such controls; and (v) the internal audit function. (b) To prepare the report required in the annual proxy statement as set forth in the rules of the SEC; (c) To make such examinations as are necessary to monitor the corporate financial reporting and external audit requirements of Juniper Networks, Inc. and its subsidiaries (the “Company”); (d) To provide to the Board of Directors the results of its monitoring and examining and recommendations derived therefrom; (e) To nominate independent auditors; (f) To provide to the Board of Directors such additional information and materials as it may deem necessary to make the Board of Directors aware of significant financial matters that require its attention; and (g) To undertake those specific duties and responsibilities described in this charter as well as such other duties as the Board of Directors from time to time prescribe. MEMBERSHIP The Audit Committee will consist of at least three members of the Board of Directors, each of whom will be appointed by and serve at the discretion of the Board of Directors and shall meet the following requirements, as well as any requirements promulgated by the SEC now or in the future: (a) Each member will be independent, as defined by Nasdaq Rule 4200 and any rule or regulation prescribed by the SEC; (b) Each member will be able to read and understand fundamental financial statements, in accordance with the Nasdaq Audit Committee requirements; (c) At least one member will have past employment experience in finance or accounting, requisite professional certification in accounting, or other comparable experience or background, including a current or past position as a principal financial officer or other senior officer with financial oversight responsibilities. RESPONSIBILITIES The responsibilities of the Audit Committee shall include: (a) Overseeing the internal audit function and reviewing, on a continuing basis, the adequacy of the Company’s system of internal controls, including meeting periodically with the Company’s management and the independent auditors to review the adequacy of such controls and to review before release the disclosure regarding such system of internal controls required under SEC rules to be contained in the Company’s periodic filings and the attestations or reports by the independent auditors relating to such disclosure; A-1


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    (b) Appointing, compensating and overseeing the work of the independent auditors (including resolving disagreements between management and the independent auditors regarding financial reporting) for the purpose of preparing or issuing an audit report or related work; (c) Pre-approving audit and non-audit services provided to the Company by the independent auditors (or subsequently approving non-audit services in those circumstances where a subsequent approval is necessary and permissible); in this regard, the Audit Committee shall have the sole authority to approve the hiring and firing of the independent auditors, all audit engagement fees and terms and all non-audit engagements, as may be permissible, with the independent auditors; (d) Reviewing and providing guidance with respect to the external audit and the Company’s relationship with its independent auditors by (i) reviewing the independent auditors’ proposed audit scope, approach and independence; (ii) obtaining on a periodic basis a statement from the independent auditors regarding relationships and services with the Company which may impact independence and presenting this statement to the Board of Directors, and to the extent there are relationships, monitoring and investigating them; (iii) reviewing the independent auditors’ peer review conducted every three years; (iv) discussing with the Company’s independent auditors the financial statements and audit findings, including any significant adjustments, management judgments and accounting estimates, significant new accounting policies and disagreements with management and any other matters described in SAS No. 61, as may be modified or supplemented; (v) reviewing reports submitted to the audit committee by the independent auditors in accordance with the applicable SEC requirements; and (vi) reviewing and discussing with management and the independent auditors the annual audited financial statements and quarterly unaudited financial statements, including the Company’s disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” prior to filing the Company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, respectively, with the SEC; (e) Directing the Company’s independent auditors to review before filing with the SEC the Company’s interim financial statements included in Quarterly Reports on Form 10-Q, using professional standards and procedures for conducting such reviews; (f) Conducting a post-audit review of the financial statements and audit findings, including any significant suggestions for improvements provided to management by the independent auditors; (g) Reviewing before release the unaudited quarterly operating results in the Company’s quarterly earnings release; (h) Overseeing compliance with the requirements of the SEC for disclosure of auditor’s services and audit committee members, member qualifications and activities; (i) Reviewing, approving and monitoring the Company’s code of ethics for its senior officers; (j) Reviewing management’s monitoring of compliance with the Company’s standards of business conduct and with the Foreign Corrupt Practices Act; (k) Reviewing, in conjunction with counsel, any legal matters that could have a significant impact on the Company’s financial statements; (l) Providing oversight and review at least annually of the Company’s risk management policies, including its investment policies; (m) Reviewing the performance of the independent auditors and ensure that the independent auditors are accountable to the Board of Directors, as representatives of stockholders. (n) Ensuring receipt from the independent auditors of a formal written statement delineating between the auditor and the Company, consistent with Independence Standards Board Standard 1, as well as actively engaging in a dialog with the independent auditors with respect to any disclosed relationships or services that may impact the objectivity and independence of the independent auditor; A-2


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    (o) If necessary, instituting special investigations and, if appropriate, hiring special counsel or experts to assist; (p) Reviewing related party transactions for potential conflicts of interest; (q) Reviewing and reassessing the adequacy of this formal written charter on an annual basis; and (r) Performing other oversight functions as requested by the full Board of Directors. In addition to the above responsibilities, the Audit Committee will undertake such other duties as the Board of Directors delegates to it, and will report, at least annually, to the Board of Directors regarding the Committee’s examinations and recommendations. MEETINGS The Audit Committee will meet at least four times each year. The Audit Committee may establish its own schedule that it will provide to the Board of Directors in advance. The Audit Committee will meet separately with the Chief Executive Officer and separately with the Chief Financial Officer of the Company at such times as are appropriate to review the financial affairs of the Company. The Audit Committee will meet with the independent auditors of the Company, at such times as it deems appropriate, to review the independent auditor’s examination and management report and to otherwise fulfill its responsibilities under the charter. REPORTS The Audit Committee will record its summaries of recommendations to the Board of Directors in written form that will be incorporated as a part of the minutes of the meeting of the Board of Directors at which those recommendations are presented. MINUTES The Audit Committee will maintain written minutes of its meetings, which minutes will be filed with the minutes of the meetings of the Board of Directors. A-3


