JUNIPER NETWORKS INC
424B1, 1999-09-30
COMPUTER COMMUNICATIONS EQUIPMENT
Previous: TRB SYSTEMS INTERNATIONAL INC, 10-K, 1999-09-30
Next: PINNACLE RESOURCES INC, NT 10-K, 1999-09-30



<PAGE>   1

                                                Filed Pursuant to Rule 424(B)(1)
                                                Registration Statement No. 86317
                                5,000,000 Shares

                                 [Juniper logo]

                                  Common Stock

                             ----------------------

     Juniper Networks, Inc. is offering 1,500,000 of the shares to be sold in
the offering. The selling stockholders identified in this prospectus are
offering an additional 3,500,000 shares. Juniper Networks will not receive any
of the proceeds from the sale of shares being sold by the selling stockholders.

     The common stock is quoted on the Nasdaq National Market under the symbol
"JNPR". The last reported sale price of the common stock on September 29, 1999
was $191.4375 per share.

     See "Risk Factors" beginning on page 6 to read about the certain factors
you should consider before buying shares of the common stock.

                             ----------------------

     NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

                             ----------------------

<TABLE>
<CAPTION>
                                                              Per Share       Total
                                                              ---------    ------------
<S>                                                           <C>          <C>
Initial price to public.....................................   $190.00     $950,000,000
Underwriting discount.......................................   $  6.65     $ 33,250,000
Proceeds, before expenses, to Juniper Networks..............   $183.35     $275,025,000
Proceeds, before expenses, to the selling stockholders......   $183.35     $641,725,000
</TABLE>

     To the extent the underwriters sell more than 5,000,000 shares of common
stock, the underwriters have the option to purchase up to an additional 272,562
shares from Juniper Networks and 477,438 shares from selling stockholders at the
initial price to public less the underwriting discount.

                             ----------------------

     The underwriters expect to deliver the shares against payment in New York,
New York on October 5, 1999.

GOLDMAN, SACHS & CO.
          CREDIT SUISSE FIRST BOSTON
                    BANCBOSTON ROBERTSON STEPHENS
                              DAIN RAUSCHER WESSELS
                                    A DIVISION OF DAIN
                                  RAUSCHER INCORPORATED
                                       SG COWEN
                                              WARBURG DILLON READ LLC

                             ----------------------

                      Prospectus dated September 29, 1999.
<PAGE>   2

                               [Inside Cover Art]
<PAGE>   3

                               PROSPECTUS SUMMARY

     You should read the following summary together with the more detailed
information regarding Juniper Networks, the common stock being sold in this
offering and our consolidated financial statements, including the notes to those
statements, appearing elsewhere in this prospectus. Unless otherwise indicated,
this prospectus assumes that the underwriters' option to purchase additional
shares in the offering will not be exercised.

                                JUNIPER NETWORKS

      We are a leading provider of Internet infrastructure solutions that enable
Internet service providers and other telecommunications service providers to
meet the demands resulting from the rapid growth of the Internet. We deliver
next generation Internet backbone routers that are specifically designed, or
purpose-built, for service provider networks and offer our customers increased
reliability, performance, scalability, interoperability and flexibility, and
reduced complexity and cost compared to current alternatives. Our flagship
product is the M40 Internet backbone router. The M40 combines the features of
our JUNOS Internet Software, high performance ASIC-based (application specific
integrated circuit) packet forwarding technology and Internet optimized
architecture into a purpose-built solution for service providers. Unlike
conventional routers, which were originally developed for enterprise
applications and are increasingly inadequate for service provider use in public
networks, our Internet backbone routers are specifically designed to accommodate
the size and scope of the Internet.

      We sell our Internet backbone routers primarily through a direct sales
force and an original equipment manufacturer. Our M40 Internet backbone router
is currently used by several of the world's leading service providers, such as
UUNet, an MCI WorldCom Company, Cable & Wireless USA, AT&T/IBM Global Services,
Frontier GlobalCenter Inc. and Verio Inc.

      We believe that the Internet will continue to grow at significant rates
and will evolve into the next generation public network, superseding and
expanding upon many of the functions provided by the traditional telephone
network. This trend will drive the need for new Internet infrastructure
equipment that can deliver the high levels of reliability and scalability needed
in a public network. We believe we have developed the first commercially
available Internet backbone routing platform specifically designed and built to
meet these requirements. Ryan Hankin Kent, an industry research firm, estimates
that the market for Internet backbone routers was $169 million in 1998 and is
expected to increase to approximately $5.5 billion in 2003.

      Our objective is to become the primary supplier of high performance
Internet backbone infrastructure equipment. The following are key elements of
our strategy:

- - leverage our early lead as supplier of purpose-built Internet infrastructure
  equipment;

- - work closely with our key customers;

- - increase our penetration in major service providers;

- - leverage our early successes to rapidly penetrate new customers;

- - expand our sales and distribution network;

- - maintain and extend our technology leadership; and

- - enable new IP-based services.

      Our principal executive offices are located at 385 Ravendale Drive,
Mountain View, California 94043, and our telephone number is (650) 526-8000.
Juniper Networks is a registered trademark and the Juniper Networks logo and M40
are trademarks of Juniper Networks. Each trademark, trade name or service mark
of any other company appearing in this prospectus belongs to its holder.
Information contained on our website, www.juniper.net, does not constitute part
of

                                        3
<PAGE>   4

the prospectus. We were incorporated in the State of California in February
1996, and we reincorporated in the State of Delaware in March 1998.

                                  THE OFFERING

     The following information assumes that the underwriters do not exercise the
option granted by us and the selling stockholders listed on page 61 under the
caption "Principal and Selling Stockholders" to purchase additional shares in
this offering. See "Underwriting."
                             ----------------------

<TABLE>
<S>                                                       <C>
Shares offered by Juniper Networks......................  1,500,000
Shares offered by the selling stockholders..............  3,500,000
Shares to be outstanding after the offering(1)..........  51,277,014
Use of proceeds.........................................  For general corporate purposes, principally
                                                          working capital and capital expenditures.
Nasdaq National Market symbol...........................  "JNPR"
</TABLE>

- ---------------

(1) Based on shares outstanding as of June 30, 1999. It excludes:

- -   8,181,683 shares of common stock reserved for issuance under our Amended
    1996 Stock Plan, of which 5,007,695 shares were subject to outstanding
    options at a weighted average exercise price of $10.59 per share, and
    3,173,988 shares were available for future grants;

- -   240,410 shares of common stock issuable upon exercise of outstanding
    warrants at a weighted average exercise price of $1.71 per share; and

- -   500,000 shares available for issuance under our 1999 Employee Stock Purchase
    Plan. See "Capitalization," "Management -- Incentive Stock Plans,"
    "Description of Capital Stock" and Notes 5, 6 and 10 to the Consolidated
    Financial Statements.

                                        4
<PAGE>   5

                   SUMMARY CONSOLIDATED FINANCIAL INFORMATION
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                  PERIOD FROM                                  SIX MONTHS
                                   INCEPTION            YEAR ENDED               ENDED
                              (FEBRUARY 2, 1996)       DECEMBER 31,             JUNE 30,
                                TO DECEMBER 31,     -------------------   --------------------
                                     1996             1997       1998       1998        1999
                              -------------------   --------   --------   ---------   --------
                                                                              (UNAUDITED)
<S>                           <C>                   <C>        <C>        <C>         <C>
CONSOLIDATED STATEMENT OF
  OPERATIONS DATA:
Net revenues................        $    --         $     --   $  3,807   $      --   $ 27,600
Operating loss..............         (1,939)         (11,598)   (32,270)    (12,052)   (10,965)
Net loss....................         (1,799)         (10,363)   (30,971)    (11,108)   (10,527)
</TABLE>

<TABLE>
<CAPTION>
                                                                   JUNE 30, 1999
                                                              -----------------------
                                                                              AS
                                                               ACTUAL     ADJUSTED(1)
                                                              --------    -----------
                                                                    (UNAUDITED)
<S>                                                           <C>         <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments...........  $107,801     $382,026
Working capital.............................................    99,358      373,583
Total assets................................................   143,131      417,356
Long-term obligations, less current portion.................     2,521        2,521
Stockholders' equity........................................   113,974      388,199
</TABLE>

- ---------------

(1) The consolidated balance sheet data at June 30, 1999, as adjusted, gives
    effect to the sale of the shares at the initial price to the public of
    $190.00, after deducting the underwriting discount and estimated offering
    expenses payable by us.

                                        5
<PAGE>   6

                                  RISK FACTORS

     This offering involves a high degree of risk. You should carefully consider
the risks described below before making an investment decision.

    OUR FAILURE TO INCREASE OUR REVENUES WOULD PREVENT US FROM ACHIEVING AND
                           MAINTAINING PROFITABILITY.

      We have incurred significant losses since inception and expect to continue
to incur losses in the future. As of June 30, 1999, we had an accumulated
deficit of $53.7 million. Although our net revenues have grown from zero in the
quarter ended September 30, 1998 to $17.6 million in the quarter ended June 30,
1999, we cannot be certain that our revenues will continue to grow, or that we
will achieve sufficient revenues to achieve profitability. We have large fixed
expenses and we expect to continue to incur significant and increasing sales and
marketing, product development and administrative expenses. As a result, we will
need to generate significantly higher revenues to achieve and maintain
profitability. See "Selected Financial Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and Consolidated
Financial Statements and the Notes to the Consolidated Financial Statements for
more information on our results of operations.

           OUR LIMITED OPERATING HISTORY MAKES FORECASTING DIFFICULT.

      As a result of our limited operating history, it is difficult to forecast
accurately our revenues, and we have limited meaningful historical financial
data upon which to base planned operating expenses. Specifically, we began
operations in February 1996, introduced our M40 Internet backbone router product
in September 1998 and began shipping the M40 in volume in October 1998. In
addition, our operating expenses are largely based on anticipated revenue trends
and a high percentage of our expenses are and will continue to be fixed in the
short-term. The revenue and income potential of our products and business are
unproven and the market that we are addressing is rapidly evolving. If we do not
achieve our expected revenues, our operating results will be below our
expectations and the expectations of investors and market analysts, which could
cause the price of our common stock to decline.

 THE M40 CURRENTLY IS OUR ONLY PRODUCT AND A SIGNIFICANT PORTION OF OUR FUTURE
                   REVENUE DEPENDS ON ITS COMMERCIAL SUCCESS.

      Our future growth and a significant portion of our future revenue depends
on the commercial success of our M40 Internet backbone router, which is the only
product that we currently offer. Many customers who have purchased the M40 have
not yet fully deployed the product in large network environments and may not
choose to do so. Even if our customers do fully deploy our product, it may not
operate as expected. Failure of the M40 to operate as expected could delay or
prevent its adoption. If our target customers do not widely adopt, purchase and
successfully deploy the M40, our revenues will not grow significantly and our
business, financial condition and results of operations will be seriously
harmed.

OUR SUCCESS DEPENDS ON OUR ABILITY TO DEVELOP PRODUCTS AND PRODUCT ENHANCEMENTS
                      THAT WILL ACHIEVE MARKET ACCEPTANCE.

      We cannot assure you that we will be able to develop new products or
product enhancements in a timely manner, or at all. Any failure to develop new
products or product enhancements will substantially decrease market acceptance
and sales of our present and future products which will significantly harm our
business and financial results. Even if we are able to develop and commercially
introduce new products and enhancements, we cannot assure you that the new
products or enhancements will achieve widespread market acceptance. Any failure
of our future products to achieve market

                                        6
<PAGE>   7

acceptance could harm our business and financial results.

      THE LONG SALES AND IMPLEMENTATION CYCLES FOR THE M40, AS WELL AS OUR
EXPECTATION THAT CUSTOMERS WILL SPORADICALLY PLACE LARGE ORDERS WITH SHORT LEAD
   TIMES MAY CAUSE REVENUES AND OPERATING RESULTS TO VARY SIGNIFICANTLY FROM
                              QUARTER TO QUARTER.

      A customer's decision to purchase the M40 involves a significant
commitment of its resources and a lengthy evaluation and product qualification
process. As a result, our sales cycle may be lengthy. Throughout the sales
cycle, we often spend considerable time educating and providing information to
prospective customers regarding the use and benefits of the M40. Even after
making the decision to purchase the M40, our customers tend to deploy the M40
slowly and deliberately. Timing of deployment can vary widely and depends on the
skill set of the customer, the size of the network deployment, the complexity of
the customer's network environment and the degree of hardware and software
configuration necessary to deploy the M40. Customers with large networks usually
expand their networks in large increments on a periodic basis. Accordingly, we
expect to receive purchase orders for significant dollar amounts on an irregular
basis. Because of our limited operating history, we cannot predict these sales
and development cycles. These long cycles, as well as our expectation that
customers will tend to sporadically place large orders with short lead times,
may cause our revenues and operating results to vary significantly and
unexpectedly from quarter to quarter.

  WE HAVE A LIMITED NUMBER OF CUSTOMERS UPON WHOM WE RELY, AND ANY DECREASE IN
        REVENUE FROM THESE CUSTOMERS COULD HAVE AN ADVERSE EFFECT ON US.

      We began recognizing revenues from sales of the M40 in the quarter ended
December 31, 1998. A significant portion of our revenues to date have been
recognized from a limited number of customers with two customers representing
approximately 62% of our revenues for the six months ended June 30, 1999. We
expect that the majority of our revenues will continue to depend on sales of the
M40 to a small number of customers. Any downturn in the business of these
customers or potential new customers could significantly decrease the sales of
the M40 to these customers which could seriously harm our revenues and results
of operations.

   IF THE INTERNET DOES NOT CONTINUE TO EXPAND AS A WIDESPREAD COMMUNICATIONS
           MEDIUM, DEMAND FOR OUR PRODUCTS MAY DECLINE SIGNIFICANTLY.

      Our future success depends on the continued growth of the Internet as a
widely used medium for commerce and communication. If the Internet does not
continue to expand as a widespread communications medium and commercial
marketplace, the growth of the market for Internet infrastructure equipment may
not continue and the demand for our products could decline significantly.

        WE FACE INTENSE COMPETITION THAT COULD REDUCE OUR MARKET SHARE.

      Competition in the Internet infrastructure market is intense. This market
has historically been dominated by Cisco Systems with other companies such as
Bay Networks (acquired by Nortel Networks) and Ascend (recently acquired by
Lucent Technologies) providing products to a smaller segment of the market. In
addition, a number of private companies have announced plans for new products to
address the same problems which our products address.

      In order to compete effectively in the Internet router market we must
deliver products which:

- - provide extremely high network reliability;

- - provide high performance interfaces and packet processing capabilities;

- - scale easily and efficiently with minimum disruption to the network;

- - interoperate with existing network designs and equipment vendors;
                                        7
<PAGE>   8

- - reduce the complexity of the network by decreasing the need for overlapping
  equipment; and

- - provide a cost-effective solution for service providers.

      If we are unable to compete successfully against our current and future
competitors, we could experience price reductions, reduced gross margins and
loss of market share, any one of which could materially and adversely affect our
business, operating results and financial condition. See "Business --
Competition" for detailed information about our competition.

 WE MUST EXPAND SUBSTANTIALLY OUR DIRECT AND INDIRECT SALES OPERATIONS IN ORDER
            TO INCREASE MARKET AWARENESS AND SALES OF OUR PRODUCTS.

      Our products and services require a sophisticated sales effort targeted at
several key people within each of our prospective customers' organizations. This
sales effort requires the efforts of select personnel as well as specialized
system and consulting engineers. We have recently expanded our direct sales
force and plan to hire additional qualified sales personnel and system and
consulting engineers. Competition for these individuals is intense, and we might
not be able to hire the kind and number of sales personnel and system and
consulting engineers we need. In addition, we believe that our future success is
dependent upon establishing successful relationships with a variety of
distribution partners. We have entered into agreements with only a small number
of distribution partners. In addition, some of our distribution partners also
sell products that compete with the M40. We cannot be certain that we will be
able to reach agreement with additional distribution partners on a timely basis
or at all, or that our distribution partners will devote adequate resources to
selling our products.

      If we are unable to expand our direct and indirect sales operations, we
may not be able to increase market awareness or sales of our products, which may
prevent us from achieving and maintaining profitability.

IF WE DO NOT EXPAND SUBSTANTIALLY OUR CUSTOMER SERVICE AND SUPPORT ORGANIZATION,
              SALES OF OUR PRODUCTS MAY BE SIGNIFICANTLY REDUCED.

      The complexity of our products and the difficulty of installing them
require highly trained customer service and support personnel. We currently have
a small customer service and support organization and will need to increase our
staff to support new customers and the expanding needs of existing customers.
Hiring customer service and support personnel is very competitive in our
industry due to the limited number of people available with the necessary
technical skills and understanding of the Internet. If we are unable to expand
our customer service and support organization, we may not be able to increase
sales of our products, which would seriously harm our business.

  WE ARE DEPENDENT ON SOLE SOURCE AND LIMITED SOURCE SUPPLIERS FOR SEVERAL KEY
 COMPONENTS, AND IF WE ARE UNABLE TO BUY THESE COMPONENTS ON A TIMELY BASIS, WE
             WILL NOT BE ABLE TO DELIVER THE M40 TO OUR CUSTOMERS.

