Segments (Notes)

3 Months Ended

Mar. 31, 2013

Segment Reporting [Abstract]

Segments [Text Block]

Segments

The Company’s chief operating decision maker (“CODM”) allocates resources and assesses performance based on financial information of the Company’s divisions. In the first quarter of 2013, the Company consolidated operational oversight and management of all security products within the SSD segment. As a result of this change, security products previously reported in the PSD segment (including the Branch SRX, Branch Firewall, and J Series product families) are now reported in the SSD segment. The Company reclassified the segment data for the prior period to conform to the current period's presentation.

The Company’s PSD segment primarily offers scalable routing and switching products that are used in service provider, enterprise, and public sector networks to control and direct network traffic from data centers, core, edge, aggregation, campus, Wide Area Networks ("WANs"), and customer premise equipment level. The Company's PSD segment consists of routing and switching products and services. Routing products and services include the ACX, E, M, MX, PTX, and T Series. Switching products and services primarily consist of the EX Series and wireless local area network solutions, as well as QFabric™.

The Company's SSD segment offers solutions that meet a broad array of our customers’ priorities, from protecting the users, applications and data on the network to providing network services across a distributed infrastructure. The SSD segment primarily consists of security, software, management, virtualization, routing products and services. Security includes SRX, firewall, vGW Virtual Gateways, virtual private network systems and appliances, secure socket layer virtual private network appliances, intrusion detection and prevention appliances, wide area network optimization platforms, Junos Pulse, and J Series. Software and services for the mobile and wireline network edge include traffic flow monitoring, mobile business services, dynamic application and subscriber awareness, next generation network addressing, as well as the MobileNext architecture for mobile networks. Management and virtualization products include Junosphere, Junos SDK, JunosV App Engine and the network management platform, Junos Space.

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

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

	Three Months Ended March 31,
	2013			2012
Net revenues:
PSD	$	809.2		$	765.7
SSD	250.0			266.8
Total net revenues	$	1,059.2		$	1,032.5
Segment contribution margin:
PSD	$	330.1		$	276.3
SSD	102.0			110.3
Total segment contribution margin	$	432.1		$	386.6
Corporate unallocated expenses(1)	$	(266.1	)	$	(263.1	)
Amortization of purchased intangible assets(2)	(7.5		)	(7.3		)
Share-based compensation expense	(49.9		)	(65.0		)
Share-based payroll tax expense	(3.5		)	(0.3		)
Restructuring charges(3)	(7.7		)	(2.0		)
Acquisition and litigation charges	(10.4		)	(1.2		)
Total operating income	87.0			47.7
Other expense, net	(10.1		)	(24.4		)
Income before income taxes	$	76.9		$	23.3

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

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

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

Depreciation expense allocated to the PSD segment was $34.4 million and $26.9 million in the three months ended March 31, 2013 and March 31, 2012, respectively. Depreciation expense allocated to the SSD segment was $9.7 million and $9.2 million in the three months ended March 31, 2013 and March 31, 2012, respectively.

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

	Three Months Ended March 31,
	2013		2012
Americas:
United States	$	547.0	$	468.4
Other	45.1		62.9
Total Americas	592.1		531.3
Europe, Middle East, and Africa	290.6		307.1
Asia Pacific	176.5		194.1
Total	$	1,059.2	$	1,032.5

During the three months ended March 31, 2013, AT&T and Verizon Communications, Inc. ("Verizon") accounted for 10.2% and 10.1% of net revenues, respectively. During the three months ended March 31, 2012, Verizon accounted for 12.2% of net revenues.

The Company tracks assets by physical location. The majority of the Company’s assets, excluding cash and cash equivalents and investments, as of March 31, 2013 and December 31, 2012, were attributable to U.S. operations. As of March 31, 2013 and December 31, 2012, gross property and equipment held in the U.S., as a percentage of total property and equipment, was approximately 83% for both periods. Although management reviews asset information on a corporate level and allocates depreciation expense by segment, the CODM does not review asset information on a segment basis.