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    Directions to the Historic Del Monte Building 100 S. Murphy Ave. #103 Sunnyvale, CA 94086-6118 From Highway 101 Northbound or Southbound: Exit Mathilda Avenue South. Proceed 1.5 miles to Washington Avenue. Turn left. Go 3 blocks to Murphy Avenue and turn left. The Historic Del Monte Building is at the end of the block on the right. (See map) (See map for parking) The banquet office is on the rear of the building facing Sunnyvale Ave. Look for the green awning that says “Banquet Office” and the elevator can be found at the rear entrance. From Highway 280 Northbound: Exit at De Anza Blvd and turn right. (De Anza Blvd. will become Sunnyvale/Saratoga Rd.) Proceed 2 miles to El Camino Real. Cross El Camino and drive to Washington Avenue. Turn right on Washington. Go 3 blocks to Murphy Avenue and turn left. The Historic Del Monte Building is at the end of the block on the right. (See map) (See map for parking) The banquet office is on the rear of the building facing Sunnyvale Ave. Look for the green awning that says “Banquet Office” and the elevator can be found at the rear entrance. From Highway 280 Southbound: Exit at De Anza Blvd. and turn left. (De Anza Blvd. will become Sunnyvale/Saratoga Rd.) Proceed 2 miles to El Camino Real. Cross El Camino and drive to Washington Avenue. Turn right on Washington. Go 3 blocks to Murphy Avenue and turn left. The Historic Del Monte Building is at the end of the block on the right. (See map) (See map for parking) The banquet office is on the rear of the building facing Sunnyvale Ave. Look for the green awning that says “Banquet Office” and the elevator can be found at the rear entrance. From Highway 880 Northbound or Southbound: Exit at Highway 237 and drive to the Mathilda Exit. Turn left and drive 2 miles to Washington Avenue. Turn left. Go 3 blocks to Murphy Avenue and turn left. The Historic Del Monte Building is at the end of the block on the right. (See map) (See map for parking) The banquet office is on the rear of the building facing Sunnyvale Ave. Look for the green awning that says “Banquet Office” and the elevator can be found at the rear entrance. A-4


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    UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) H ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2002 OR h TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission file no. 0-26339 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 (Address of principal executive offices, including zip code) (408) 745-2000 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common stock, $.00001 par value 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 H No h Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of the Form 10-K or any amendment to this Form 10-K. A Indicate by check mark whether the registrant is an accelerated filer (as defined by Exchange Act Rule 12b-2). Yes H No h As of February 28, 2003 there were 376,289,841 shares of the Registrant’s Common Stock outstanding. The aggregate market value of the Common Stock held by non-affiliates of the Registrant was approximately $1,333,111,000 (based on the closing price for the Common Stock on the NASDAQ National Market on June 28, 2002). DOCUMENTS INCORPORATED BY REFERENCE The information called for by Part III is incorporated by reference to specified portions of the Registrant’s definitive Proxy Statement to be issued in conjunction with the Registrant’s 2003 Annual Meeting of Stockholders, which is expected to be filed not later than 120 days after the Registrant’s fiscal year ended December 31, 2002.


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    Table of Contents PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ITEM 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ITEM 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 ITEM 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 ITEM 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 PART II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 ITEM 5. Market for Registrant’s Common Equity and Related Stockholder Matters . . . . . . 12 ITEM 6. Selected Consolidated Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 ITEM 7a. Quantitative and Qualitative Disclosure about Market Risk . . . . . . . . . . . . . . . . . . . . . . 31 ITEM 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 ITEM 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 ITEM 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 ITEM 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . 66 ITEM 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 ITEM 14. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 PART IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 ITEM 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K . . . . . . . . . . . . . 68 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69