      We currently purchase several key components, including ASICs and power
supplies, from single or limited sources. We worked with IBM for over two years
to develop several of our key proprietary application specific integrated
circuits, or ASICs, which are custom designed integrated circuits built to
perform a specific function more rapidly than a general purpose microprocessor.
IBM is currently our sole source supplier of these ASICs. These ASICs are very
complex, and we may not be able to develop an alternate source to IBM in a
timely manner, which could hurt our ability to deliver the M40 to our customers.
We also purchase power supplies from a single source and purchase other custom
components from other sole or limited sources. If we are unable to buy these
components on a timely basis, we will not be able to deliver the M40 to our
customers, which would negatively impact present and future sales and revenue
which would, in turn, seriously harm our business.

                                        8
<PAGE>   9

 WE CURRENTLY DEPEND ON ONE CONTRACT MANUFACTURER, AND IF WE HAVE TO QUALIFY A
     NEW CONTRACT MANUFACTURER WE MAY LOSE REVENUE AND DAMAGE OUR CUSTOMER
                                 RELATIONSHIPS.

      Solectron, a third party manufacturer for numerous companies, manufactures
the M40 at its Milpitas, California facility on a purchase order basis and is
our sole manufacturer. We currently do not have a long-term supply contract with
Solectron.

      Qualifying a new contract manufacturer and commencing volume production is
expensive and time consuming. If we are required or choose to change contract
manufacturers, we may lose revenue and damage our customer relationships.

IF WE FAIL TO ACCURATELY PREDICT OUR MANUFACTURING REQUIREMENTS, WE COULD INCUR
              ADDITIONAL COSTS OR EXPERIENCE MANUFACTURING DELAYS.

      Because we currently do not have a long-term supply contract with
Solectron, it is not obligated to supply products to us for any specific period,
in any specific quantity or at any certain price, except as may be provided in a
particular purchase order. We provide forecasts of our demand to Solectron up to
six months prior to scheduled delivery of products to our customers. If we
overestimate our requirements, Solectron may have excess inventory, which would
increase our costs. If we underestimate our requirements, Solectron may have an
inadequate inventory, which could interrupt manufacturing of our products and
result in delays in shipments and revenues. In addition, lead times for
materials and components we order vary significantly and depend on factors such
as the specific supplier, contract terms and demand for each component at a
given time. We also may experience shortages of certain components from time to
time, which also could delay the manufacturing of our products.

    WE DEPEND UPON SOLECTRON TO MANUFACTURE OUR PRODUCTS ON A TIMELY BASIS.

      We plan to regularly introduce new products and product enhancements,
which will require that we coordinate our efforts with those of our suppliers
and Solectron to rapidly achieve volume production. If we should fail to
effectively manage our relationship with Solectron, or if Solectron experiences
delays, disruptions or quality control problems in its manufacturing operations,
our ability to ship products to our customers could be delayed.

  THE UNPREDICTABILITY AND SEASONALITY OF OUR QUARTERLY RESULTS MAY ADVERSELY
                 AFFECT THE TRADING PRICE OF OUR COMMON STOCK.

      Our revenues and operating results will vary significantly from quarter to
quarter due to a number of factors, many of which are outside of our control and
any of which may cause our stock price to fluctuate. The primary factors that
may affect us include the following:

- - demand for the M40;

- - the timing of sales of the M40;

- - the timing of recognizing revenue and deferred revenue;

- - new product introductions by our competitors;

- - changes in our pricing policies or the pricing policies of our competitors;

- - our ability to develop, introduce and ship new products and product
  enhancements that meet customer requirements in a timely manner;

- - our ability to obtain sufficient supplies of the sole or limited source
  components, including ASICs and power supplies for the M40;

- - increases in the prices of the components we purchase;

- - our ability to attain and maintain production volumes and quality levels for
  the M40;

- - decisions by end-users to reallocate their information resources to other
  purposes, including year 2000 preparedness;

- - Internet growth and demand for Internet infrastructure;

- - prototype expenses;
                                        9
<PAGE>   10

- - costs related to acquisitions of technology or businesses; and

- - general economic conditions as well as those specific to the Internet and
  related industries.

      In addition, we are dependent on decisions by customers to build their
Internet infrastructure, which decisions are in turn dependent upon the success
and expected demand for the services offered by those customers. Furthermore,
the long sales and implementation cycles for the M40, as well as the degree to
which customers will sporadically place large orders with short lead times, may
cause revenues and operating results to vary significantly from quarter to
quarter.

      We also expect to experience seasonality in our operating results. Our
customers may accept shipments of products during the fourth quarter of this
year and the first quarter of next year; however, due to the uncertainties of
the year 2000 problem, they may not integrate the products into their networks
until a later time which could adversely affect our revenues in those quarters.
In addition, we expect the growth rate in our sales in the first quarter to be
adversely affected due to our customers' budgeting cycles.

      We plan to increase significantly our operating expenses to fund greater
levels of research and development, expand our sales and marketing operations,
broaden our customer support capabilities and develop new distribution channels.
We also plan to expand our general and administrative functions to address the
increased reporting and other administrative demands, which will result from
being a publicly traded company and the increasing size of our business. Our
operating expenses are largely based on anticipated revenue trends and a high
percentage of our expenses are, and will continue to be, fixed in the short
term. As a result, a delay in generating or recognizing revenue for the reasons
set forth above, or for any other reason, could cause significant variations in
our operating results from quarter to quarter and could result in substantial
operating losses.

      Due to the foregoing factors, we believe that quarter-to-quarter
comparisons of our operating results are not a good indication of our future
performance. It is likely that in some future quarters, our operating results
may be below the expectations of public market analysts and investors. In this
event, the price of our common stock may fall.

IF OUR PRODUCTS DO NOT INTEROPERATE WITH OUR CUSTOMERS' NETWORKS, INSTALLATIONS
  WILL BE DELAYED OR CANCELLED AND COULD RESULT IN SUBSTANTIAL PRODUCT RETURNS
                         WHICH COULD HARM OUR BUSINESS.

      Our products are designed to interface with our customers' existing
networks, each of which has different specifications and utilizes multiple
protocol standards. Many of our customers' networks contain multiple generations
of products that have been added over time as these networks have grown and
evolved. Our products must interoperate with all of the products within these
networks as well as future products in order to meet our customers'
requirements. If we find errors in the existing software used in our customers'
networks, we must modify our JUNOS Internet Software to fix or overcome these
errors so that our products will interoperate and scale with the existing
software and hardware. If our products do not interoperate with those of our
customers' networks, installations could be delayed, orders for our products
could be cancelled or our products could be returned. This would also seriously
harm our reputation, which could seriously harm our business and prospects.

BECAUSE OUR PRODUCTS ARE COMPLEX AND ARE DEPLOYED IN COMPLEX ENVIRONMENTS, THEY
MAY HAVE ERRORS OR DEFECTS THAT WE FIND ONLY AFTER FULL DEPLOYMENT, WHICH COULD
                          SERIOUSLY HARM OUR BUSINESS.

      The M40, including our JUNOS Internet Software, is a highly complex
product. In addition, the M40 is designed to be deployed in very large and
complex networks. Although we have thoroughly tested the M40, because of the
nature of the product, it can only be fully tested when deployed in very large
networks with high amounts of traffic. To
                                       10
<PAGE>   11

date, customers have only deployed the M40 on a limited basis. Consequently, our
customers may discover errors or defects in the hardware or the software after
it has been fully deployed. If we are unable to fix errors or other problems
that may be identified in full deployment, we could experience:

- - loss of or delay in revenues and loss of market share;

- - loss of customers;

- - failure to achieve market acceptance;

- - diversion of development resources;

- - increased service and warranty costs;

- - legal actions by our customers; and

- - increased insurance costs.

CUSTOMER PRODUCT LIABILITY CLAIMS BASED ON ERRORS IN OUR SOFTWARE OR MISTAKES IN
     PERFORMING OUR SERVICES COULD RESULT IN COSTLY LITIGATION AGAINST US.

      We may be subject to claims based on errors in our software or mistakes in
performing our services, including claims relating to damages to our customers'
internal systems. Our contracts with our customers generally contain provisions
designed to limit our exposure to potential product liability claims, such as
disclaimers of warranties and limitations on liability for special,
consequential and incidental damages. We believe our product liability insurance
is adequate to cover potential product liability claims. However, a product
liability claim, whether successful or not, could seriously impact our capital
reserves, harm our reputation, and direct the attention of key personnel away
from our business, any of which could harm our business.

  PROBLEMS ARISING FROM USE OF OUR PRODUCTS IN CONJUNCTION WITH OTHER VENDORS'
     PRODUCTS COULD DISRUPT OUR BUSINESS AND HARM OUR FINANCIAL CONDITION.

      Service providers typically use our products in conjunction with products
from other vendors. As a result, when problems occur, it may be difficult to
identify the source of the problem. These problems may cause us to incur
significant warranty and repair costs, divert the attention of our engineering
personnel from our product development efforts and cause significant customer
relations problems.

OUR PRODUCTS ARE NEW AND FACE RAPID TECHNOLOGICAL CHANGES AND EVOLVING STANDARDS
   AND IF WE DO NOT RESPOND IN A TIMELY MANNER, OUR BUSINESS COULD BE HARMED.

      The Internet infrastructure market is characterized by rapid technological
change, frequent new product introductions, changes in customer requirements and
evolving industry standards. In developing our products, we have made, and will
continue to make, assumptions with respect to which standards will be adopted by
our customers and competitors. If the standards adopted are different from those
which we have chosen to support, market acceptance of our products may be
significantly reduced or delayed and our business will be seriously harmed. In
addition, the introduction of products embodying new technologies and the
emergence of new industry standards could render our existing products obsolete.

      In addition, in order to introduce products embodying new technologies and
new industry standards, we must be able to gain access to the latest
technologies of our suppliers such as IBM. Any failure to gain access to the
latest technologies could harm our business and operating results.

 OUR FAILURE TO ESTABLISH AND MAINTAIN KEY CUSTOMER RELATIONSHIPS MAY RESULT IN
 DELAYS IN INTRODUCING NEW PRODUCTS OR CAUSE CUSTOMERS TO FOREGO PURCHASING OUR
                                   PRODUCTS.

      Our future success will also depend upon our ability to develop and manage
key customer relationships in order to introduce a variety of new products and
product enhancements that address the increasingly sophisticated needs of our
customers. Our failure to establish and maintain these customer relationships
may adversely affect

                                       11
<PAGE>   12

our ability to develop new products and product enhancements. In addition, we
may experience delays in releasing new products and product enhancements in the
future. Material delays in introducing new products and enhancements or our
inability to introduce competitive new products may cause customers to forego
purchases of our products and purchase those of our competitors, which could
seriously harm our business.

 IF WE FAIL TO MANAGE EXPANSION EFFECTIVELY, OUR BUSINESS, FINANCIAL CONDITION
                    AND PROSPECTS COULD BE SERIOUSLY HARMED.

      Our ability to successfully offer our products and implement our business
plan in a rapidly evolving market requires an effective planning and management
process. We continue to increase the scope of our operations domestically and
internationally and have grown our headcount substantially. At December 31,
1997, we had a total of 80 employees and at June 30, 1999, we had a total of 265
employees. In addition, we plan to continue to hire a significant number of
employees this year. This growth has placed, and our anticipated growth in
future operations will continue to place, a significant strain on our management
systems and resources. We expect that we will need to continue to improve our
financial and managerial controls, reporting systems and procedures, and will
need to continue to expand, train and manage our work force worldwide.
Furthermore, we expect that we will be required to manage multiple relationships
with various customers and other third parties.

 WE DEPEND ON OUR KEY PERSONNEL TO MANAGE OUR BUSINESS EFFECTIVELY IN A RAPIDLY
 CHANGING MARKET AND IF WE ARE UNABLE TO HIRE ADDITIONAL PERSONNEL, OUR ABILITY
                     TO SELL OUR PRODUCTS COULD BE HARMED.

      Our future success depends upon the continued services of our executive
officers and other key engineering, sales, marketing and support personnel. None
of our officers or key employees is bound by an employment agreement for any
specific term and we do not have "key person" life insurance policies covering
any of our employees.

      We also intend to hire a significant number of engineering, sales,
marketing and support personnel in the future, and we believe our success
depends, in large part, upon our ability to attract and retain these key
employees. Competition for these persons is intense, especially in the San
Francisco Bay area. In particular, we have experienced difficulty in hiring
qualified ASIC, software, system and test and customer support engineers and
there can be no assurance that we will be successful in attracting and retaining
these individuals. The loss of the services of any of our key employees, the
inability to attract or retain qualified personnel in the future, or delays in
hiring required personnel, particularly engineers and sales personnel, could
delay the development and introduction of and negatively impact our ability to
sell our products.

IF WE BECOME SUBJECT TO UNFAIR HIRING CLAIMS WE COULD INCUR SUBSTANTIAL COSTS IN
                              DEFENDING OURSELVES.

      Companies in our industry whose employees accept positions with
competitors frequently claim that their competitors have engaged in unfair
hiring practices. We have received claims of this kind in the past and we cannot
assure you that we will not receive claims of this kind in the future as we seek
to hire qualified personnel or that those claims will not result in material
litigation. We could incur substantial costs in defending ourselves against
these claims, regardless of their merits.

    OUR BUSINESS WILL BE ADVERSELY AFFECTED IF WE ARE UNABLE TO PROTECT OUR
           INTELLECTUAL PROPERTY RIGHTS FROM THIRD-PARTY CHALLENGES.

      We rely on a combination of patent, copyright, trademark and trade secret
laws and restrictions on disclosure to protect our intellectual property rights.
We also enter into confidentiality or license agreements with our employees,
consultants and corporate partners, and control access to and distribution of
our software, documentation
                                       12
<PAGE>   13

and other proprietary information. Despite our efforts to protect our
proprietary rights, unauthorized parties may attempt to copy or otherwise obtain
and use our products or technology. Monitoring unauthorized use of our products
is difficult and we cannot be certain that the steps we have taken will prevent
unauthorized use of our technology, particularly in foreign countries where the
laws may not protect our proprietary rights as fully as in the United States.

 NECESSARY LICENSES OF THIRD-PARTY TECHNOLOGY MAY NOT BE AVAILABLE TO US OR MAY
                               BE VERY EXPENSIVE.

      From time to time we may be required to license technology from third
parties to develop new products or product enhancements. We cannot assure you
that third party licenses will be available to us on commercially reasonable
terms, if at all. The inability to obtain any third-party license required to
develop new products and product enhancements could require us to obtain
substitute technology of lower quality or performance standards or at greater
cost either of which could seriously harm our business, financial condition and
results of operations.

  WE COULD BECOME SUBJECT TO LITIGATION REGARDING INTELLECTUAL PROPERTY RIGHTS
                    WHICH COULD SERIOUSLY HARM OUR BUSINESS.

      In recent years, there has been significant litigation in the United
States involving patents and other intellectual property rights. Although we
have never been involved in any intellectual property litigation, we may be a
party to litigation in the future to protect our intellectual property or as a
result of an alleged infringement of others' intellectual property. These claims
and any resulting lawsuit, if successful, could subject us to significant
liability for damages and invalidation of our proprietary rights. These
lawsuits, regardless of their success, would likely be time-consuming and
expensive to resolve and would divert management time and attention. Any
potential intellectual property litigation also could force us to do one or more
of the following:

- - stop selling, incorporating or using our products that use the challenged
  intellectual property;

- - obtain from the owner of the infringed intellectual property right a license
  to sell or use the relevant technology, which license may not be available on
  reasonable terms, or at all; or

- - redesign those products that use such technology.

      If we are forced to take any of the foregoing actions, our business may be
seriously harmed. Although we carry general liability insurance, our insurance
may not cover potential claims of this type or may not be adequate to indemnify
us for all liability that may be imposed. For more information concerning our
intellectual property rights, see "Business -- Intellectual Property."

 WE FACE RISKS ASSOCIATED WITH OUR INTERNATIONAL OPERATIONS THAT COULD HARM OUR
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

      We market and sell our products in the United States and internationally.
We have established an office in England, The Netherlands and Japan to market
and sell our products in Europe and Asia, respectively.

      We intend to expand substantially our international operations and enter
new international markets. This expansion will require significant management
attention and financial resources to develop successfully direct and indirect
international sales and support channels. We may not be able to maintain or
increase international market demand for the M40.

      We currently have limited experience in marketing and distributing our
products internationally and in developing versions of our products that comply
with local standards. In addition, international operations are subject to other
inherent risks, including:

- - greater difficulty in accounts receivable collection and longer collection
  periods;

                                       13
<PAGE>   14

- - difficulties and costs of staffing and managing foreign operations;

- - the impact of recessions in economies outside the United States;

- - unexpected changes in regulatory requirements;

- - certification requirements;

- - reduced protection for intellectual property rights in some countries;

- - potentially adverse tax consequences; and

- - political and economic instability.

      Our international revenues were $4.4 million for the six months ended June
30, 1999 and are generally denominated in U.S. dollars. Consequently, we do not
currently engage in currency hedging activities. However, a portion of our
international revenues may be denominated in foreign currencies in the future.

     WE FACE A NUMBER OF UNKNOWN RISKS ASSOCIATED WITH YEAR 2000 PROBLEMS.

      The year 2000 computer problem refers to the potential for system and
processing failures of date-related data as a result of computer-controlled
systems using two digits rather than four to define the applicable year. For
example, computer programs that have time-sensitive software may recognize a
date represented as "00" as the year 1900 rather than the year 2000. This could
result in a system failure or miscalculations causing disruptions of operations,
including among other things, a temporary inability to process transactions,
send invoices or engage in similar normal business activities.

      We have designed the M40 for use in the year 2000 and beyond and believe
it is year 2000 compliant. However, our products are generally integrated into
larger networks involving sophisticated hardware and software products supplied
by other vendors. Each of our customers' networks involves different
combinations of third party products. We cannot evaluate whether all of their
products are year 2000 compliant. We may face claims based on year 2000 problems
in other companies' products or based on issues arising from the integration of
multiple products within the overall network. Although no claims of this kind
have been made, we may in the future be required to defend our products in legal
proceedings which could be expensive regardless of the merits of these claims.

      If our suppliers, vendors, major distributors, partners, customers and
service providers fail to correct their year 2000 problems, these failures could
result in an interruption in, or a failure of, our normal business activities or
operations. If a year 2000 problem occurs, it may be difficult to determine
which party's products have caused the problem. These failures could interrupt
our operations and damage our relationships with our customers. Due to the
general uncertainty inherent in the year 2000 problem resulting from the
readiness of third-party suppliers and vendors, we are unable to determine at
this time whether year 2000 failures could harm our business and our financial
results.

      Our customers' purchasing plans could be affected by year 2000 issues if
they need to expend significant resources to fix their existing systems to
become year 2000 compliant. This situation may reduce funds available to
purchase our products. In addition, some customers may wait to purchase our
products until after the year 2000, which may reduce our revenue. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Year 2000 Compliance."

   ANY ACQUISITIONS WE MAKE COULD DISRUPT OUR BUSINESS AND HARM OUR FINANCIAL
                                   CONDITION.

      We intend to make investments in complementary companies, products or
technologies. In the event of any such investments or acquisitions, we could:

- - issue stock that would dilute our current stockholders' percentage ownership;

- - incur debt;

- - assume liabilities;

- - incur amortization expenses related to goodwill and other intangible assets;
  or

- - incur large and immediate write-offs.

                                       14
<PAGE>   15

      These acquisitions also involve numerous risks, including:

- - problems combining the purchased operations, technologies or products;

- - unanticipated costs;

- - diversion of management's attention from our core business;

- - adverse effects on existing business relationships with suppliers and
  customers;

- - risks associated with entering markets in which we have no or limited prior
  experience; and

- - potential loss of key employees, particularly those of the acquired
  organizations.

      We cannot assure you that we will be able to successfully integrate any
businesses, products, technologies or personnel that we might acquire in the
future.

MANAGEMENT MAY APPLY THE PROCEEDS OF THIS OFFERING TO USES THAT DO NOT INCREASE
                          OUR PROFITS OR MARKET VALUE.

      Our management will have considerable discretion in the application of the
net proceeds from this offering, and you will not have the opportunity, as part
of your investment decision, to assess whether the proceeds are being used
appropriately. The net proceeds may be used for corporate purposes that do not
increase our profitability or our market value. Pending application of the
proceeds, they may be placed in investments that do not produce income or that
lose value. See "How We Intend to Use the Proceeds From This Offering."

 INSIDERS WILL CONTINUE TO HAVE SUBSTANTIAL CONTROL OVER JUNIPER NETWORKS AFTER
    THIS OFFERING AND COULD DELAY OR PREVENT A CHANGE IN CORPORATE CONTROL.

      We anticipate that the executive officers, directors and entities
affiliated with them will, in the aggregate, beneficially own approximately
42.1% of our outstanding common stock following the completion of this offering.
These stockholders, if acting together, would be able to influence significantly
all matters requiring approval by our stockholders, including the election of
directors and the approval of mergers or other business combination
transactions. See "Principal and Selling Stockholders."

 PROVISIONS OF OUR CHARTER DOCUMENTS MAY HAVE ANTI-TAKEOVER EFFECTS THAT COULD
                        PREVENT A CHANGE IN OUR CONTROL.

      Provisions of our amended and restated certificate of incorporation,
bylaws, and Delaware law could make it more difficult for a third party to
acquire us, even if doing so would be beneficial to our stockholders. See
"Description of Capital Stock."

   THERE MAY BE SALES OF A SUBSTANTIAL AMOUNT OF OUR COMMON STOCK AFTER THIS
               OFFERING THAT COULD CAUSE OUR STOCK PRICE TO FALL.

      Our common stock began trading on the Nasdaq National Market on June 25,
1999; however, to date there have been a limited number of shares trading in the
public market. This offering will result in additional shares of our common
stock being available on the open market. In addition, our current stockholders
hold a substantial number of shares, which they will be able to sell in the
public market in the near future. Sales of a substantial number of shares of our
common stock in this offering and thereafter could cause our stock price to
fall. In addition, the sale of shares by our stockholders could impair our
ability to raise capital through the sale of additional stock. See "Shares
Eligible for Future Sale."

  WE EXPECT TO EXPERIENCE VOLATILITY IN OUR SHARE PRICE WHICH COULD NEGATIVELY
                            AFFECT YOUR INVESTMENT.

      The market price of our common stock may fluctuate significantly in
response to a number of factors, some of which are beyond our control,
including:

- - quarterly variations in operating results;

- - changes in financial estimates by securities analysts;

                                       15
<PAGE>   16

- - changes in market valuations of Internet related companies;

- - announcements by us or our competitors of new products or of significant
  acquisitions, strategic partnerships or joint ventures;

- - any loss of a major customer;

- - additions or departures of key personnel;

- - any deviations in net revenues or in losses from levels expected by securities
  analysts;

- - future sales of common stock; and

- - volume fluctuations, which are particularly common among highly volatile
  securities of Internet related companies.

                   NOTE REGARDING FORWARD-LOOKING STATEMENTS

      This prospectus contains forward-looking statements that involve risks and
uncertainties. We use words such as "anticipates," "believes," "plans,"
"expects," "future," "intends" and similar expressions to identify
forward-looking statements. This prospectus also contains forward-looking
statements attributed to third parties relating to their estimates regarding the
growth of Internet use. You should not place undue reliance on these
forward-looking statements, which apply only as of the date of this prospectus.
Our actual results could differ materially from those anticipated in these
forward-looking statements for many reasons, including the risks faced by us and
described in the preceding pages and elsewhere in this prospectus.

              HOW WE INTEND TO USE THE PROCEEDS FROM THIS OFFERING

      Our net proceeds from the sale of the 1,500,000 shares of common stock
offered by us are to be $274.2 million at the initial price to the public of
$190.00 per share, after deducting estimated offering expenses payable by us
(approximately $800,000) and the underwriting discount.

      Our principal purposes for engaging in this offering are to:

- - increase our equity capital;

- - increase the size of the public float for our common stock;

- - facilitate future access by us to public equity markets; and

- - allow for the orderly liquidation of the investments made by certain former
  preferred stockholders.

      We expect to use the net proceeds from this offering for working capital
and general corporate purposes. In addition, we may use a portion of the net
proceeds to acquire complementary products, technologies or businesses. Pending
use of the net proceeds of this offering, we intend to invest the net proceeds
in interest-bearing, investment-grade securities. We will not receive any
proceeds from the sale of the shares being sold by the selling stockholders. See
"Principal and Selling Stockholders."

                                       16
<PAGE>   17

                          PRICE RANGE OF COMMON STOCK

     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. The following table sets forth, for the periods
indicated, the high and low closing prices per share of the common stock as
reported on the Nasdaq National Market.

<TABLE>
<CAPTION>
                            1999                               HIGH       LOW
                            ----                              -------   -------
<S>                                                           <C>       <C>
Second Quarter (since June 25, 1999)........................  $149.00   $98.875
Third Quarter (through September 29, 1999)..................  $227.00   $125.00
</TABLE>

On September 29, 1999 the reported last sale price of the common stock on the
Nasdaq National Market was $191.4375. As of June 30, 1999 there were
approximately 300 stockholders of record.

                                DIVIDEND POLICY

      We have never declared or paid any dividends on our capital stock. We
currently expect to retain future earnings, if any, for use in the operation and
expansion of our business and do not anticipate paying any cash dividends in the
foreseeable future. Our lease lines prohibit the payment of dividends without
prior approval of the lessors.

                                       17
<PAGE>   18

                                 CAPITALIZATION

     The following table sets forth (1) our actual capitalization as of June 30,
1999, and (2) our capitalization as adjusted to give effect to the sale by us of
1,500,000 shares of common stock at the initial price to the public of $190.00
per share (less the underwriting discount and estimated offering expenses
payable by us). You should read this table in conjunction with our consolidated
financial statements and the related notes included elsewhere in this
prospectus.

<TABLE>
<CAPTION>
                                                                  JUNE 30, 1999
                                                              ----------------------
                                                               ACTUAL    AS ADJUSTED
                                                              --------   -----------
                                                              (IN THOUSANDS, EXCEPT
                                                                   SHARE DATA)
<S>                                                           <C>        <C>
Long-term obligations, net of current portion...............  $  2,521    $  2,521
Stockholders' equity:
  Convertible preferred stock, $0.00001 par value,
     10,000,000 shares authorized at June 30, 1999..........        --          --
  Common stock, $0.00001 par value, 200,000,000 shares
     authorized, 49,777,014 shares issued and outstanding
     (actual); 51,277,014 shares issued and outstanding (as
     adjusted)..............................................         *           *
  Additional paid-in capital................................   172,106     446,331
  Deferred stock compensation...............................    (4,472)     (4,472)
  Accumulated deficit.......................................   (53,660)    (53,660)
                                                              --------    --------
       Total stockholders' equity...........................   113,974     388,199
                                                              --------    --------
          Total capitalization..............................  $116,495    $390,720
                                                              ========    ========
</TABLE>

- ---------------

(1) Based on shares outstanding as of June 30, 1999. It excludes: (A) 8,181,683
    shares of common stock reserved for issuance under our Amended 1996 Stock
    Plan, of which 5,007,695 were subject to outstanding options at a weighted
    average exercise price of $10.59 per share and 3,173,988 shares available
    for future grants, (B) 240,410 shares of common stock issuable upon exercise
    of warrants at a weighted average exercise price of $1.71 per share; and (C)
    500,000 shares available for issuance under our 1999 Employee Stock Purchase
    Plan. See "Management -- Incentive Stock Plans," "Description of Capital
    Stock" and Notes 5, 6 and 10 to the Consolidated Financial Statements.

 *  Less than $1,000

                                       18
<PAGE>   19

                                    DILUTION

      If you invest in our common stock, your interest will be diluted to the
extent of the difference between the public offering price per share of our
common stock and the net tangible book value per share of our common stock after
this offering. We calculate net tangible book value per share by dividing the
net tangible book value (total assets less tangible assets and total
liabilities) by the number of outstanding shares of common stock.

      Our net tangible book value at June 30, 1999, was $114.0 million, or $2.29
per share, based on 49,777,014 shares of our common stock outstanding.

      After giving effect to the sale of the 1,500,000 shares of common stock by
us at the initial price to the public of $190.00 per share (less the
underwriting discount and estimated offering expenses payable by us), our net
tangible book value at June 30, 1999, would be $388.2 million, or $7.57 per
share. This represents an immediate increase in the net tangible book value of
$5.28 per share to existing stockholders and an immediate dilution of $182.43
per share to new investors, or approximately 96.0% of the initial price to the
public of $190.00 per share.

      The following table illustrates this per share dilution:

<TABLE>
<S>                                                           <C>      <C>

Initial price to the public per share.......................           $190.00
  Net tangible book value per share at June 30, 1999........  $2.29
  Increase per share attributable to new investors..........   5.28
                                                              -----
Net tangible book value per share after this offering.......              7.57
                                                                       -------
Dilution per share to new investors.........................           $182.43
                                                                       =======
</TABLE>

                                       19
<PAGE>   20

                      SELECTED CONSOLIDATED FINANCIAL DATA

      The selected consolidated financial data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our consolidated financial statements and the
related notes included elsewhere in this prospectus. The consolidated statement
of operations data set forth below for the period from February 2, 1996
(inception) to December 31, 1996, and for the fiscal years ended December 31,
1997 and 1998, and the consolidated balance sheet data as of December 31, 1997
and 1998 have been derived from the audited consolidated financial statements of
Juniper Networks, Inc. included elsewhere in this prospectus, which have been
audited by Ernst & Young LLP, Independent Auditors. The consolidated balance
sheet data at December 31, 1996 are derived from unaudited consolidated
financial statements that are not included in this prospectus. The consolidated
statement of operations data for the six-month periods ended June 30, 1998 and
1999, and the consolidated balance sheet data as of June 30, 1999, are
unaudited. In the opinion of management, all necessary adjustments (consisting
only of normal recurring adjustments) have been included to present fairly the
unaudited quarterly results when read in conjunction with the audited
consolidated financial statements and the notes thereto appearing elsewhere in
this prospectus. The historical results are not necessarily indicative of
results to be expected for any future period. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

<TABLE>
<CAPTION>
                                                             PERIOD FROM
                                                              INCEPTION
                                                             (FEBRUARY 2,                             SIX MONTHS
                                                               1996) TO         YEAR ENDED               ENDED
                                                             DECEMBER 31,      DECEMBER 31,            JUNE 30,
                                                             ------------   -------------------   -------------------
                                                                 1996         1997       1998       1998       1999
                                                             ------------   --------   --------   --------   --------
                                                                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                          <C>            <C>        <C>        <C>        <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net revenues...............................................    $    --      $     --   $  3,807   $     --   $ 27,600
Cost of revenues...........................................         --            --      4,416        219     14,393
                                                               -------      --------   --------   --------   --------
  Gross profit (loss)......................................         --            --       (609)      (219)    13,207
Operating expenses:
  Research and development.................................      1,850         9,406     23,987      9,558     14,172
  Sales and marketing......................................         --         1,149      4,216      1,283      6,452
  General and administrative...............................         89         1,043      2,223        779      1,753
  Amortization of deferred stock compensation..............         --            --      1,235        213      1,795
                                                               -------      --------   --------   --------   --------
    Total operating expenses...............................      1,939        11,598     31,661     11,833     24,172
                                                               -------      --------   --------   --------   --------
Operating loss.............................................     (1,939)      (11,598)   (32,270)   (12,052)   (10,965)
Interest income (expense), net.............................        140         1,235      1,301        946        560
                                                               -------      --------   --------   --------   --------
Loss before income taxes...................................     (1,799)      (10,363)   (30,969)   (11,106)   (10,405)
Provision for income taxes.................................         --            --          2          2        122
                                                               -------      --------   --------   --------   --------
Net loss...................................................    $(1,799)     $(10,363)  $(30,971)  $(11,108)  $(10,527)
                                                               =======      ========   ========   ========   ========
Basic and diluted net loss per share(1)....................    $ (0.46)     $  (1.21)  $  (2.39)  $  (0.98)  $  (0.64)
                                                               =======      ========   ========   ========   ========
Shares used in computing basic and diluted net loss per
  share(1).................................................      3,958         8,591     12,957     11,372     16,436
                                                               =======      ========   ========   ========   ========
Pro forma basic and diluted net loss per share
  (unaudited)(1)...........................................                            $  (0.84)             $  (0.26)
                                                                                       ========              ========
Shares used in computing pro forma basic and diluted net
  loss per share (unaudited)(1)............................                              37,070                40,816
                                                                                       ========              ========
CONSOLIDATED BALANCE SHEET DATA (AT PERIOD END):
Cash, cash equivalents and short-term investments..........    $ 9,468      $ 46,227   $ 20,098              $107,801
Working capital............................................      9,315        44,691     14,432                99,358
Total assets...............................................     10,388        50,210     36,671               143,131
Long-term obligations, less current portion................        408         2,083      5,204                 2,521
Stockholders' equity.......................................      9,728        46,048     17,065               113,974
</TABLE>

- -------------------------
(1) See Note 1 of Notes to Consolidated Financial Statements for an explanation
    of the determination of the shares used to compute net loss per share.

                                       20
<PAGE>   21

                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The following discussion and analysis should be read in conjunction with
"Selected Consolidated Financial Data" and our consolidated financial statements
and the related notes included elsewhere in this prospectus. This discussion
contains forward-looking statements that involve risks and uncertainties. Our
actual results could differ materially from those anticipated in the
forward-looking statements as a result of certain factors including the risks
discussed in "Risk Factors" and elsewhere in this prospectus.