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    PART I This Annual Report on Form 10-K (“Report”), including the “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, contains forward-looking statements regarding future events and the future results of Juniper Networks that are based on current expectations, estimates, forecasts, and projections about the industry in which Juniper Networks operates and the beliefs and assumptions of the management of Juniper Networks. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of such words, and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in this Report under the section entitled “Risk Factors” and elsewhere, and in other reports Juniper Networks files with the Securities and Exchange Commission (“SEC”), specifically the most recent reports on Form 10-Q, each as it may be amended from time to time. Juniper Networks undertakes no obligation to revise or update publicly any forward-looking statements for any reason. ITEM 1. Business Overview We are a leading provider of network infrastructure solutions that transform the business of networking by converting bandwidth—a commodity—into a dependable, secure and highly valuable corporate asset. Our products, services and solutions enable service providers and other network-intensive businesses to support and deliver services and applications on a highly efficient and low cost integrated network. Our products are designed and purpose-built for service provider networks and offer our customers best-in-class performance with less complexity and cost than legacy alternatives. Unlike conventional routers, originally developed for enterprise applications and increasingly inadequate for use in the highly scaled public and private networks, our products are specifically designed to accommodate substantial size, scope and security demands. We lead the industry in transforming packets into profit for network service providers, wireless and cable operators, government agencies, research and education networks and information-intensive enterprises. Our acquisition of Unisphere Networks, Inc., completed in July 2002, has enabled us to extend our ability to supply shared access applications expertise to the leading service providers, carriers and PTTs throughout the world. We were incorporated in California in 1996 and reincorporated in Delaware in 1997 with our corporate headquarters in Sunnyvale, California. Our corporate mailing address is 1194 North Mathilda Avenue, Sunnyvale, California 94089 and the telephone number at that location is (408) 745-2000. Our website is www.juniper.net. Industry Background The Internet has evolved from an academic research project into a network of hundreds of separately administered, public and private networks interconnected using Internet Protocol (IP). IP traffic continues to grow, driven by increasing numbers of new users, connected devices and Internet transactions. The result of the widespread use of IP is a ubiquitous network that today carries a large and growing amount of data traffic enabling millions of users to share information and conduct electronic commerce. Industry research firms forecast continued growth worldwide in the Internet and Internet traffic. The importance of IP continues to increase as the number of users, connected devices and transactions over the highly scaled public and private networks increases. The rapid adoption of the Internet and the tremendous growth of IP traffic have prompted service providers to construct large-scale data networks. These highly scaled public and private networks are being optimized to transport data traffic as compared to traditional telephone networks, which were optimized to transport voice traffic. The architecture of these next generation networks is being driven by two key technologies: packet/cell switching and optical networking. Advantages of Packet/Cell Switching. Packet/cell switching technology, which divides data traffic into distinct units called packets or cells and routes each packet or cell independently, provides superior use of available network capacity compared to traditional circuit switching technology. In a circuit switched network, each data 1


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    stream, such as a voice telephone call between two points, is provided with a dedicated channel, or circuit, for the duration of the telephone call. This approach leads to inefficient use of network resources because a channel is fully dedicated to each transaction, whether or not data is actually flowing at any given moment. As a result, circuit switched architecture is highly inefficient for Internet applications which tend to create large bursts of data traffic followed by long periods of silence. Packet/cell switching architectures enable greater utilization out of a fixed capacity circuit by combining traffic that has different capacity demands of the circuit at different times. Packet/cell switches more efficiently fill the available network bandwidth with packets of data from many users, thereby reducing the wasted bandwidth due to silence from any one particular user. The use of packet/cell switching is driving the architecture of the Internet to be fundamentally different from traditional circuit switched voice based networks. In packet/cell switched networks, IP has emerged as the de facto standard for providing services to end users. Other packet/cell switching products include frame relay switches, asynchronous transfer mode (ATM) switches and routers. Rapid Advances in Optical Networking. Optical networking technology uses pulses of light, rather than pulses of electricity, to transmit data in a network, and uses fiber optic connections instead of wires. Optical networking can be used to transmit much more information over a given connection than electrical signals can convey. Optical networking advances, such as dense wavelength division multiplexing, or DWDM, which allows transmission of several frequencies of light over one strand of optical fiber, have enabled still higher data transmission rates and improved efficiency of bandwidth utilization. Packet/cell technologies have not kept up with optical technologies and traditional packet switching equipment is not capable of forwarding packets at rates sufficient to keep pace with optical transmission speeds. Our IP-based products are purpose-built to meet these requirements. Fundamental Requirements for Highly Scaled Public and Private Networks The reliability and performance of current network infrastructure equipment have become and continue to be critical issues for service providers as they support dramatic growth in IP traffic and increasingly seek to offer new revenue generating, mission-critical and other services. The need for high reliability, high performance, high performance under stressful conditions, scalability, interoperability and cost effectiveness are fundamental requirements in meeting the needs associated with the growth in IP traffic. New requirements will continue to arise for next generation networks, which will drive a set of new requirements for network infrastructure equipment. High Reliability. As businesses and consumers increasingly rely on the Internet for mission-critical applications, high network reliability becomes essential. Service providers are increasingly expected to provide a similar degree of reliability on the Internet that users have become accustomed to on the traditional telephone network. The “five nines” (99.999%) reliability standard of the traditional telephone network is becoming the target to which suppliers of next-generation Internet platforms are being compared. As service providers begin to bundle voice and data on their networks, this high degree of reliability is becoming even more critical. High Performance. To handle the rapid growth in IP traffic, today’s networks increasingly require routers that can operate at higher speeds. The processing of data packets at these high speeds requires sophisticated forwarding technology to inspect each packet and assign it to a destination based on priority, data type and other considerations. Since a large number of IP packets, many of which perform critical administrative functions, are small in size, high performance Internet routers need to achieve their specified transmission speeds even for small packet sizes. Since smaller packets increase packet processing demands, routing large numbers of smaller packets tends to be more resource intensive than routing of larger packets. A wire speed router, which achieves its specified transmission rate for any type of traffic passing through it, can accomplish this task. Thus, provisioning of mission- critical services increasingly requires the high performance enabled by wire speed processing. High Performance Under Stressful Conditions. In a large and complex network, individual components inevitably fail. However, the failure of an individual device or link must not compromise the network as a whole. In a typical network, when a failure occurs, the network loses some degree of capacity and, in turn, a greater load falls on the remaining network routers, which must provide alternate routes. Routers must quickly adjust to the new state of the network to maintain packet forwarding rates and avoid dropping significant numbers of packets when active routes are lost or when large numbers of routes change. Routing protocols are used to accomplish this convergence, a process that places even greater stress on the router. Given the complexity of Internet infrastructure, 2