                                    OVERVIEW

      We are a leading provider of Internet infrastructure solutions that enable
Internet service providers and other telecommunications service providers, or,
collectively, service providers, to meet the demands resulting from the rapid
growth of the Internet. We deliver next generation Internet backbone routers
that are specifically designed, or purpose-built, for service provider networks
and offer our customers increased reliability, performance, scalability,
interoperability and flexibility, and reduced complexity and cost compared to
current alternatives. Our flagship product is the M40 Internet backbone router.
The M40 combines the features of our JUNOS Internet Software, high performance
ASIC-based packet forwarding technology and Internet optimized architecture into
a purpose-built solution for service providers.

      In September 1998, after extensive field testing of our JUNOS Internet
Software, we began shipping our first product, the M40 Internet backbone router,
with volume shipments beginning in October 1998. We currently sell through our
direct sales force to major service providers in North America. In addition, we
distribute through value added resellers system integrators and resellers to
smaller customers in North America and to international customers. Distribution
and support is also provided by our strategic original equipment manufacturer
relationship with Ericsson.

      From our inception in February 1996 through September 1998, our operating
activities were primarily devoted to increasing our research and development
capabilities, designing our ASICs, developing our software, developing and
testing the M40 and developing other products. We also staffed our
administrative, marketing and sales organizations and implemented strategic
relationships. Since our inception, we have incurred significant losses, and as
of June 30, 1999, we had an accumulated deficit of $53.7 million. We have not
achieved profitability on a quarterly or annual basis. We expect to incur
significant sales and marketing, research and development and general and
administrative expenses and, as a result, we will need to generate significantly
higher revenues to achieve and maintain profitability.

      Our revenues currently are derived from sales of one product, the M40.
While we are developing and plan to introduce future products, there can be no
assurance that we will be successful in these efforts. To date, we have
generated a substantial portion of our revenues from a limited number of
customers, with two customers accounting for approximately 62% of our net
revenues in the six months ended June 30, 1999. While we are seeking to
diversify our customer base, there can be no assurance that these efforts will
be successful.

      To date, most of our direct sales have been in North America, and our
international sales have been through our strategic original equipment
manufacturer relationship with Ericsson and other distributors. However, we have
recently launched sales and marketing efforts internationally, initially focused
on Europe and Asia.

      We expect that a significant portion of our future revenues will continue
to come from sales of the M40 to a small number of customers. We have focused
our initial sales and marketing efforts primarily on the world's leading service
providers. We expect to
                                       21
<PAGE>   22

receive a large portion of our revenues from these initial customers until we
can sufficiently penetrate additional accounts.

      Because the market for Internet backbone routers is new and evolving, the
volume and timing of orders are difficult to predict. A customer's decision to
purchase the M40 typically involves a significant commitment of their resources
and a lengthy evaluation and product qualification process. This initial
evaluation and product qualification process typically takes several months and
includes:

- - technical evaluation;

- - integration;

- - testing;

- - network planning; and

- - implementation into the network.

      Even after making the decision to purchase the M40, our customers tend to
deploy the M40 slowly and deliberately. Timing of deployment can vary widely and
depends on the skill set of the customer, the size of the network deployment,
the complexity of the customer's network environment and the degree of hardware
and software configuration necessary to deploy the M40. Customers with large
networks usually expand their networks in large increments on a periodic basis.
Accordingly, we expect to receive purchase orders for significant dollar amounts
on an irregular basis. Because of our limited operating history, we cannot
predict these sales and development cycles. Long sales and implementation cycles
for the M40, as well as the expectation that customers will tend to sporadically
place large orders with short lead times, may cause revenues and operating
results to vary significantly and unexpectedly from quarter to quarter.

      We recognize product revenue at the time of shipment, unless we have
future obligations for installation or have to obtain customer acceptance, in
which case revenue is deferred until these obligations are met. Revenue from
service obligations is deferred and recognized on a straight-line basis over the
contractual period. Amounts billed in excess of revenue recognized are included
as deferred revenue in the accompanying consolidated balance sheets. At June 30,
1999, a total of $12.8 million of revenue was deferred. It is currently expected
that this deferred revenue will be recognized in 1999. The amount of estimated
product returns is provided for in the period of the sale. We provide a reserve
for warranty returns based on our warranty history. Historically, selling prices
in the Internet infrastructure equipment market have been relatively stable.
However, as competitors launch new products, this pricing trend may change.

      Our gross margins will primarily be affected by the following factors:

- - demand for our products and services;

- - new product introductions both by us and by our competitors;

- - changes in our pricing policies and those of our competitors;

- - the mix of interfaces sold;

- - the mix of products and services sold;

- - the mix of sales channels through which our products and services are sold;

- - the mix of domestic and international sales; and

- - the volume manufacturing pricing we are able to attain from our partner for
  outsourced manufacturing.

      We have outsourced our manufacturing, our repair operations and the
majority of our supply chain management operations. Accordingly, a significant
portion of our cost of revenues consists of payments to Solectron, our contract
manufacturer. Solectron manufactures our products using quality assurance
programs and standards which we established. Manufacturing engineering and
documentation control are conducted at our facility in Mountain View,
California.

                                       22
<PAGE>   23

      Research and development expenses consist primarily of salaries and
related personnel costs, fees paid to consultants and outside service providers,
non-recurring engineering charges and prototype costs related to the design,
development, testing and enhancement of our ASICs and software and system
development. We expense our research and development costs as they are incurred.
Several components of our research and development effort require significant
expenditures, the timing of which can cause significant quarterly variability in
our expenses. The number of prototypes required to build and test a complex
product such as the M40 is large and this building and testing process occurs
over a short period of time. Our ASIC development requires an upfront payment of
non-recurring engineering charges, regardless of whether the integrated circuit
works, and a per unit cost payable as ASICs are purchased. With several large
ASICs in our architecture, we will incur large non-recurring engineering and
prototype expenses with every enhancement of the M40 and any new product
development. We are devoting substantial resources to the continued development
of new products. We believe that research and development is critical to our
strategic product development objectives and that to leverage our leading
technology and meet the changing requirements of our customers, we will need to
fund investments in several development projects in parallel. As a result, we
expect our research and development expenses to increase in absolute dollars in
the future.

      Selling and marketing expenses consist primarily of salaries, commissions
and related expenses for personnel engaged in marketing, sales and customer
engineering support functions, as well as costs associated with promotional and
other marketing expenses. We intend to expand our direct and indirect sales
operations substantially, both domestically and internationally, in order to
increase market awareness of our products. We expect that sales and marketing
expenses will increase substantially in absolute dollars over the next year as
we hire additional sales and marketing personnel, initiate additional marketing
programs to support the M40 and establish sales offices in additional domestic
and international locations. In addition, we believe our future success is
dependent upon establishing successful relationships with a variety of
distribution partners. To date, we have entered into agreements with only a
small number of distribution partners. To be successful, we must reach agreement
with additional distribution partners in several countries. Similarly, the
complexity of our Internet backbone routers and the difficulty of installing
them require highly trained customer service and support personnel. We expect to
significantly expand our customer service and support organization to meet these
requirements. We believe that continued investment in sales and marketing is
critical to our success and expect these expenses to increase in absolute
dollars in the future.

      General and administrative expenses consist primarily of salaries and
related expenses for executive, finance, accounting, facilities, human resources
personnel, recruiting expenses, professional fees and other corporate expenses.
We expect general and administrative expenses to increase in absolute dollars as
we add personnel and incur additional costs related to the growth of our
business and our operation as a public company.

      In connection with the grant of certain stock options to employees during
1998 and the three months ended March 31, 1999, we recorded deferred
compensation of $6.4 million and $1.1 million, respectively, representing the
difference between the deemed value of the common stock for accounting purposes
and the exercise price of these options at the date of grant. Deferred
compensation is presented as a reduction of stockholders' equity and is
amortized over the vesting period of the applicable options. We expensed $1.2
million of deferred compensation during the year ended December 31, 1998, and
$1.8 million of deferred compensation during the six months ended June 30, 1999.
This compensation expense relates to stock options awarded to individuals in all
operating expense

                                       23
<PAGE>   24

categories. See Note 6 of our consolidated financial statements.

      As of December 31, 1998, we had $34.0 million of federal net operating
loss carryforwards and $33.0 million of state net operating loss carryforwards
for tax reporting purposes available to offset future taxable income. Such net
operating loss carryforwards expire at various dates beginning in 2004 to the
extent that they are not utilized. We have not recognized any benefit from the
future use of loss carryforwards for these periods, or for any other periods,
since inception. Management's evaluation of all the available evidence in
assessing realizability of the tax benefits of such loss carryforwards indicates
that the underlying assumptions of future profitable operations contain risks
that do not provide sufficient assurance to recognize the tax benefits
currently.

                             RESULTS OF OPERATIONS

NET REVENUES

      The quarter ended December 31, 1998, was our first quarter of revenue. Net
revenues were $3.8 million in the year ended December 31, 1998, and $27.6
million for the six months ended June 30, 1999 (none for the corresponding six
month period of the preceding year). Two customers accounted for 100% of the net
revenues in the three months ended December 31, 1998, and two customers
accounted for 62% of the net revenues in the six months ended June 30, 1999.

COST OF REVENUES

      Cost of revenues for the year ended December 31, 1998, were $4.4 million
and for the six months ended June 30, 1999, were $14.4 million ($219,000 for the
corresponding six month period of the preceding year). Cost of revenues includes
the cost of our manufacturing overhead and customer service and support
organizations.

RESEARCH AND DEVELOPMENT EXPENSES

      Research and development expenses were $24.0 million in 1998, an increase
of $14.6 million or 155% over 1997, and were $14.2 million in the six months
ended June 30, 1999, an increase of $4.6 million or 48% over the comparable
period of 1998. The increase was due primarily to increased costs associated
with a significant increase in personnel, which accounted for approximately 30%
of the increase in 1998 over 1997 and 70% of the increase in the six months
ended June 30, 1999 over the comparable period in 1998. An increase in
non-recurring engineering costs accounted for approximately 10% of the increase
in 1998 over 1997 and a negligible portion of the increase in the six months
ended June 30, 1999 over the comparable period in 1998. The increase in research
and development expenses in 1998 over 1997 was due also to an increase in
prototype expenses, which accounted for approximately 40% of the increase;
however, the increase in research and development expenses in the six months
ended June 30, 1999 over the comparable period in 1998 was partially offset by a
decrease of approximately 30% in prototype expenses. The primary purposes of the
increase in research and development expenses were to support the completion,
bring-up, alpha test (the early tests of the product in labs) and beta test (the
tests conducted at customer premises just prior to shipping the product when
product is of sufficient quality to run in production networks) phases of the
product development and to complete the M40 product as well as increased
research and development expenses for next generation products. Development is
essential to our future success and we expect that research and development
expenses will increase in absolute dollars in future periods.

SALES AND MARKETING EXPENSES

      Sales and marketing expenses were $4.2 million in 1998, an increase of
$3.1 million or 267% over 1997, and were $6.5 million in the six months ended
June 30, 1999, an increase of $5.2 million or 403%

                                       24
<PAGE>   25

over the comparable period of 1998. The increase was due primarily to a
significant increase in the number of sales and marketing personnel. The costs
associated with such increase in personnel accounted for approximately 70% of
the increase in 1998 over 1997 and 55% of the increase in the six months ended
June 30, 1999 over the comparable period in 1998.

GENERAL AND ADMINISTRATIVE EXPENSES

      General and administrative expenses totaled $2.2 million in 1998, an
increase of $1.2 million or 113% over 1997, and $1.8 million in the six months
ended June 30, 1999, an increase of $1.0 million or 125% over the comparable
period of 1998. The increase was due primarily to the increased costs associated
with an increase in the number of general and administrative personnel and with
increased recruiting, accounting and consulting activities, each of which
accounted for approximately 35% of the increase in general and administrative
expenses in 1998 over 1997 and 25% and 50%, respectively, of the increase in the
six months ended June 30, 1999 over the comparable period in 1998. The primary
purpose of the increase was to support our growing business activities.

INTEREST INCOME, NET

      Net interest income includes income on cash investments partially offset
by expenses related to financing obligations. Net interest income was $1.3
million for the year ended December 31, 1998 and $560,000 in the six months
ended June 30, 1999. This compares with net interest income of $1.2 million for
the year ended December 31, 1997 and $946,000 in the six months ended June 30,
1998. Most of the net interest income decrease for the six months ended June 30,
1999 compared to the six months ended June 30, 1998 was due to less interest
income as average cash balances from the proceeds of issuances of preferred and
common stock were smaller in the first quarter of the 1999 period as compared to
the first quarter of the 1998 period.

PROVISION FOR INCOME TAXES

      The Company has recorded a tax provision of $122,000 for the six month
period ending June 30, 1999. The provision for income taxes consists primarily
of foreign taxes.

                                       25
<PAGE>   26

                        QUARTERLY RESULTS OF OPERATIONS

     The following table presents our operating results for the quarters ended
December 31, 1998, March 31, 1999 and June 30, 1999, which are the only quarters
for which we have recognized revenue. The information for each of these quarters
is unaudited and has been prepared on the same basis as the audited financial
statements appearing elsewhere in this prospectus. In the opinion of management,
all necessary adjustments consisting only of normal recurring adjustments, have
been included to present fairly the unaudited quarterly results when read in
conjunction with our audited consolidated financial statements and the related
notes appearing elsewhere in this prospectus. These operating results are not
necessarily indicative of the results of any future period.

<TABLE>
<CAPTION>
                                                                 QUARTER ENDED
                                                     -------------------------------------
                                                     DECEMBER 31,    MARCH 31,    JUNE 30,
                                                         1998          1999         1999
                                                     ------------    ---------    --------
                                                                (IN THOUSANDS)
<S>                                                  <C>             <C>          <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net revenues.......................................    $ 3,807        $10,044     $17,556
Cost of revenues...................................      3,815          6,347       8,046
                                                       -------        -------     -------
  Gross profit (loss)..............................         (8)         3,697       9,510
Operating expenses:
  Research and development.........................      6,145          6,181       7,991
  Sales and marketing..............................      1,718          2,603       3,849
  General and administrative.......................        882            776         977
  Amortization of deferred stock compensation......        648            904         891
                                                       -------        -------     -------
          Total operating expenses.................      9,393         10,464      13,708
                                                       -------        -------     -------
Operating loss.....................................     (9,401)        (6,767)     (4,198)
Interest income (expense) and provision for income
  taxes, net.......................................        117             92         346
                                                       -------        -------     -------
Net loss...........................................    $(9,284)       $(6,675)    $(3,852)
                                                       =======        =======     =======
</TABLE>

      Our revenues and operating results will vary significantly from quarter to
quarter due to a number of factors, many of which are outside of our control and
any of which may cause our stock price to fluctuate. The primary factors that
may affect us include the following:

- - demand for the M40;

- - the timing of sales of the M40;

- - the timing of recognizing revenue and deferred revenue;

- - new product introductions by our competitors;

- - changes in our pricing policies or the pricing policies of our competitors;

- - our ability to develop, introduce and ship new products and product
  enhancements that meet customer requirements in a timely manner;

- - our ability to obtain sufficient supplies of sole or limited source
  components, including ASICs and power supplies for the M40;

- - increases in the prices of the components we purchase;

- - our ability to attain and maintain production volumes and quality levels for
  the M40;

- - decisions by end-users to reallocate their information resources to other
  purposes, including year 2000 preparedness;

- - Internet growth and demand for Internet infrastructure;

                                       26
<PAGE>   27

- - prototype expenses;

- - costs related to acquisitions of technology or businesses; and

- - general economic conditions as well as those specific to the Internet and
  related industries.

      In addition, we are dependent on decisions by customers to build their
Internet infrastructure, which decisions are in turn dependent upon the success
and expected demand for the services offered by those customers. Furthermore,
the long sales and implementation cycles for the M40, as well as the degree to
which customers will sporadically place large orders with short lead times, may
cause revenues and operating results to vary significantly from quarter to
quarter.

      We also expect to experience seasonality in our operating results. Our
customers may accept shipments of products during the fourth quarter of this
year and the first quarter of next year; however, due to the uncertainties of
the year 2000 problem, they may not integrate the products into their networks
until a later time which could adversely affect our revenues in those quarters.
In addition, we expect the growth rate in our sales in the first quarter to be
adversely affected due to our customers' budgeting cycles.

      We plan to increase significantly our operating expenses to fund greater
levels of research and development, expand our sales and marketing operations,
broaden our customer support capabilities and develop new distribution channels.
We also plan to expand our general and administrative functions to address the
increased reporting and other administrative demands, which will result from
being a publicly traded company and the increasing size of our business. Our
operating expenses are largely based on anticipated revenue trends, and a high
percentage of our expenses are and will continue to be fixed in the short term.
As a result, a delay in generating or recognizing revenue for the reasons set
forth above or for any other reason could cause significant variations in our
operating results from quarter to quarter and could result in substantial
operating losses.

      Due to the foregoing factors, we believe that quarter-to-quarter
comparisons of our operating results are not a good indication of our future
performance. It is likely that in some future quarters, our operating results
may be below the expectations of public market analysts and investors. In this
event, the price of our common stock may fall.

                        LIQUIDITY AND CAPITAL RESOURCES

      Since inception, we have financed our operations primarily through private
sales of approximately $90.8 million of convertible preferred stock and our
recent initial public offering which raised approximately $65.2 million, net of
issuance costs, as well as through capital leases for computers, office
equipment, software and furniture.

      We used $24.8 million in cash for operations in 1998, an increase of $16.2
million from the $8.6 million used in 1997. The increase was primarily due to an
increase in our net loss from $10.4 million in 1997 to $31.0 million in 1998,
partially offset by increased non-cash charges in 1998. We used $3.0 million in
cash for operations in the six months ended June 30, 1999, as a result of our
net loss of $10.5 million, partially offset by an increase in deferred revenue
and non-cash charges.

      We generated $9.3 million in cash from investing activities in 1998 and
used $13.0 million in cash from investing activities in 1997. We generated $48.5
million in cash in 1997, $5.2 million in cash in 1998 and $101.9 million in cash
in the six months ended June 30, 1999, from financing activities, primarily
private sales of convertible preferred stock and our recent initial public
offering. We have used leases to partially finance capital purchases. In
addition, we had $7.4 million in capitalized lease obligations outstanding at
December 31, 1998, and $3.7 million at June 30, 1999.

      At June 30, 1999, cash, cash equivalents, short-term and long-term

                                       27
<PAGE>   28

investments totaled $115.3 million. The increase from $20.1 million at December
31, 1998 was due to the receipt of $33.9 million from the sale of preferred
stock in March 1999 and the receipt of $65.2 million, net of issuance costs,
from the recent initial public offering in June 1999.

      Our capital requirements depend on numerous factors, including:

- - market acceptance of our products;

- - the resources we devote to developing, marketing, selling and supporting our
  products;

- - the timing and extent of establishing international operations; and

- - other factors.

      We expect to devote substantial capital resources to continue our research
and development efforts, to hire and expand our sales, support, marketing and
product development organizations, to expand marketing programs, to establish
additional facilities worldwide and for other general corporate activities.
Although we believe that our current cash balances will be sufficient to fund
our operations for at least the next 12 months, there can be no assurance that
we will not require additional financing within this time frame or that such
additional funding, if needed, will be available on terms acceptable to us or at
all.

      At June 30, 1999, accounts receivable had increased to $17.3 million as
compared to $8.1 million at December 31, 1998 and deferred revenue had increased
to $12.8 million, as compared to $5.6 million at December 31, 1998, due to the
increase in revenues.

      Our customers are billed at the time that the product is shipped, with
payment terms generally of 30 days. We have deferred the revenue recognition on
shipments to new customers until the point at which the installation obligations
are satisfied. The typical installation process, which involves customer and
Juniper Networks personnel, historically has taken approximately 90 days. For
sales to existing customers, we recognize revenue upon shipment as these
customers have already concluded the product testing period. Customers
historically either have paid us prior to the completion of the installation
process. The accounts receivable balance as of December 31, 1998 was collected
prior to March 31, 1999.

                              YEAR 2000 COMPLIANCE

      IMPACT OF THE YEAR 2000 COMPUTER PROBLEM. The year 2000 computer problem
refers to the potential for system and processing failures of date-related data
as a result of computer-controlled systems using two digits rather than four to
define the applicable year. For example, computer programs that have
time-sensitive software may recognize a date represented as "00" as the year
1900 rather than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including among other things,
a temporary inability to process transactions, send invoices, or engage in
similar normal business activities.

      STATE OF READINESS OF OUR PRODUCTS. We have designed the M40 for use in
the year 2000 and beyond and believe it is year 2000 compliant. However, our
products are generally integrated into larger networks involving sophisticated
hardware and software products supplied by other vendors. Each of our customers'
networks involves different combinations of third party products. We cannot
evaluate whether all of their products are year 2000 compliant. We may face
claims based on year 2000 problems in other companies' products or based on
issues arising from the integration of multiple products within the overall
network. Although no such claims have been made, we may in the future be
required to defend our products in legal proceedings which could be expensive
regardless of the merits of such claims.

      STATE OF READINESS OF OUR INTERNAL SYSTEMS. Our business may be affected
by year 2000 issues related to non-compliant internal systems developed by us or
by third-

                                       28
<PAGE>   29

party vendors. We have received assurances that all material systems from
third-party vendors in use by us are year 2000 compliant. We are not currently
aware of any year 2000 problem relating to any of our material internal systems.
We are in the process of testing all such systems for year 2000 compliance and
plan to complete such testing before September 30, 1999. We do not believe that
we have any significant systems that contain embedded chips that are not year
2000 compliant.

      Our internal operations and business are also dependent upon the
computer-controlled systems of third parties such as suppliers, customers and
service providers. We believe that absent a systemic failure outside our
control, such as a prolonged loss of electrical or telephone service, year 2000
problems at third parties such as suppliers, customers and service providers
will not have a material impact on our operations.

      If our suppliers, vendors, major distributors, partners, customers and
service providers fail to correct their year 2000 problems, these failures could
result in an interruption in, or a failure of, our normal business activities or
operations. If a year 2000 problem occurs, it may be difficult to determine
which party's products have caused the problem. These failures could interrupt
our operations and damage our relationships with our customers. Due to the
general uncertainty inherent in the year 2000 problem resulting from the
readiness of third-party suppliers and vendors, we are unable to determine at
this time whether year 2000 failures could harm our business and our financial
results.

      Our customers' purchasing plans could be affected by year 2000 issues if
they need to expend significant resources to fix their existing systems to
become year 2000 compliant. This situation may reduce funds available to
purchase our products. In addition, some customers may wait to purchase our
products until after the year 2000, which may reduce our revenue.

      COST. Based on our assessment to date, we anticipate that costs associated
with testing and remediating our internal systems will be approximately
$200,000.

      RISKS. Failure of our internal systems to be year 2000 compliant could
temporarily prevent us from processing orders, issuing invoices and developing
products and could require us to devote significant resources to correcting such
problems. Due to the general uncertainty inherent in the year 2000 computer
problem, resulting from the uncertainty of the year 2000 readiness of
third-party suppliers and vendors, we are unable to determine at this time
whether the consequences of year 2000 failures will have a material impact on
our business, results of operations or financial condition.

                        RECENT ACCOUNTING PRONOUNCEMENTS

      In March 1998, the American Institute of Certified Public Accountants, or
AICPA, issued Statement of Position, or SOP, No. 98-1, Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use. SOP No. 98-1
requires entities to capitalize certain costs related to internal-use software
once certain criteria have been met. We expect that the adoption of SOP No. 98-1
will not have a material impact on our financial position or results of
operations. We adopted SOP No. 98-1 effective January 1, 1999.

      In April 1998, the AICPA issued SOP No. 98-5, Reporting on the Costs of
Start-Up Activities. SOP No. 98-5 requires that all start up costs related to
new operations must be expensed as incurred. In addition, all start-up costs
that were capitalized in the past must be written off when SOP No. 98-5 is
adopted. We expect that the adoption of SOP No. 98-5 will not have a material
impact on our financial position or results of operations. We adopted SOP No.
98-5 effective January 1, 1999.

      In June 1998, the Financial Accounting Standards Board issued FAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. FAS No. 133
establishes methods for derivative financial instruments and hedging activities
related to those instruments, as well as other hedging

                                       29
<PAGE>   30

activities. Because we do not currently hold any derivative instruments and do
not engage in hedging activities, we expect that the adoption of FAS No. 133
will not have a material impact on our financial position or results of
operations.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET INTEREST RATE SENSITIVITY

      The primary objective of our investment activities is to preserve
principal while at the same time maximizing the income we receive from our
investments without significantly increasing risk. Some of the securities that
we have invested in may be subject to market risk. This means that a change in
prevailing interest rates may cause the principal amount of the investment to
fluctuate. For example, if we hold a security that was issued with a fixed
interest rate at the then-prevailing rate and the prevailing interest rate later
rises, the principal amount of our investment will probably decline. To minimize
this risk, we maintain our portfolio of cash equivalents and short and long term
investments in a variety of securities, including money market funds, government
and non-government debt securities, commercial paper and municipal bonds. In
general, money market funds are not subject to market risk because the interest
paid on such funds fluctuates with the prevailing interest rate. In addition, we
invest in relatively short-term securities. As of December 31, 1998, all of our
investments mature in less than one year. See Note 2 to the Consolidated
Financial Statements.

     The following table presents the amounts of cash equivalents and
investments that are subject to market risk by range of expected maturity and
weighted average interest rates as of June 30, 1999 and December 31, 1998. This
table does not include money market funds because those funds are not subject to
market risk.

<TABLE>
<CAPTION>
                                                             MATURING BETWEEN
                                           MATURING IN       THREE MONTHS AND
                                           THREE MONTHS       SIXTEEN MONTHS        TOTAL
                                           ------------      ----------------      -------
                                                    (DOLLAR AMOUNTS IN THOUSANDS)
<S>                                        <C>               <C>                   <C>
AT JUNE 30, 1999
Cash equivalents.........................    $ 6,570             $    --           $ 6,570
Weighted average interest rate...........       5.23%                 --%             5.23%
Investments..............................    $ 8,531             $14,342           $22,873
Weighted average interest rate...........       5.03%               5.62%             5.40%
          Total portfolio................    $15,101             $14,342           $29,443
Weighted average interest rate...........       5.12%               5.62%             5.36%
</TABLE>

<TABLE>
<CAPTION>
                                                             MATURING BETWEEN
                                           MATURING IN       THREE MONTHS AND
                                           THREE MONTHS          ONE YEAR           TOTAL
                                           ------------      ----------------      -------
                                                    (DOLLAR AMOUNTS IN THOUSANDS)
<S>                                        <C>               <C>                   <C>
AT DECEMBER 31, 1998
Cash equivalents.........................    $16,520             $    --           $16,520
Weighted average interest rate...........       5.33%                 --%             5.33%
</TABLE>

                           EXCHANGE RATE SENSITIVITY

     We operate primarily in the United States, and all sales to date have been
made in US dollars. Accordingly, we have had no material exposure to foreign
currency rate fluctuations.

                                       30
<PAGE>   31

                                    BUSINESS

                                    OVERVIEW

      We are a leading provider of Internet infrastructure solutions that enable
Internet service providers and other telecommunications service providers, to
meet the demands resulting from the rapid growth of the Internet. We deliver
next generation Internet backbone routers that are specifically designed, or
purpose-built, for service provider networks and offer our customers increased
reliability, performance, scalability, interoperability and flexibility, and
reduced complexity and cost compared to current alternatives. Our flagship
product is the M40 Internet backbone router. The M40 combines the features of
our JUNOS Internet Software, high performance ASIC-based packet forwarding
technology and Internet-optimized architecture into a purpose-built solution for
service providers. Unlike conventional routers, which were originally developed
for enterprise applications and are increasingly inadequate for service provider
use in public networks, our Internet backbone routers are specifically designed
to accommodate the size and scope of the Internet.

      We believe that the Internet will continue to grow at significant rates
and will evolve into the next generation public network, superseding and
expanding upon many of the functions provided by the traditional telephone
network. This trend will drive the need for new Internet infrastructure
equipment that can deliver the high levels of reliability and scalability needed
in a public network. We believe we have developed the first commercially
available Internet backbone routing platform specifically designed and built to
meet these requirements. Ryan Hankin Kent, an industry research firm, estimates
that the market for Internet backbone routers was $169 million in 1998 and
expects that market to increase to approximately $5.5 billion in 2003.

      We sell our Internet backbone routers primarily through our direct sales
force, value-added resellers, an original equipment manufacturer and other
country specific distributors. Our M40 Internet backbone router is currently
used by several of the world's leading service providers, including
UUNet/MCIWorldCom, Cable & Wireless, AT&T/IBM Global Services, Frontier
GlobalCenter and Verio.

                              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 is growing
exponentially, 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.
International Data Corporation, an industry research firm, forecasts continued
dramatic growth worldwide in the Internet and Internet traffic:

- - World Wide Web users will grow from approximately 142 million in 1998 to
  approximately 399 million in 2002;

- - the number of computers and other devices accessing the World Wide Web will
  grow from approximately 89 million in 1997 to approximately 537 million by
  2002; and

- - commerce revenues on the Internet will grow from approximately $50 billion at
  the end of 1998 to approximately $734 billion by the end of 2002.

      The importance of IP continues to increase as the number of users,
connected devices and transactions over the Internet grows. This growth
highlights the potential for the Internet to replace the traditional telephone
network and the pervasive public network.

      The rapid adoption of the Internet and the tremendous growth of IP traffic
have prompted service providers to construct large

                                       31
<PAGE>   32

scale data networks. These 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 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, a
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. Primary packet/cell switching products include
frame relay switches, 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.
Currently available DWDM technology enables the transmission of up to 128
frequencies which allows a service provider to multiply the transmission
capacity of a fiber optic network by a factor of up to 128.

      PACKET/CELL TECHNOLOGIES HAVE NOT KEPT UP WITH OPTICAL TECHNOLOGIES. Many
service providers are installing DWDM equipment and are increasingly focusing on
combining IP and optical networking technologies. However, traditional packet
switching equipment is not capable of forwarding packets at rates sufficient to
keep pace with optical transmission speeds. As affordable fiber optic
transmission capacity becomes widely available, the performance and complexity
of current packet/cell switching architectures is increasingly constraining the
growth of the Internet.

      The intersection of traditional packet/cell switching and fiber optic
technology is demonstrated by the following diagram:

[DIAGRAM]

THE NEW REQUIREMENTS OF THE INTERNET

      The reliability and performance of current Internet infrastructure
equipment have become critical issues for service providers as they continue to
support dramatic growth in IP traffic and increasingly seek to offer new revenue
generating, mission-critical services,

                                       32
<PAGE>   33

such as Virtual Private Networks, or VPNs, and voice-over IP. New requirements
for next generation networks are driving a set of new requirements for Internet
infrastructure equipment, including:

- - high reliability;

- - high performance;

- - high performance under stressful conditions;

- - scalability;

- - interoperability;

- - reduced complexity; and

- - cost effectiveness.

      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 interface speeds as
high as 2.5 billion bits of information per second (Gbps), and in the near
future, 10 Gbps. 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. Routers
based on general-purpose microprocessors traditionally are unable to forward
small packets at maximum rates, and, as a consequence, fail to operate at wire
speed, which results in data loss, packet retransmission and network
instability. A wire speed router, which achieves its specified transmission rate
for any type of traffic passing through it, can accomplish this task. Unlike the
enterprise environment, where network capacity is relatively inexpensive and
service quality requirements are not as demanding, the additional capacity and
related costs of network bandwidth and low service levels resulting from
retransmission of dropped packets are increasingly unacceptable to service
providers. 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, 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 Internet users and 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, Internet infrastructure equipment
                                       33
<PAGE>   34

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. Major service providers connect their respective networks via peering
arrangements, in which service providers agree to exchange traffic with one
another. These arrangements are prone to abuse, such as the illicit use by one
service provider of another service provider's backbone to carry excess traffic.
Service provider relationships are controlled by a set of rules called policies,
implemented through a data protocol called Border Gateway Protocol 4, or BGP4.
The software in each router must offer 100% compatibility with all aspects of
BGP4, as well as 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.

      REDUCED COMPLEXITY. Today's Internet architectures are highly complex.
Since traditional routers have not fully met service providers' needs, many
service providers have tried to improve Internet backbone performance by adding
additional network devices such as ATM switches in the core of the network. As a
result, service providers have built networks with ATM switches surrounded by an
overlay network of lower capacity routers. These different layers of equipment
lead to higher capital costs and the need to manage distinct network elements.
ATM switches are also poorly suited to carrying IP traffic, which results in
inefficient use of network bandwidth. Moreover, this network design can cause
unpredictable router behavior during periods of stress because the routers are
not aware of the ATM backbone infrastructure and thus cannot quickly converge if
there is a partial network outage.

                                       34
<PAGE>   35

     This type of layered backbone network with a complex patchwork of products
based on different technologies is represented below:

                                   [DIAGRAM]

      COST EFFECTIVENESS. Exponential growth in IP traffic and intense price
competition in the telecommunications market is increasingly requiring 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. Currently, service providers are moving from OC-3 (155 million bits per
second, or Mbps) and OC-12 (622 Mbps) speed networks at the core to higher
capacity OC-12 and OC-48 (2.5 gigabits per second, or Gbps) speed networks. In
turn, the connections from each PoP to the core are evolving from 100 Mbps and
OC-3 speeds to gigabit and OC-12 transmission rates. 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 and complexity of their architectures.

                         THE JUNIPER NETWORKS SOLUTION

      We develop, market and sell what we believe is the first commercially
available purpose-built Internet backbone router optimized for the specific high
performance needs of service providers. Our flagship product, the M40 Internet
backbone router, combines the features of our JUNOS Internet Software,
high-performance ASIC-based packet forwarding technology and Internet-optimized
architecture.