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    particularly compared to enterprise networks, the convergence process is far more complex and places a far greater load on the routing software, thereby requiring a much more sophisticated device. Scalability. Due to the rapid growth in IP traffic, service providers must continuously expand their networks, both in terms of increased numbers of access points of presence (PoPs), and also greater capacity per PoP. To facilitate this expansion process, network infrastructure equipment must be highly scalable. Next generation routers therefore need to be upgradeable and configurable to function within constantly changing networks while incurring minimal downtime. Interoperability. Service providers do not have the time or inclination to change their existing networks to favor introduction of new products; rather, new products must be compatible with the existing environment. Given the open and inter-connected nature of the Internet, the complexity of running an Internet backbone network requires a service provider to control and police relations with other service providers. For example, service providers must carefully control what traffic is accepted under what conditions from other providers. The software in each router must offer 100% compatibility with the interior protocols and standards used within each service provider’s backbone network. The compatibility level must be maintained despite changes to software equipment configuration and network architecture and upgrades to the various protocol standards. Thus, routing software must be flexible and quickly upgradeable to support any necessary revisions. This level of compatibility, in turn, cannot impact the performance, scalability or reliability of the equipment. Attaining this sophisticated level of interoperability is highly challenging and requires significant testing to ensure compatibility. Cost Effectiveness. Growth in IP traffic and intense price competition in the telecommunications market continues to require service providers to seek solutions that significantly reduce the capital expenditures required to build and operate their networks. In addition to the basic cost of equipment such as routers, service providers incur substantial ancillary costs in terms of space required to deploy the equipment, power consumption and on- going operations and maintenance. Service providers therefore want to deploy dense and varied equipment configurations in limited amounts of rack and floor space. Therefore, in order to continue to scale their networks toward higher data speeds in a cost effective manner, service providers need the ability to mix and match easily many different speed connections at appropriate densities, without significantly increasing the consumption of space or power. There is a clear need for next generation routers that can support high speeds and offer new IP-based services. Network operators are eagerly seeking new solutions that increase the level of scalability and reliability within their networks and reduce the cost of their architectures. The Juniper Networks Solution We developed, marketed and sold the first commercially available purpose-built Internet backbone router optimized for the specific high performance needs of service providers. As the need for core bandwidth continued to increase, the need for service rich platforms at the edge of the network was created. Our products are designed to address the needs at the core and the edge of the network as well as for wireless and cable access by combining the features of high-performance ASIC-based packet forwarding technology, our software and a network-optimized architecture. Software. Our software has been designed to meet the IP network routing, operations and control requirements of the world’s largest service providers and is an integral embedded component of our product family system architecture. The ability of our software to manage the complex network sharing relationships among service providers allows our products to be placed at critical points in the core of a service provider’s network. Our software allows our products to have widespread network placement due to its interoperability with Cisco’s Internetwork Operating System, or IOS, currently the most broadly deployed routing operating system. Unconstrained by legacy routing software, we developed our software using a modular design, in which distinct functions are implemented as separate modules with well defined interfaces and interactions, simplifying troubleshooting and maintenance. These features keep functionality distinct, and minimize the impact of any failure that may occur to the specific software application in which the failure occurs. Also, we believe the modularity of our software will enable the continuous upgrade of new enhanced capabilities, while protecting reliability and compatibility with existing networks. 3