                                       35
<PAGE>   36

      JUNOS INTERNET SOFTWARE. Our Internet software, called JUNOS, is one of
our key competitive differentiators. JUNOS is designed to meet the IP network
routing, operations and control requirements of the world's largest service
providers and is an integral component of the M40 system architecture. The
ability of JUNOS to manage the complex network sharing relationships among
service providers allows the M40 to be placed at critical points in the core of
a service provider's network. The JUNOS Internet Software allows the M40 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. The ability to coexist has enabled the M40 to achieve
successful deployment where other products in the past have failed.

      Unconstrained by legacy routing software, we developed JUNOS using a
modular design, in which distinct functions are implemented as separate modules
with well defined interfaces and interactions, simplifying troubleshooting and
maintenance. JUNOS operates in protected memory mode. 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
JUNOS' software modularity will enable the continuous upgrade of new enhanced
capabilities, while protecting reliability and compatibility with existing
networks. The design and development of the JUNOS Internet Software has been
possible due to the significant Internet engineering expertise of our
development team. Our expert engineers have authored or co-authored 22 Requests
for Comments, which are documents by industry experts that define major
standards for Internet protocols.

      HIGH PERFORMANCE ASIC-BASED PACKET FORWARDING TECHNOLOGY. The M40 Internet
backbone router contains five major integrated circuits that we designed and
built using the most advanced ASIC technology. These ASICs contain over five
million gates in total, with three of the designs each having a larger number of
transistors than the Intel Pentium II microprocessor. The result is a system
that is substantially faster than today's general purpose microprocessor based
routers in its ability to process and forward IP packets, allowing the M40 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. We expect to leverage our existing ASIC technology in future products
and continue to capitalize on our advanced ASIC design capabilities.

      INTERNET OPTIMIZED ARCHITECTURE. As a purpose-built Internet backbone
router, the M40 employs an architecture designed exclusively for the Internet.
The M40 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 JUNOS Internet Software and wire speed packet
forwarding performance through high performance ASICs. Furthermore, with the
routing and forwarding functions segregated, the M40 does not sacrifice
performance, even when there is a failure in the network. When a failure occurs,
JUNOS detects the failure and is able to quickly converge to the new state of
the network while the ASICs continue to forward packets at wire speed until they
receive updated routes from JUNOS.

      The key benefits of our solution are:

- - carrier class reliability;

- - wire speed performance;

- - scalability;

- - interoperability;

- - flexibility;

- - reduced complexity; and

- - cost effectiveness.

      CARRIER CLASS RELIABILITY. The M40's system architecture provides reliable
operation for service providers in large

                                       36
<PAGE>   37

complex networks even under abnormal conditions. This architecture, combined
with JUNOS' modular software design, limits the impact of a failure to the
specific software application. In addition, the hardware used in the M40 has
been designed with a very high level of integration to maximize the mean time
between failure. Moreover, data and instructions have appropriate error
correction and parity checks in memory to guarantee their integrity.

      WIRE SPEED PERFORMANCE. We believe the M40 is the first Internet backbone
router that can forward minimum-sized IP packets over OC-48 links at wire speed.
This maximizes network stability and the capacity utilization of expensive wide
area circuits. In contrast to available solutions, the M40 is able to maintain
packet forwarding rates and to avoid dropping significant numbers of packets
when active routes are lost or when large numbers of routes change.

      SCALABILITY. Our JUNOS Internet Software is designed to accommodate
service providers' scale requirements. In addition, the ASIC interface links
have been oversized, enabling the M40 to easily scale with growing levels of
data traffic. We believe our software and ASIC designs represent a competitive
advantage, because it is very difficult for existing vendors to graft these
capabilities to their prior generation designs.

      INTEROPERABILITY. The M40 has demonstrated consistent interoperability
with existing network infrastructures. Our internal test environments confirm
interoperability with Cisco routers, a variety of leading ATM and Gigabit
Ethernet switches and SONET add drop multiplexers. Deployment of the M40 at
several major carriers has demonstrated that JUNOS is interoperable with
installed Cisco routers for both routing and administration. In addition, JUNOS
enables service providers to manage their complex peering relationships with
other service providers despite frequent software, equipment configuration and
network architecture changes.

      FLEXIBILITY. Our ASICs are programmable and provide the flexibility to add
support for new protocols or changes in existing protocols. Since JUNOS is
modular in architecture and already supports existing and emerging protocols, it
is also a platform for efficiently introducing new interfaces and new services
in the network.

      REDUCED COMPLEXITY. The M40 is purpose-built for service providers and
allows a simple and more structured approach to building Internet backbones
compared to the complex topologies in place today. With the M40, service
providers can build more efficient networks with less dependence on devices like
ATM switches, which reduce the operational burdens of running multiple distinct
network layers.

                                       37
<PAGE>   38

      Additionally, the M40 offers a thorough implementation of traffic
engineering based on MPLS, including the ability to dynamically adapt traffic
flows according to rules adopted by the network operator. Traffic engineering
refers to a set of capabilities for understanding underlying traffic trends in
the network and maximizing the utilization of the network on multiple
dimensions.

                                   [DIAGRAM]

      COST EFFECTIVENESS. We have integrated these customer benefits into a
system that provides critical routing and forwarding functions at lower overall
cost. The M40's wire speed performance allows service providers to reduce
network operating cost by making more efficient use of their networks. In
addition, we designed the M40 to support a broad variety and density of
interfaces in a unit that occupies half a typical telecommunications rack. As a
result, service providers can cost effectively deploy the M40, which can be
easily upgraded, to connect to a variety of speed and circuit types at the
network core.

                         THE JUNIPER NETWORKS STRATEGY

      Our objective is to become the primary supplier of high performance
Internet backbone infrastructure. The key elements of our strategy include:

- - leverage early lead as supplier of purpose-built Internet infrastructure;

- - work very closely with key customers;

- - increase penetration at major service providers;

- - leverage early success to penetrate new customers rapidly;

- - expand sales and distribution network;

- - maintain and extend technology leadership; and

- - enable new IP-based services.

      LEVERAGE EARLY LEAD AS SUPPLIER OF PURPOSE-BUILT INTERNET
INFRASTRUCTURE. From inception we have focused solely on designing and building
Internet infrastructure

                                       38
<PAGE>   39

for service providers. We have integrated purpose-built software and hardware
into an Internet optimized architecture that specifically meets service
providers' needs and have seen significantly positive initial responses from our
existing and potential customers. We believe that many of these customers will
deploy Internet backbone infrastructure equipment from only a few vendors. The
purpose-built advantages of the M40 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 Internet backbone 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 the M40 and JUNOS
Internet Software, we worked very closely with customers to design and build a
product specifically to meet their complex needs. Since JUNOS has been available
and used by our customers for over a year, we understand clearly 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 has
been 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. While we have received initial orders
from major service providers, such as UUNet/MCI WorldCom, Cable & Wireless,
AT&T/IBM Global Services, Frontier GlobalCenter and Verio, we believe that there
is a significant opportunity to further penetrate these large and complex
networks given the advantages of the M40. As the growth of the Internet requires
these service providers to continue to build their networks and replace outdated
equipment, we will pursue further opportunities to capture greater market share
within these large accounts.

      LEVERAGE EARLY SUCCESSES TO PENETRATE NEW CUSTOMERS RAPIDLY. We believe
that the Internet infrastructure equipment buying patterns of the medium and
smaller-sized service providers typically lag behind those of the larger service
providers. Since the network challenges that the large service providers face
today are likely to be the problems encountered by smaller service providers in
the near future, we believe smaller service providers are likely to deploy
equipment similar to larger service providers. Furthermore, smaller service
providers often lack the technical resources to thoroughly test different
vendors' products. Therefore, they typically piggyback on larger service
providers' evaluation efforts by purchasing the same platforms deployed by the
larger service providers. Since we have begun to sell to several of the largest
service providers, we intend to leverage this success by allocating our
marketing efforts towards a greater number of medium and smaller-sized service
providers.

      EXPAND SALES AND DISTRIBUTION NETWORK. In order to pursue the large number
of potential customers for our Internet infrastructure solutions, we plan to
aggressively add to our sales and distribution capabilities. We are adding to
our direct sales and support capabilities for our major customers in North
America and adding value-added resellers, system integrators and distributors to
sell to and support our other domestic and international customers. In addition
to our strategic original equipment

                                       39
<PAGE>   40

manufacturer relationship with Ericsson, we
are adding distribution partners on a country specific basis. In the quarter
ended June 30, 1999, we added 21 people to the sales organization and announced
the opening of both a European and Japanese office.

      MAINTAIN AND EXTEND TECHNOLOGY LEADERSHIP. Our Internet software, ASIC
technology and Internet-optimized architecture have been key elements to
establishing our technology leadership. We believe that these elements are
highly leverageable into future products we are currently building. We intend to
maintain and extend our technological leadership in the Internet infrastructure
market through continued significant investment in JUNOS Internet Software and
ASIC designs to enhance the feature richness of the M40 and to develop future
differentiated offerings for service providers.

      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. While we believe
that current service providers are likely to be the largest and most successful
IP network operators in the near term, many new service providers are likely to
emerge oriented around the delivery of IP-based services. These services, which
include web hosting, outsourced Internet and intranet services, VPNs, outsourced
enterprise applications and voice-over IP, are cost-effectively enabled by our
Internet infrastructure platform. Although the market for our products today is
driven primarily by the need for traditional Internet network capacity, as other
IP-based services and applications continue to grow in importance, the total
potential market for our products will continue to grow commensurately.

                                   TECHNOLOGY

      Our core technology consists of our Internet backbone router architecture,
JUNOS Internet Software and ASIC hardware expertise. Our general-purpose
architecture is initially embodied in the M40, but also is designed to serve as
the platform for future generations of products.

M40 ARCHITECTURE

      The following diagram illustrates the architecture of the M40 Internet
backbone router:

                                   [DIAGRAM]

      The M40 architecture delivers the forwarding rates and network control
necessary to scale Internet backbones rapidly and reliably. The M40 system
includes a Routing Engine, or RE, and a Packet Forwarding Engine, or PFE. The
clean separation of the routing and forwarding functions ensures that the two
functions do not compete for the same resources.

      THE ROUTING ENGINE. The RE consists of the JUNOS Internet Software
operating on an Intel-based platform. The JUNOS Internet

                                       40
<PAGE>   41

Software features Internet-scale protocol support, with flexible policy software
that enables maximum control over the acceptance, modification and advertisement
of route prefixes. In addition, the JUNOS Internet Software offers a range of
configuration management tools that simplify the configuration process and help
protect against operator error. The RE conducts the processing intensive
activity of maintaining the routing table, from which the forwarding table
residing in the PFE is derived. The RE is connected to the PFE through a
dedicated 100 Mbps link. After constructing or updating the forwarding table,
the RE downloads a copy of the table to the PFE. Updates to the forwarding table
are done atomically in small incremental steps so that packet forwarding is not
interrupted by routing changes.

      THE PACKET FORWARDING ENGINE. The M40 delivers wire speed packet
forwarding using our ASIC designs. All links between ASICs are oversized,
dedicated channels, and the PFE architecture is free from the bottlenecks faced
by traditional crossbar switches, which use intelligent agent software to
perform both routing and forwarding functions over multiple connections to
either parts of the network. Bottlenecks can occur in a crossbar switch because
the routing and forwarding functions are not separated. The heart of the PFE is
the Internet Processor ASIC. With over one million gates and a lookup rate of
over 40 million packets per second, or Mpps, the Internet Processor represents
the largest and fastest route lookup ASIC currently available, capable of
processing data at throughput rates in excess of 40 Gbps.

      All lookup rates reflect longest-match route table lookups for all packets
and all lookups are performed in hardware. There is no caching mechanism, which
is a mechanism by which critical information, such as destinations for traffic,
is stored in rapidly accessible memory to make the process of looking up traffic
destinations faster. In addition there is no risk of cache misses in the system
which can result in slower storage access and thus considerably slower traffic
delivery. In addition, the forwarding table can be updated without affecting
forwarding rates. The Internet Processor is programmable to support up to four
different forwarding tables (layer 2 and/or layer 3) simultaneously. Supported
forwarding protocols currently include unicast and multicast IPv4 and MPLS.
Finally, the Internet Processor maintains its performance regardless of length
of lookups or table size.

      The PFE also features a shared memory system with single-stage buffering,
so packets are written to and read from memory only once. Single-stage buffering
greatly reduces the complexities and throughput delays associated with
multistage buffering systems. The pooled memory is distributed across the
Flexible PIC Concentrator, or FPC, cards, allowing memory to scale as interfaces
are added. The Internet Processor also features prefix accounting mechanisms
that operate at rates in excess of 20 Mpps.

JUNOS INTERNET SOFTWARE: TRAFFIC ENGINEERING AND CONTROL

      JUNOS Internet Software offers a full suite of Internet-scale,
Internet-tested routing protocols. Protocols and software tools, which are used
to control and direct network traffic, are critical to an Internet backbone
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.

      JUNOS Internet Software features implementations of all major Internet
protocols, including BGP4, DVMRP, PIM, IS-IS, Open Shortest Path First. IS-IS
and Open Shortest Path First are algorithms broadly used in enterprise networks
and by service providers to determine and update the running state of the
network and available destinations in the network. These implementations were
developed in-house by our design team which has extensive experience in
addressing the scaling issues of rapidly growing service providers.

      JUNOS Internet Software also provides a new level of traffic engineering
capabilities

                                       41
<PAGE>   42

with its implementation of MPLS. Developed
in conjunction with the Internet Engineering Task Force, our MPLS capability
offers enhanced visibility into traffic patterns and the ability to control the
path traffic takes through the network. Path selection enables service providers
to engineer traffic for efficient use of network capacity and avoidance of
congestion. We expect MPLS and its traffic engineering capabilities to become a
crucial tool for service providers as they scale their networks.

      JUNOS Internet Software features a modular design, with separate programs
running in protected memory space in conjunction with an independent operating
system. Unlike monolithic, unprotected operating system designs, which are prone
to system wide failure, the protected, modular approach improves reliability by
ensuring that modifications made to one module have no unwanted side-effects on
other sections of the software. In addition, having clean software interfaces
between modules facilitates software development and maintenance, enabling
faster response to customer needs and delivery of new features.

      JUNOS Internet Software has been extensively tested in multiple service
provider networks to ensure compatibility with Cisco's IOS. Since each major
service provider's network is different, this extensive testing is necessary to
ensure seamless introduction into existing service provider environments.

                                    PRODUCTS

M40 INTERNET BACKBONE ROUTER

      The M40 Internet backbone router is specifically designed for the
specialized needs of service providers. The M40 features leading-edge
packet-forwarding performance, very high port density and flexibility, and
purpose-built Internet software. The M40 delivers higher speed performance for
service providers than current alternatives. The M40 helps solve the critical
problem of managing backbone networks by ensuring greater control over traffic
and better use of network capacity and by providing service providers with the
necessary traffic engineering tools, such as MPLS.

                                   [DIAGRAM]

FEATURES OF THE M40 INTERNET BACKBONE ROUTER

      PORT DENSITY PER RACK-INCH. Our M40 Internet backbone router offers very
high port density per rack-inch, ensuring optimal use of valuable and scarce PoP
rack space. Because the forwarding engine is oversized, all interfaces perform
at wire speed for all packet sizes.

      The M40 router features a highly flexible combination of backbone
interface speeds on the market today. In a 35-inch chassis, the M40 router
provides 8 OC-48/STM-16, 32 OC-12/STM-4, 128 OC-3/STM-1 or 128 DS3 interfaces.
M40 interfaces are located on Physical Interface Cards, or PICs, which plug into
FPC boards. There are eight FPC slots on the M40 and each FPC slot supports up
to four PICs and an aggregate throughput rate of more than 2.5 Gbps. In addition
to supporting wire speed OC-48 interfaces, each FPC supports various
combinations of interfaces, permitting the

                                       42
<PAGE>   43

mixing of interface types and speeds on a single FPC. Supported PIC interfaces
include:

- - 1-port OC-48/STM-16 SONET/SDH;

- - 1-port OC-12/STM-4 SONET/SDH;

- - 1-port OC-12/STM-4 ATM;

- - 4-port OC-3/STM-1 SONET/SDH;

- - 2-port OC-3/STM-1 ATM;

- - 4-port DS3; and

- - 1-port Gigabit Ethernet.

      The PIC interface cards are sold both as part of the initial product
configuration and also, subsequently, as add-on items. Interfaces are typically
added as the customer's network expands or the capacity of individual links is
upgraded.

      CLASS-OF-SERVICE FLEXIBILITY. The M40 router is designed for a variety of
class-of-service applications. The M40's queuing mechanism is based on a
weighted round-robin selection among multiple queues on outgoing interfaces.
Queues can be configured with drop profiles to control the rate of packet drops
based on utilization of buffer capacity.

      LOW POWER CONSUMPTION. As provider PoPs have grown and become more fully
populated with systems, power consumption has become a significant concern.
Access to sufficient power can be a constraint on the ability of a facility to
support a larger network. Because of its low part count and efficient design,
our M40 Internet backbone router draws less than 1700 watts of power (35A at
48V) in a fully loaded configuration, enabling it to offer very high performance
and port density per watt.

      ENGINEERED FOR STRESSFUL CONDITIONS. The M40 architecture is designed to
reliably handle stressful network conditions. For example, the route lookup
capacity of our Internet Processor has been oversized with respect to interface
speeds. In addition, the separation of routing and processing enables the M40 to
converge quickly while maintaining wire speed.

      BUILT FOR RELIABILITY. In addition to preserving network reliability, the
M40 router is designed to ensure system reliability. The M40's cooling system is
fully redundant to protect against individual fan failure. Similarly, the M40's
dual power supplies are fully redundant, each capable of supporting the full
power load of the system. The M40 can boot off of any one of multiple redundant
storage media, ensuring that the system remains operational in the event of a
disk failure. For software reliability, JUNOS Internet Software features a
protected, modular design with separate processes running in protected memory
space on top of an independent operating system. A modular design protects
against system wide failures, ensuring that modifications made to one module
have no unwanted side-effects on other portions of the code base. Finally, a low
component count and an efficient design combine to give the M40 system superior
reliability.

      The M40 base price list ranges between $45,000 and $52,000. PIC module
prices begin at $18,000.

                                       43
<PAGE>   44

                                   CUSTOMERS

     The following is a list of our customers that as of June 30, 1999 have
ordered at least $100,000 of products:

                                 BACKBONE ISP:
                                AT&T Corporation
                             Cable & Wireless, Inc.
                             Frontier GlobalCenter
                           GST Network Funding, Inc.
                            AT&T/IBM Global Services
                                   MIBH, Inc.
                                     Sprint
                               TCG CERFnet, Inc.
                                     UUNet
                                   Verio Inc.
                             CONTENT SITE/HOSTING:
                         AboveNet Communications, Inc.
                              Conxion Corporation
                          Exodus Communications, Inc.
                                MULTISERVICE IP:
                                   ICI/Digex
                                  PSINet, Inc.
                    QWEST Communications International Inc.
                             EDUCATION/GOVERNMENT:
                               MCI WorldCom-vBNS
                       University of Southern California
                            University of Washington
                          INTERNATIONAL (ASIA/EUROPE):
                                    Ericsson
                                   K-Net Ltd.
                         Nissho Electronics Corporation
                                OKI Electronics
                             Samsung America, Inc.
                          NTT PC Communications, Inc.

      We recognize revenue from the shipment of products at the time of shipment
unless we have future obligations for installation or if we have to obtain
customer acceptance. In those cases, we defer recognition of the revenue until
we have met our obligations.

      For the six months ended June 30, 1999, we recognized revenue from
shipments to 11 customers. Two customers, UUNet/ MCIWorldCom and Cable &
Wireless, Inc., accounted for approximately 62% of our net revenues for the six
months ended June 30, 1999.

                              SALES AND MARKETING

      We sell and market our products primarily through our direct sales
organization, value-added resellers, an original equipment manufacturer and
country specific distributors.

      DIRECT SALES. Our North American direct sales organization is divided into
Western and Eastern regional operations. Our direct sales efforts are 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 Director 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.

                                       44
<PAGE>   45

      ORIGINAL EQUIPMENT MANUFACTURER PARTNER. We have established a strategic
distribution relationship with Ericsson. We believe that Ericsson has
significant customer relationships in place and offers products which complement
ours. Ericsson will provide the first level of support to its customers. Our
agreement with Ericsson allows it to distribute our products on a worldwide,
non-exclusive basis with discounts based upon the volume of orders it receives.

      INTERNATIONAL DISTRIBUTORS. In order to further our international sales
objectives, we are establishing a number of country specific distributors. These
distributors have expertise in deploying complex Internet infrastructure
equipment in their respective markets and provide the first level of support
required by our international customers.

      As of June 30, 1999, we employed 59 people in our sales support and
marketing organizations.

                          CUSTOMER SERVICE AND SUPPORT

      We believe that a broad range of support services is essential to the
successful installation and ongoing support of the M40. We have hired support
engineers with proven Internet experience. 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 two-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, dumps,
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 resource 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 June 30, 1999, we employed 24 people in our customer service and
support organization, with the majority located in our Mountain View, California
corporate headquarters.

                            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 Internet software.

      Our research and development department is organized into teams that work
in parallel on several projects in a way similar to the development of
successive generations of complex microprocessors. As a result, we will seek to
offer our customers next generation products as they are needed.

      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

                                       45
<PAGE>   46

the competitiveness of our product and service offerings. We are leveraging our
first 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 JUNOS Internet 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 June 30, 1999, we employed 136 people in our research and
development organization.

      Our research and development expenses totaled $14.2 million for the six
months ended June 30, 1999, $24.0 million for the year ended December 31, 1998,
$9.4 million for the year ended December 31, 1997 and $1.9 million for the
period from February 2, 1996, the date of our inception, to December 31, 1996.

                                 MANUFACTURING

      Our manufacturing operation is entirely outsourced. We have developed a
strategic relationship with Solectron, 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, 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. This arrangement provides us with the following benefits:

- - we operate without dedicating any space to manufacturing operations;

- - we conserve the working capital that would be required for funding inventory;

- - we can adjust manufacturing volumes quickly to meet changes in demand; and

- - we can quickly deliver products to customers through Solectron's turnkey
  manufacturing and drop shipment capabilities.

      Our ASICs are manufactured by IBM using its 0.25 micron process. IBM is
responsible for all aspects of the production of the ASICs using our proprietary
designs.

                                  COMPETITION

      Competition in the Internet infrastructure market is intense. The market
historically has been dominated by Cisco Systems, Inc., with other companies
such as Bay Networks, Inc. (now Nortel Networks Corporation) and Ascend
Communications, Inc. (which has been acquired by Lucent Technologies Inc.)
providing products to a smaller segment of the market. In addition, a number of
private companies have announced plans for new products to address the same
problems which 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 the Internet has grown rapidly, Cisco has leveraged
this position and has developed a broad product line of routers which 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
                                       46
<PAGE>   47

Internet 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 the M40 Internet backbone router. 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 private companies which claim to have products
with greater capabilities than the M40. Consolidation in this industry has
begun, with one or more of these smaller private companies being acquired by
large, established suppliers of Internet 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 which can substitute for some
uses of routers. For example, high bandwidth asynchronous transfer mode, or 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 multi-protocol label switching,
or 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.

                             INTELLECTUAL PROPERTY

      Our success and ability to compete are substantially dependent upon our
internally developed technology and know how. We have two patents issued
relating to high speed switching devices. These patents will expire on April 18,
2017 and December 16, 2016, respectively. In addition we have five patent
applications pending in the United States relating to the design of the M40 and
our future products. 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
the M40. Our JUNOS Internet 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. We cannot be
certain that we will be able to obtain the necessary intellectual property
rights or that other parties will not contest our intellectual property rights.

                                       47
<PAGE>   48

                               LEGAL PROCEEDINGS

      We are not subject to any material legal proceedings.

                                   EMPLOYEES

      As of June 30, 1999, we had 265 full-time employees, 136 of whom were
engaged in research and development, 59 in sales and marketing, 24 in customer
support and 46 in finance, administration and operations. None of our employees
is 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
whom 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.

                                   FACILITIES

      We sublease approximately 60,000 square feet in two buildings located in
Mountain View, California. Approximately 33,000 square feet are subleased
pursuant to a sublease that expires December 31, 2001, and approximately 27,000
square feet are subleased pursuant to a sublease that expires June 30, 2000. We
believe that by the end of 1999, we will need additional space to accommodate
our growth. To provide this necessary additional space, we have entered into
leases for approximately 144,000 and 25,000 square feet of office space in
Sunnyvale, California. The lease on the office space for 144,000 square feet
will commence on the later of May 1, 2000 or the completion of our improvements
on the premises, and it will expire on the later of May 1, 2012 or twelve years
after the completion of our improvements on the premises. The lease on the
office space for 25,000 square feet will commence on October 1, 1999, and it
will expire two months after the later of May 1, 2000 or the completion of our
improvements on the 144,000 square foot facility. The commercial real estate
market in the San Francisco Bay area is volatile and unpredictable in terms of
available space, rental fees, occupancy rates and preferred locations. We can
not be certain that additional space will be available when we require it, or
that it will be affordable or in a preferred location.

                                       48
<PAGE>   49

                                   MANAGEMENT

                        EXECUTIVE OFFICERS AND DIRECTORS

     Our executive officers and directors and their ages, as of August 31, 1999,
are as follows:

<TABLE>
<CAPTION>
            NAME              AGE                             POSITION
            ----              ----                            --------
<S>                           <C>    <C>
Scott Kriens................   42    President, Chief Executive Officer and Chairman of the
                                     Board
Pradeep Sindhu..............   46    Chief Technical Officer and Vice Chairman of the Board
Joe Furgerson...............   40    Vice President of Marketing
Marcel Gani.................   46    Chief Financial Officer
Steven Haley................   44    Vice President of Worldwide Sales and Service
Gary Heidenreich............   50    Vice President of Operations
Peter L. Wexler.............   43    Vice President of Engineering
William R. Hearst III(1)....   49    Director
Vinod Khosla(2).............   44    Director
C. Richard Kramlich(1)......   64    Director
William Stensrud(2).........   49    Director
</TABLE>

- ---------------

(1) Member of audit committee

(2) Member of compensation committee

      SCOTT 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 received a B.A. in Economics
from California State University, Hayward.

      PRADEEP 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 B.S.E.E. from the Indian Institute of Technology in Kanpur, an M.S.E.E.
from the University of Hawaii and a Masters in Computer Science and Ph.D. in
Computer Science from Carnegie-Mellon University.

      JOE FURGERSON joined Juniper Networks in January 1997. He served as our
Director of Marketing from January 1997 to September 1998 and has served as our
Vice President of Marketing since September 1998. From April 1994 to December
1996, Mr. Furgerson served as Director of Product Marketing, Network Systems
Division at 3Com Corporation, a data networking company. He holds a B.A. in
Economics from Claremont Men's College and an M.B.A. from the Stanford Graduate
School of Business.

      MARCEL 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.

                                       49
<PAGE>   50

      STEVEN HALEY joined Juniper Networks as Vice President of Worldwide Sales
and Service in August 1997. Prior to joining Juniper Networks, Mr. Haley served
as Vice President of Sales at Cisco Systems, Inc., a data networking company,
from July 1996 to August 1997. From February 1990 to July 1996, he worked for
StrataCom, Inc., serving in a variety of management roles from Managing
Director, Europe to Vice President of Sales, Americas. He holds a B.S. in
Marketing from the University of Massachusetts, Amherst.

      GARY HEIDENREICH joined Juniper Networks in July 1997 as Vice President of
Operations. From August 1993 to July 1997, Mr. Heidenreich served as Vice
President of Systems Manufacturing at 3Com Corporation. Mr. Heidenreich holds an
M.B.A. from the University of Dallas and a B.S.I.E. from New Mexico State
University.

      PETER L. WEXLER joined Juniper Networks as Vice President of Engineering
in January 1997. From April 1995 to January 1997, Mr. Wexler served as Vice
President of Engineering at Bay Networks, a data networking company. From April
1993 to April 1995, Mr. Wexler served as Director of High-End Platform
Development at Wellfleet Communications, a predecessor to Bay Networks and a
manufacturer of high-performance routers. He holds a B.S.E. from State
University of New York at Stony Brook, an M.S.E. from the University of Illinois
and an M.B.A. from Boston University.

      WILLIAM R. HEARST III has served as a Director of Juniper Networks since
February 1996 and has served as a member of the audit committee since July 1998.
Mr. Hearst is a partner with Kleiner Perkins Caufield & Byers, a venture capital
firm located in Menlo Park, California. From May 1995, until August 1996, he was
the Chief Executive Officer of @Home Network, 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 also serves on the boards of
Excite@Home, RePlay Networks, Com21, Inc., Oblix, Inc., Doublebill.com, Inc.,
Geocast, Network Systems Inc., the Hearst Corporation and Hearst-Argyle
Television. He is a Fellow of the AAAS, a Trustee of Carnegie Institution in
Washington DC, and a Trustee of the California Academy of Sciences. Mr. Hearst
is a 1972 graduate of Harvard University, holding an AB degree in Mathematics.

      VINOD KHOSLA has served as a Director of Juniper Networks since February
1996 and has served as a member of the compensation committee since July 1998.
Mr. Khosla has been a General Partner with the venture capital firm of Kleiner
Perkins Caufield & Byers from February 1986 to the present. 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
Asera, Cerent, Concentric Network Corporation, Corio Inc., Corvis Corporation,
Siara Systems and QWEST Communications International Inc., as well as several
other private companies. Mr. Khosla holds a B.S.E.E. from the Indian Institute
of Technology in New Delhi, an M.S.E. from Carnegie-Mellon University, and an
M.B.A. from the Stanford Graduate School of Business.

      C. RICHARD KRAMLICH has served as a Director of Juniper Networks since
July 1996 and has been a member of the audit committee since July 1998. 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 is a director of
Healtheon Corporation, Netsolve, Inc., Com 21, Inc., Lumisys, Inc., Silicon
Graphics, Inc. and Chalone Wine Group, Inc. Mr. Kramlich holds a B.S. from
Northwestern University and an M.B.A. from Harvard Business School.

      WILLIAM STENSRUD has served as a Director of Juniper Networks since
October 1996 and has served as a member of the compensation committee since July
1998. Mr. Stensrud has been a General Partner with the venture capital firm of
Enterprise Partners from January 1997 to the present. Mr. Stensrud was an
independent investor and turn-around executive from March 1996
                                       50
<PAGE>   51

to January 1997. During this period Mr. Stensrud served as President at 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
the acquisition through March 1996, Mr. Stensrud served as an executive at 3Com
Corporation. From 1986 to 1992, Mr. Stensrud served as the Marketing Vice
President of StrataCom, Inc., a telecommunications equipment company, which Mr.
Stensrud co-founded. Mr. Stensrud also serves on the boards of Rhythms
Corporation, Paradyne Corporation and Packeteer Corporation. He holds a B.S.
degree in Electrical Engineering and Computer Science from Massachusetts
Institute of Technology.

                               BOARD OF DIRECTORS

      Our board of directors currently consists of six authorized members. The
board is divided into three classes, Class I, Class II and Class III, with each
class serving staggered three-year terms. The Class I Directors, currently
Messrs. Kriens and Stensrud, will stand for re-election at the 2000 annual
meeting of stockholders. The Class II Directors, currently Messrs. Khosla and
Sindhu, will stand for re-election at the 2001 annual meeting of stockholders
and the Class III Directors, currently Messrs. Hearst and Kramlich, will stand
for re-election at the 2002 annual meeting of stockholders. This classification
of the board of directors may delay or prevent a change in control of our
company or in our management. See "Description of Capital Stock -- Delaware
Anti-Takeover Law and Certain Charter and Bylaw Provisions."

      Executive officers are appointed by the board of directors on an annual
basis and serve until their successors have been elected and qualified. There
are no family relationships among any of our directors, officers or key
employees.

BOARD COMMITTEES

      We established an audit committee and a compensation committee in July
1998. The audit committee consists of Messrs. Hearst and Kramlich. The audit
committee reviews our internal accounting procedures and consults with and
reviews the services provided by our independent accountants.

      The compensation committee consists of Messrs. Khosla and Stensrud. The
compensation committee reviews and recommends to the board of directors the
compensation of all of our officers and directors, including stock compensation
and loans and establishes and reviews general policies relating to the
compensation and benefits of our employees.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

      Prior to establishing the compensation committee, the board of directors
as a whole performed the functions delegated to the compensation committee. No
member of the board of directors or 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 our board of directors
or compensation committee.

DIRECTOR COMPENSATION

      We do not currently compensate in cash our directors for their service as
members of the board of directors, although they are reimbursed for certain
expenses in connection with attendance at board of director and compensation
committee meetings. Under our 1996 Stock Plan, nonemployee directors are
eligible to receive stock option grants at the discretion of the board of
directors or other administrator of the plan. For further information regarding
the provisions of the 1996 Stock Plan, see "-- Incentive Stock Plans."

                                       51
<PAGE>   52

LIMITATIONS ON DIRECTORS' LIABILITY AND INDEMNIFICATION

      Our certificate of incorporation limits the liability of directors to the
maximum extent permitted by Delaware law. Delaware law provides that directors
of a corporation will not be personally liable for monetary damages for breach
of their fiduciary duties as directors, except liability for:

- - any breach of their duty of loyalty to the corporation or its stockholders;

- - acts or omissions not in good faith or which involve intentional misconduct or
  a knowing violation of law;

- - unlawful payments of dividends or unlawful stock repurchases or redemptions;
  or

- - any transaction from which the director derived an improper personal benefit.

      The limitation of liability does not apply to liabilities arising under
the federal securities laws and does not affect the availability of equitable
remedies such as injunctive relief or rescission.

      Our certificate of incorporation and bylaws provide that we will indemnify
our directors and officers and may indemnify our employees and other agents to
the fullest extent permitted by law. We believe that indemnification under our
bylaws covers at least negligence and gross negligence on the part of
indemnified parties. Our bylaws also permit us to secure insurance on behalf of
any officer, director, employee or other agent for any liability arising out of
his or her actions in their capacity as an officer, director, employee or other
agent, regardless of whether the bylaws would permit indemnification.