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    High Performance ASIC-Based Packet Forwarding Technology. Our products utilize high performance ASIC-based technology. The result is a platform that is substantially faster than today’s general purpose microprocessor based routers in its ability to process and forward IP packets, allowing our products to deliver high performance at wire speed. The ability to enhance and implement large scale ASICs will be a long-term differentiator for us, particularly as the sophistication required to forward traffic across higher speed networks increases. Network Optimized Architecture. Our products employ an architecture designed exclusively for the highly scaled public and private networks. The system architecture provides a clean separation between the routing and packet-forwarding functions. Separating these two functions enables us to develop independently a full-featured routing protocol and traffic engineering functionality through our software and wire speed packet forwarding performance through high performance ASICs. Juniper Networks Products. Our products have been developed or acquired as part of our strategy to provide the reliable delivery of core, edge, wireless and cable Internet services at scale for the New Public Network. As part of our product and services offerings, our Model for Integrated Network Transformation (MINT) provides a business and network framework that enable service providers to transition from a commodity transport business model to a more lucrative, value-added services model. Technologies such as IP routing, multi-protocol label switching (MPLS) and Packet Processing have been successfully deployed in a number of service provider networks for a number of years and have now been enhanced and matured to a degree that they can now be applied to solving issues such as the supply of new IP based services and consolidating legacy networks. The MINT provides an operational approach to apply the technologies appropriate to the revenue opportunities being presented to our customers. The MINT advocates a software based approach in the provision of services similar to the model that has proved to be successful in the telephony market. It defines a new operational model for service providers to address the data communications market by: • addressing underserved markets with new services and a low touch/low cost operational model improving the profitability of these service; and • supporting existing services such as Frame Relay, ATM, Internet access with a better cost model — the same service but a better cost model. Our M-series and T-series product platforms share common software and services, and common family of ASIC technology for full compatibility and scalability. Critical service provider applications including high-speed access, peering, and hosting are served by our platforms. Physical interfaces are interchangeable between most platforms, increasing user flexibility and allowing common sparing. Our solution provides several key benefits to our customers: carrier class reliability, wire speed performance, scalability, interoperability, flexibility, reduced complexity and cost effectiveness. The M-series and T-series products leverage our third generation of high-density silicon and the same proven JUNOS software that is common across all of our M-series and T-series platforms to ensure continuous and predictable service delivery, while minimizing capital and operational costs. This ensures network service providers migrating ATM and FR traffic to MPLS transport are able to do so smoothly and seamlessly without disruption to customer applications. Our E-series products are designed to allow simultaneous delivery of high-speed services over dedicated connections, such as T1, T3 and optical interfaces, as well as over DSL, cable and wireless connections from a single system. By delivering multiple high-speed access services from a single system, our products reduce the need to purchase, install and operate multiple pieces of equipment. The combination of our software and hardware allows communications service providers to deploy new high-value data services. Our E-series products support value- added data services for business-critical applications across the Internet, such as virtual private networks and priority service levels, or IP quality of service. Our J-series product, developed together with Ericsson A.B., provides a scalable solution for both GPRS and WCDMA networks and supports wireless operators in their evolution from voice-centric GSM networks to the new multimedia-rich 3G networks. Through the use of consistent software features in our M-series routers and the new Ericsson GGSN application software, operators gain scalability advantages, including the ability to natively offer the latest IPv6 standard for IP networking — which includes advanced quality of service (QoS) features, as well 4


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    as vast new IP addressing capabilities. The J-series products natively support high packet-forwarding performance and robust, standards-based QoS capabilities — including support for Differentiated Services (DiffServ), MPLS, and all four 3GPP R3 QoS classes. The result is the first carrier-class GGSN capable of handling demanding high- speed data multimedia services such as streaming video, real-time gaming, videoconferencing and live application sharing. The J-series products can be integrated into an existing backbone network and the operator gains with ease of deployment and cost-of-ownership benefits through using the same infrastructure for GPRS/WCDMA and other types of IP access. We sell the J-series products exclusively through our reseller Ericsson. The G-series products, based on CableLabst DOCSIS™ 1.1 and interim PacketCable specifications, combine the CMTS with our M-series routers allowing cable operators to efficiently deliver advanced IP services, including VoIP through two-way cable plants, and offer interoperability with call management servers, media gateways, billing and provisioning systems and multimedia terminal adapters. The G-series products utilize a purpose-built DOCSIS-compliant integrated circuit — the Broadband Cable Processor ASIC, to allow cable operators to deliver more bandwidth for advanced IP services and with superior RF performance and thereby simultaneously supporting a higher number of cable modems and to lower capital expenses. The Juniper Networks Strategy Our objective and strategy is to transform the business of networking by converting bandwidth, which is a commodity, into a dependable, secure and highly valuable corporate asset. Our technological leadership and problem solving abilities combined with our experience and fundamental understanding of high performance Packet Processing will help us in meeting our objectives. Key elements of our strategy are described below. Maintain and Extend Technology Leadership. Our ASIC technology, software and network-optimized product architecture have been key elements to establishing our technology leadership. We believe that these elements are highly leverageable into future products we are currently developing. We intend to maintain and extend our technological leadership in the network infrastructure market through continued significant investment to enhance the feature richness of our products and to develop future differentiated offerings for service providers. Leverage Early Lead as Supplier of Purpose-Built Network Infrastructure. From inception we have focused on designing and building network infrastructure for service providers and have integrated purpose-built software and hardware into a network optimized architecture that specifically meets service providers’ needs. We believe that many of these customers will deploy network infrastructure equipment from only a few vendors. The purpose- built advantages of our products provide us with a time-to-market lead, which is a critical advantage in gaining rapid penetration as one of these selected vendors. Once our products are widely deployed in a service provider’s network as the primary or even secondary network infrastructure equipment, we believe we create a significant barrier to entry to potential competitors who do not currently offer commercially-viable next generation routing solutions. Work Very Closely With Key Customers. In developing our products, including our software, we worked very closely with customers to design and build a product specifically to meet their complex needs and, over the last four years, we have expanded our understanding of the challenges facing these carriers, enabling us to subsequently design additional features and capabilities into both our software and hardware. We believe our close relationships with, and constant feedback from, our customers have been key elements in our design wins and rapid deployment to date. We plan to continue to work very closely with our key customers to implement enhancements to current products as well as to design future products that specifically meet their evolving needs. We are also actively involved with these customers in developing key standards, such as MPLS, and are an active participant in standards organizations such as the Internet Engineering Task Force and the Optical Internetworking Forum. Increase Penetration at Major Service Providers. Our initial focus was to penetrate several of the largest service providers, where operators have the technical sophistication, resources and desire to test and evaluate our solution against potential alternatives. We believe that there is a significant opportunity to further penetrate these large and complex networks given the advantages of our products. Enable New IP-Based Services. Our platform enables service providers to build networks cost effectively and to offer new differentiated services for their customers more efficiently than conventional products. We believe 5


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    that the delivery of IP-based services and applications, including web hosting, outsourced Internet and intranet services, VPNs, outsourced enterprise applications and voice-over IP, will continue to grow and are cost-effectively enabled by our network infrastructure solutions. Technology Our core technology consists of our backbone router architecture, software and ASIC hardware expertise. Our general-purpose architecture was initially embodied in the M40, but also is designed to serve as the platform for our future generations of core products. We have products based on our M-series and T-series platforms, our E-series platforms, our J-series platform and our G-series platform. Our software offers a full suite of scalable, Internet-tested routing protocols. Protocols and software tools, which are used to control and direct network traffic, are critical to a network routing solution. Software control is made more important by the fact that the size and complexity of backbone networks are increasing at a time when service providers are looking to differentiate themselves through value-added service offerings. Customers Our customers include end users and value added resellers. We recognize revenue from the shipment of products at the time of shipment unless we have future obligations for network interoperability or if we have to obtain customer acceptance. In those cases, we defer recognition of the revenue and related costs until we have met our obligations. Ericsson accounted for approximately 17% of our recognized product revenues for the year ended December 31, 2002. Sales and Marketing We sell and market our products primarily through our direct sales organization and value-added resellers. Direct Sales. Our North American direct sales organization is divided into regional operations with our direct sales efforts focused on the largest service providers. The direct sales account managers cover the market on an assigned account basis and work as a team with account oriented systems engineers. They are directed by a regional operations manager who reports to the North American Vice President of Sales. We also have technical engineers that consult with and provide our customers with guidance and assistance on the evolution of their networks as it relates to the deployment of our products. These consulting engineers also help in defining the features that are required for our products to be successful in specific applications. A key feature of our sales effort is the relationship we establish at various levels in our customers’ organization. Our sales team maintains contact with key individuals who have service planning and infrastructure buildout responsibility. Value Added Resellers. We have complemented our direct sales effort in the United States through the addition of several highly focused value added resellers. Our arrangements with value added resellers typically have been non-exclusive and provide the value added reseller with discounts based upon the volume of their orders. Strategic Distribution Relationships. We have established a strategic distribution relationship with both Ericsson A.B. and Siemens A.G. We believe that both Ericsson and Siemens have significant customer relationships in place and offer products that complement ours. Our agreements with Ericsson and Siemens allow them to distribute our products on a worldwide, non-exclusive basis with discounts based upon the volume. Ericsson and Siemens provide the first level of support to its customers. International Resellers. We have established, in addition to Ericsson and Siemens, strategic value added reseller relationships with Nortel and Alcatel to sell and service our products on a worldwide non-exclusive basis. To further our international sales objectives, we also have established a number of country specific value added resellers. These resellers have expertise in deploying complex network infrastructure equipment in their respective markets and provide the first level of support required by our international customers. As of December 31, 2002, we employed 410 people in our sales and marketing organizations. 6


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    Customer Service and Support We believe that a broad range of support services is essential to the successful installation and ongoing support of our products and we have hired support engineers with proven network experience to provide those services. We offer the following services: 24 hours a day, seven days a week technical assistance (on-line, telephone and on-site), professional services, educational services, logistics services and web-based information. We offer a variety of flexible and comprehensive support programs, including basic hardware and software warranty services, next day onsite parts and labor, 24 hours a day, seven days a week same day parts and labor and on-site resident engineers. We deliver these services directly to major end users and also utilize a multi-tiered support model, leveraging the capabilities of our partners and third party organizations. We also train our partners in the delivery of education and support services. Customer service and support provide front line product support and is the problem resolution interface to our partners and direct end users. If customer service and support are unable to resolve an issue themselves, they duplicate the problem scenario and provide the failure information, such as logs, traces and system configuration to appropriate subject matter experts in our engineering department. Based on the severity of the problem and the impact to our customers’ network, there are strict escalation guidelines to ensure that the appropriate technical resources and management attention is brought to bear on the problem in a timeframe commensurate with problem priority. The overall goal is to fix the problem, at the appropriate level, in the right timeframe in order to ensure our customers’ satisfaction. As of December 31, 2002, we employed 165 people in our worldwide customer service and support organization. Research and Development We have assembled a team of skilled engineers with extensive experience in the fields of high end computing, network system design, Internet routing protocols and embedded software. These individuals have been drawn from leading computer data networking and telecommunications companies. In addition to building complex hardware and software systems, the engineering team has experience in delivering very large, highly integrated ASICs and extremely scalable software. We believe that strong product development capabilities are essential to our strategy of enhancing our core technology, developing additional applications, incorporating that technology and maintaining the competitiveness of our product and service offerings. We are leveraging our third generation ASICs, developing additional network interfaces targeted to our customer applications and continuing to develop next generation technology to support the anticipated growth in network bandwidth requirements. We continue to expand the functionality of our software to improve performance and scalability, and to provide an enhanced user interface. Our research and development process is driven by the availability of new technology, market demand and customer feedback. We have invested significant time and resources in creating a structured process for undertaking all product development projects. This process involves all functional groups and all levels within our Company. Following an assessment of market demand, our research and development team develops a full set of comprehensive functional product specifications based on inputs from the product management and sales organizations. This process is designed to provide a framework for defining and addressing the steps, tasks and activities required to bring product concepts and development projects to market. As of December 31, 2002, we employed 704 people in our research and development organization. Our research and development expenses totaled $161.9 million for the year ended December 31, 2002, $155.5 million for the year ended December 31, 2001 and $87.8 million for the year ended December 31, 2000. Manufacturing Our manufacturing operation is outsourced. We currently have manufacturing relationships with Solectron, Celestica and Plexus, under which we have subcontracted our manufacturing activity. This subcontracting activity extends from prototypes to full production and includes activities such as material procurement, final assembly, 7


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    test, control and shipment to our customers. We design, specify and monitor all of the tests that are required to meet internal and external quality standards. These arrangements provide us with the following benefits: • we conserve the working capital that would be required for funding inventory; • we can adjust manufacturing volumes quickly to meet changes in demand; • we can quickly deliver products to customers with turnkey manufacturing and drop shipment capabilities; and • we operate without dedicating any space to manufacturing operations. Our ASICs are manufactured by IBM who is responsible for all aspects of the production of the ASICs using our proprietary designs. Competition Competition in the network infrastructure market is intense. Cisco Systems, Inc. has historically dominated the market, with other companies such as Nortel Networks and Lucent Technologies Inc. providing products to a smaller segment of the market. In addition, a number of public and private companies have announced plans for new products to address the same problems that our products address. Cisco traditionally has been the dominant supplier of solutions to this market. We believe this is the result of its early leadership position in the enterprise router market. As both large public and private networks and traffic over the Internet has grown rapidly, Cisco has leveraged this position and has developed a broad product line of routers that support all major local area and wide area interfaces. We believe that our ability to compete with Cisco depends upon our ability to demonstrate that our products are superior in meeting the needs of service providers and are extremely compatible with Cisco’s current and future products. Although we believe that we are currently among the top providers of network infrastructure solutions worldwide, we cannot assure you that we will be able to compete successfully with Cisco, currently the leading provider in this market. We expect that, over time, large companies with significant resources, technical expertise, market experience, customer relationships and broad product lines, such as Lucent and Nortel, will introduce new products which are designed to compete more effectively in this market. As a result, we expect to face increased competition in the future from larger companies with significantly more resources than we have. Although we believe that our technology and the purpose-built features of our products make them unique and will enable us to compete effectively with these companies, we cannot assure you that we will be successful. Many of our current and potential competitors, such as Cisco, Lucent and Nortel, have significantly broader product lines than we do and may bundle their products with other networking products in a manner that may discourage customers from purchasing our products. Also, many of our current and potential competitors have greater name recognition and more extensive customer bases that could be leveraged. Increased competition could result in price reduction, fewer customer orders, reduced gross margins and loss of market share, any of which could seriously harm our operating results. There are also many small public and private companies that claim to have products with greater capabilities than our products. Consolidation in this industry has begun, with one or more of these smaller private companies being acquired by large, established suppliers of network infrastructure products, and we believe it is likely to continue. As a result, we expect to face increased competition in the future from larger companies with significantly more resources than we have. Several companies also provide solutions that can substitute for some uses of routers. For example, high bandwidth ATM switches are used in the core of certain major backbone service providers. ATM switches can carry a variety of traffic types, including voice, video and data, using fixed, 53 byte cells. Companies that use ATM switches are enhancing their products with new software technologies such as MPLS, which can potentially simplify the task of mixing routers and switches in the same network. These substitutes can reduce the need for large numbers of routers. 8


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    Intellectual Property Our success and ability to compete are substantially dependent upon our internally developed technology and know-how. Our engineering teams have significant expertise in ASIC design and we own all rights to the design of the ASICs, which form the core of our products. Our software was developed internally and is protected by United States and other copyright laws. While we rely on patent, copyright, trade secret and trademark law to protect our technology, we also believe that factors such as the technological and creative skills of our personnel, new product developments, frequent product enhancements and reliable product maintenance are essential to establishing and maintaining a technology leadership position. There can be no assurance that others will not develop technologies that are similar or superior to our technology. Our success will depend upon our ability to obtain necessary intellectual property rights and protect our intellectual property rights. While we have filed patent applications, we cannot be certain that these applications will issue into patents, that we will be able to obtain the necessary intellectual property rights or that other parties will not contest our intellectual property rights. Employees As of December 31, 2002, we had 1,542 full-time employees, 704 of whom were engaged in research and development, 410 in sales and marketing, 165 in customer service and 263 in finance, administration, IT and operations. None of our employees are represented by a labor union. We have not experienced any work stoppages and we consider our relations with our employees to be good. Our future performance depends in significant part upon the continued service of our key technical, sales and senior management personnel, none of who is bound by an employment agreement requiring service for any defined period of time. The loss of the services of one or more of our key employees could have a material adverse effect on our business, financial condition and results of operations. Our future success also depends on our continuing ability to attract, train and retain highly qualified technical, sales and managerial personnel. Competition for such personnel is intense, and there can be no assurance that we can retain our key personnel in the future. Available Information We file our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 with the SEC electronically. The public may read or copy any materials we file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is http://www.sec.gov. You may obtain a free copy of our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and amendments to those reports on the day of filing with the SEC on our website on the World Wide Web at http://www.juniper.net, by contacting the Investor Relations Department at our corporate offices by calling (888) 586-4737 or by sending an e-mail message to investor-relations@juniper.net. ITEM 2. Properties Our corporate headquarters consists of leased facilities located in Sunnyvale, California where we lease approximately 424,825 square feet located in three buildings. Each building is on an individual lease with various option, extension and expansion rights and expire on the following schedule: Building #1 (144,315 square feet) expires June 30, 2012, Building #2 (122,435 square feet) expires February 14, 2013 and Building #3 (158,075 square feet) expires May 31, 2014. We also own approximately 80 acres of land adjacent to the leased corporate headquarters sites. In addition, we have leased facilities in Westford, Massachusetts, with a lease for approximately 225,000 square feet, which expires in 2011. We also lease various sales office locations throughout the U.S. Outside the 9


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    U.S., we have operations in leased sites in EMEA, Asia Pacific and the Americas. Larger site locations include Ireland, the United Kingdom, the Netherlands, Hong Kong, China, Japan and Australia. We believe that our existing properties are in good condition and suitable for the conduct of our business. For additional information regarding our obligations under leases, see Note 8 of Notes to the Consolidated Financial Statements in Item 8. ITEM 3. Legal Proceedings The Company is subject to legal claims and litigation arising in the ordinary course of business, including the matters described below. The outcome of these matters is currently not determinable. However, the Company does not expect that such legal claims and litigation will ultimately have a material adverse effect on the Company’s consolidated financial position or results of operations. 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”), the Company and certain of the Company’s officers. This action was brought on behalf of purchasers of the Company’s common stock in the Company’s initial public offering in June 1999 and its 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 its 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 companies. 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, 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. Defendants in the coordinated proceeding filed motions to dismiss. In October 2002, the Company’s officers were dismissed from the case without prejudice pursuant to a stipulation. 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 Company believes that it has meritorious defenses to the claims against it and intends to defend itself vigorously. Federal Securities Class Action Suit During the quarter ended March 31, 2002, a number of essentially identical shareholder class action lawsuits were filed in the United States District Court for the Northern District of California against the Company and certain of its officers and former officers purportedly on behalf of those stockholders who purchased the Company’s publicly traded securities between April 12, 2001 and June 7, 2001. In April 2002, the judge granted the defendants’ motion to consolidate all of these actions into one; in May 2002, the court appointed the lead plaintiffs and approved their selection of lead counsel and an amended complaint was filed in July 2002. The plaintiffs allege that the defendants made false and misleading statements, assert claims for violations of the federal securities laws and seek unspecified compensatory damages and other relief. In September 2002, the defendants moved to dismiss the amended complaint. In March 2003, the judge granted defendants motion to dismiss with leave to amend. The Company continues to believe the claims are without merit and intends to defend the action vigorously. State Derivative Claim Based on the Federal Securities Class Action Suit In August 2002, a consolidated amended shareholder derivative complaint purportedly filed on behalf of the Company, captioned In re Juniper Networks, Inc. Derivative Litigation, Civil Action No. CV 807146, was filed in the Superior Court of the State of California, County of Santa Clara. The complaint alleges that certain of the Company’s officers and directors breached their fiduciary duties to the Company by engaging in alleged wrongful conduct including conduct complained of in the securities litigation described above. The complaint also asserts claims against a Juniper Networks investor. The Company is named solely as a nominal defendant against whom 10


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    the plaintiff seeks no recovery. In October 2002, the Company as a nominal defendant and the individual defendants filed demurrers to the consolidated amended shareholder derivative complaint. In March 2003, the judge sustained defendants’ demurrers with leave to amend. Plaintiffs must file an amended complaint on or before May 12, 2003. The Company continues to believe the claims are without merit and intends to defend the action vigorously. ITEM 4. Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report. 11


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    PART II ITEM 5. Market for Registrant’s Common Equity and Related Stockholder Matters Our common stock has been quoted on the NASDAQ National Market under the symbol “JNPR” since June 25, 1999. Prior to that time, there was no public market for the common stock. All stock information has been adjusted to reflect the three-for-one split, effected in the form of a stock dividend to each stockholder of record as of December 31, 1999 and a two-for-one split, effected in the form of a stock dividend to each stockholder of record as of May 15, 2000. Juniper Networks has never paid cash dividends on its common stock and has no present plans to do so. There were approximately 1,623 stockholders of record at February 28, 2003. The following table sets forth the high and low closing bid prices as reported on NASDAQ: 2001 High Low First quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $136.62 $37.96 Second quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 65.58 $28.30 Third quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 31.76 $ 9.70 Fourth quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27.01 $ 9.29 2002 First quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21.99 $ 9.32 Second quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13.23 $ 5.13 Third quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9.21 $ 4.58 Fourth quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9.85 $ 4.43 On February 1, 2002, March 14, 2002, June 20, 2002 and October 31, 2002, 126,743, 271,974, 519,510 and 1,000,769 shares respectively, were issued to former stockholders of Pacific Broadband Communications (“PBC”) as part of an earnout associated with our acquisition of PBC in December 2001. The issuance was exempt from registration under the Securities Act of 1933. On July 1, 2002, we issued 36,500,000 shares of common stock to the stockholders of Unisphere Networks, Inc. (“Unisphere Networks”) in connection with the acquisition of Unisphere Networks. The issuance was exempt from registration pursuant to Rule 3a-10 promulgated under the Securities Act of 1933. 12

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