      We have entered into agreements to indemnify our directors, executive
officers and certain other employees, in addition to the indemnification
provided for in our bylaws. These agreements, among other things, provide for
indemnification for judgments, fines, settlement amounts and certain expenses,
including attorneys' fees incurred by in any action or proceeding, including any
action by or in the right of Juniper Networks, arising out of the person's
services as a director, executive officer or employee of us, any of our
subsidiaries or any other company or enterprise to which the person provides
services at our request. We believe that these provisions and agreements are
necessary to attract and retain qualified persons for those positions.

      The limited liability and indemnification provisions in our certificate of
incorporation and bylaws may discourage stockholders from bringing a lawsuit
against our directors for breach of their fiduciary duty and may reduce the
likelihood of derivative litigation against our directors and officers, even
though a derivative action, if successful, might otherwise benefit us and our
stockholders. A stockholder's investment in us may be adversely affected to the
extent we pay the costs of settlement or damage awards under these
indemnification provisions.

      At present, there is no pending litigation or proceeding involving any of
our directors, officers or employees in which indemnification is sought, nor are
we aware of any threatened litigation that may result in claims for
indemnification.

                                       52
<PAGE>   53

                             EXECUTIVE COMPENSATION

      SUMMARY COMPENSATION TABLE. The following table sets forth the
compensation earned, awarded or paid for services rendered to us in all
capacities for the fiscal year ended December 31, 1998, by our Chief Executive
Officer and our four next most highly compensated executive officers who earned
more than $100,000 in salary and bonus during the fiscal year ended December 31,
1998, whom we refer to in this prospectus collectively as the "Named Executive
Officers":

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                             LONG-TERM
                                                           COMPENSATION
                                                              AWARDS
                                            ANNUAL         -------------
                                         COMPENSATION       SECURITIES
                                      ------------------    UNDERLYING        ALL OTHER
NAME AND PRINCIPAL POSITIONS   YEAR    SALARY     BONUS       OPTIONS      COMPENSATION(1)
- ----------------------------   ----   --------   -------   -------------   ---------------
<S>                            <C>    <C>        <C>       <C>             <C>
Scott Kriens.................  1998   $170,000   $    --       1,245           $1,200
  President and Chief          1997    170,000        --          --               --
  Executive Officer            1996     42,500        --          --               --

Steven Haley.................  1998    150,000    69,039      38,130            1,133
  Vice President of Worldwide  1997     62,109        --          --               --
  Sales and Service            1996         --        --          --               --

Pradeep Sindhu...............  1998    140,225    25,000       1,785            1,004
  Chief Technical Officer      1997    114,000        --          --               --
                               1996     57,000        --          --               --

Peter Wexler.................  1998    150,000        --       1,020            1,133
  Vice President of            1997    137,500        --          --               --
  Engineering                  1996         --        --          --               --

Marcel Gani..................  1998    150,000        --         915            1,133
  Chief Financial Officer      1997    131,250        --          --               --
                               1996         --        --          --               --
</TABLE>

- ---------------

(1) Consists of premiums paid by us for term life insurance.

                                       53
<PAGE>   54

      OPTION GRANTS IN LAST FISCAL YEAR. The following table shows certain
information regarding stock options granted to the Named Executive Officers
during the fiscal year ended December 31, 1998. All of these stock options were
granted under our 1996 Stock Plan and have a term of ten years, subject to
earlier termination in the event the optionees' services to us cease. See
"-- Incentive Stock Plan" for a description of material terms of these stock
options. See "Certain Transactions" for a description of the exercises of stock
options granted to the Named Executive Officers under the 1996 Stock Plan. In
accordance with the rules of the Securities and Exchange Commission, also shown
below is the potential realizable value over the term of the option (the period
from the grant date to the expiration date) based on assumed rates of stock
appreciation of 5% and 10%, compounded annually. These amounts are based on
certain assumed rates of appreciation and do not represent our estimate of our
future stock price. Actual gains, if any, on stock option exercises will be
dependent on the future performance of the common stock.

                       OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
                                                                                  POTENTIAL REALIZABLE
                                                                                    VALUE AT ASSUMED
                       NUMBER OF                                                 ANNUAL RATES OF STOCK
                       SECURITIES   PERCENT OF TOTAL                                APPRECIATION FOR
                       UNDERLYING   OPTIONS GRANTED    EXERCISE                      OPTION TERM(3)
                        OPTIONS       TO EMPLOYEES     PRICE PER   EXPIRATION   ------------------------
        NAME            GRANTED     DURING PERIOD(1)   SHARE(2)       DATE          5%           10%
        ----           ----------   ----------------   ---------   ----------   ----------   -----------
<S>                    <C>          <C>                <C>         <C>          <C>          <C>
Scott Kriens.........     1,245(4)       0.035%          $1.67      8/16/08     $  300,089   $   479,073
Steven Haley.........    37,500(5)       1.076            0.83      5/13/08      9,070,324    14,461,411
                            630(4)       0.018            1.67      8/16/08        151,852       242,423
Pradeep Sindhu.......     1,785(6)       0.051            1.67      8/16/08        430,248       686,864
Peter Wexler.........     1,020(6)       0.029            1.67      8/16/08        245,856       392,494
Marcel Gani..........       915(4)       0.026            1.67      8/16/08        220,547       352,090
</TABLE>

- ---------------
(1) Based on an aggregate of 3,512,480 options granted by us during the fiscal
    year ended December 31, 1998, to our employees, directors and consultants,
    including the Named Executive Officers.

(2) Options were granted at an exercise price equal to the fair market value of
    our common stock, as determined in good faith by our board of directors.

(3) The potential realizable value is calculated based on the ten year term of
    the option at its time of grant. It is calculated based on the assumption
    that the closing price of $149.00 for the common stock on of June 30, 1999
    appreciates at the indicated annual rate compounded annually for the entire
    term of the option and that the option is exercised and sold on the last day
    of its term for the appreciated stock price.

(4) As of June 30, 1999, each of the options for Messrs. Kriens, Haley and Gani
    listed in the table under this note had been exercised, but the shares
    purchased are subject to repurchase by us at the original exercise price
    upon the optionee's cessation of services prior to vesting of the shares,
    which will be fully vested and no longer be subject to repurchase by us on
    August 16, 1999. See "Employment Agreements" for a description of
    accelerated vesting for Messrs. Kriens and Gani.

(5) As of June 30, 1999, the options for Mr. Haley listed in the table under
    this note had not been exercised, but the shares are subject to early
    exercise by Mr. Haley and are then subject to repurchase by us at the
    original exercise price upon Mr. Haley's cessation of

                                       54
<PAGE>   55

    service prior to vesting of such shares. The options for Mr. Haley under
    this note vested as to 25% on May 13, 1999, and the balance vests in a
    series of monthly installments over the next three years of service.

(6) As of June 30, 1999, none of the options for Messrs. Sindhu and Wexler
    listed in the table under this note had been exercised, but the shares are
    subject to early exercise by Messrs. Sindhu and Wexler, and are then subject
    to repurchase by us at the original exercise price upon optionee's cessation
    of service prior to the vesting of such shares. These options shall fully
    vest and no longer be subject to repurchase by us on August 16, 1999.

AGGREGATE OPTION EXERCISES AND OPTION VALUES. The following table sets forth
information with respect to the Named Executive Officers concerning option
exercises for the fiscal year ended December 31, 1998, and exercisable and
unexercisable options held as of December 31, 1998:

     OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
                                                      NUMBER OF SECURITIES
                                                     UNDERLYING UNEXERCISED        VALUE OF UNEXERCISED
                                                           OPTIONS AT             IN-THE-MONEY OPTIONS AT
                         SHARES                         DECEMBER 31, 1998          DECEMBER 31, 1998(2)
                       ACQUIRED ON      VALUE      ---------------------------  ---------------------------
        NAME            EXERCISE     REALIZED(1)   EXERCISABLE   UNEXERCISABLE  EXERCISABLE   UNEXERCISABLE
        ----           -----------   -----------   -----------   -------------  -----------   -------------
<S>                    <C>           <C>           <C>           <C>            <C>           <C>
Scott Kriens.........     1,245(3)     $2,075            --           --        $       --     $       --
Pradeep Sindhu.......        --            --         1,785(4)        --           262,984             --
Marcel Gani..........       915(3)      1,525            --           --                --             --
Peter Wexler.........        --            --         1,020(4)        --           150,277             --
Steven Haley.........       630(3)      1,050        37,500(5)        --         5,556,375             --
</TABLE>

- ---------------
(1) Based on the fair market value of our stock on the date of grant, as
    determined by our board of directors, minus the exercise price, multiplied
    by the number of shares issued upon exercise of the option.

(2) The value of in-the-money options is based on the closing price on June 30,
    1999 of $149.00 per share, minus the per share exercise price, multiplied by
    the number of shares underlying the option.

(3) As of June 30, 1999, each of the options for Messrs. Kriens, Haley and Gani
    listed in the table under this note had been exercised, but the shares
    purchased are subject to repurchase by us at the original exercise price
    upon the optionee's cessation of services prior to vesting of the shares,
    which shares shall be fully vested and no longer subject to repurchase by us
    on August 16, 1999. See "Employment Agreements" for a description of
    accelerated vesting for Messrs. Kriens and Gani.

(4) As of June 30, 1999, none of the options for Messrs. Sindhu and Wexler
    listed in the table under this note had been exercised, but the shares are
    subject to early exercise by Messrs. Sindhu and Wexler and are then subject
    to repurchase by us at the original exercise price upon optionee's cessation
    of service prior to the vesting of the shares. These options shall be fully
    vested and no longer subject to repurchase by us on August 16, 1999.

(5) As of June 30, 1999, these options had not been exercised, but the shares
    are subject to early exercise by Mr. Haley and are then subject to
    repurchase by us at the original exercise price upon Mr. Haley's cessation
    of service prior to vesting of such shares. As of May 13, 1999, 25% of these
    options were vested and the balance vests in a series of monthly
    installments over the following three years.

                                       55
<PAGE>   56

                             INCENTIVE STOCK PLANS

1996 STOCK PLAN, (AS AMENDED ON APRIL 19, 1999)

      Our 1996 Stock Plan, as amended on April 19, 1999, provides for the grant
of incentive stock options to employees and nonstatutory stock options, or
incentive stock options and stock purchase rights to employees, directors and
consultants. A total of 19,187,500 shares of common stock have been reserved for
issuance under the 1996 Stock Plan. An annual increase will be added on the
first day of our fiscal year, beginning in 2000, equal to the lesser of:

- - 3,000,000 shares;

- - 5% of the outstanding shares on that date; or

- - a lesser amount determined by the board of directors.

      As of June 30, 1999, options to purchase 5,007,695 shares of common stock
were outstanding and 3,173,988 shares were available for future grant.

      The compensation committee of the board of directors administers the 1996
Stock Plan and determines the terms of options granted, including the exercise
price, the number of shares subject to individual option awards and the vesting
period of the options. No employee may be granted options to purchase more than
1,000,000 shares in any fiscal year, except that in the initial year of
employment, the limit is 2,000,000 shares. The exercise price of incentive stock
option grants cannot be lower than 100% of the fair market value of the common
stock on the date of grant and, in the case of incentive stock options granted
to holders of more than 10% of our voting power, not less than 110% of the fair
market value. The term of an incentive stock option cannot exceed ten years, and
the term of an incentive stock option granted to a holder of more than 10% of
our voting power cannot exceed five years. Stock purchase rights may be issued
either alone, in addition to, or in tandem with other awards granted under the
1996 Stock Plan and/or cash awards made outside of the 1996 Stock Plan. Options
and stock purchase rights granted under our 1996 Stock Plan generally become
exercisable at the rate of the total number of shares subject to the option
twelve months after the date of grant, and 1/48 of the shares subject to the
option each month thereafter. Options not assumed or substituted by a successor
corporation in the event we are acquired, will terminate on the closing date of
the acquisition. The board of directors may amend, modify or terminate the 1996
Stock Plan at any time as long as such amendment, modification or termination
does not impair the rights of plan participants with respect to outstanding
options under the 1996 Stock Plan. Our 1996 Stock Plan will terminate in June
2006, unless terminated earlier by the board of directors.

1999 EMPLOYEE STOCK PURCHASE PLAN

      Our 1999 Employee Stock Purchase Plan was adopted in April 1999, and
became effective on June 24, 1999. The 1999 Employee Stock Purchase Plan
provides our employees with an opportunity to purchase common stock of Juniper
Networks through accumulated payroll deductions. A total of 500,000 shares of
common stock have been reserved for issuance under the 1999 Employee Stock
Purchase Plan, none of which had been issued as of June 30, 1999. An annual
increase will be added on the first day of our fiscal year, beginning in 2000,
equal to the lesser of:

- - 500,000 shares;

- - 1% of the outstanding shares on that date; or

- - a lesser amount determined by the board of directors.

      The 1999 Employee Stock Purchase Plan will be administered by our board of
directors or by a committee appointed by the board of directors. The 1999
Employee Stock Purchase Plan will permit eligible employees to purchase common
stock through payroll deductions of up to 10% of an employee's base compensation
on each pay day during the offering period, provided that no employee may
purchase more than 1,000

                                       56
<PAGE>   57

shares in any twelve-month period, and in no event may an employee purchase more
than $25,000 worth of stock, determined at the fair market value of the shares
at the time the option is granted, in one calendar year. Any employee employed
by us on a given enrollment date is eligible to participate during that offering
period, provided they remain employed by us for the duration of that offering
period. Unless the board of directors or its committee determines otherwise, the
1999 Employee Stock Purchase Plan will be implemented in a series of offering
periods, each approximately six months in duration; provided, however, that the
first offering period will be approximately thirteen months in duration, ending
on the last trading day on or before July 31, 2000. Offering periods will begin
on the first trading day on or after August 1 and February 1 of each year and
terminate on the last trading day in the period six months later. However, the
first offering period shall commence on the date upon which the registration
statement, of which this prospectus is a part, is declared effective by the
Commission and terminate on the last trading day in the period ending July 31,
2000. In the event we are acquired, offering and purchase periods then in
progress will be shortened and all options automatically exercised. The price at
which common stock will be purchased under the 1999 Employee Stock Purchase Plan
is equal to 85% of the fair market value of the common stock on the first day of
the applicable offering period or the last day of the applicable purchase
period, whichever is lower. Employees may end their participation in the
offering period at any time, and participation automatically ends on termination
of employment. The board of directors may amend, modify or terminate the 1999
Employee Stock Purchase Plan at any time as long as the amendment, modification
or termination does not impair vesting rights of plan participants. The 1999
Employee Stock Purchase Plan will terminate on April 18, 2009, unless terminated
earlier in accordance with its provisions.

                                  401(k) PLAN

      In 1996, we adopted a Retirement Savings and Investment Plan, or 401(k)
plan, covering our full-time employees located in the United States. The 401(k)
plan is intended to qualify under Section 401(k) of the Internal Revenue Code of
1986, as amended, so that contributions to the 401(k) plan by employees, and the
investment earnings thereon, are not taxable to employees until withdrawn from
the 401(k) plan. Pursuant to the 401(k) plan, employees may elect to reduce
their current compensation by up to the lesser of 20% of their annual
compensation or the statutorily prescribed annual limit ($10,000 in 1998) and to
have the amount of the reduction contributed to the 401(k) plan. The 401(k) plan
does not permit additional matching contributions to the 401(k) plan by us on
behalf of participants in the 401(k) plan.

                             EMPLOYMENT AGREEMENTS

      We entered into a severance 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
                                       57
<PAGE>   58

exercisable during the three-month period following the involuntary termination
had Mr. Kriens remained employed with us.

      We entered into an employment 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 our
standard vesting schedule or the balance of his unvested stock, whichever amount
is less.

                                       58
<PAGE>   59

                              CERTAIN TRANSACTIONS

     Since our inception in February 1996, there has not been, nor is there
currently proposed, any transaction or series of similar transactions to which
we were or are to be a party in which the amount involved exceeds $60,000, and
in which any director, executive officer, holder of more than 5% of our common
stock or any member of the immediate family of any of these people had or will
have a direct or indirect material interest other than compensation agreements
and other arrangements, which are described where required in "Management," and
the transactions described below.

TRANSACTIONS WITH DIRECTORS, EXECUTIVE OFFICERS AND 5% STOCKHOLDERS

     COMMON STOCK. On February 26, 1996, we issued 2,250,000 shares of common
stock at a price of $0.044 per share to Mr. Sindhu, one of our founders,
executive officers and directors.

     On June 11, 1996, we issued the following shares of common stock at a price
of $0.044 per share to the following purchasers, among others:

<TABLE>
<CAPTION>
                                                               SHARES OF
                         PURCHASER                            COMMON STOCK
                         ---------                            ------------
<S>                                                           <C>
Kleiner, Perkins, Caufield & Byers VII......................   5,493,749
KPCB VII Founders Fund......................................     600,001
KPCB Information Sciences Zaibatsu Fund II..................     156,249
</TABLE>

     Kleiner, Perkins, Caufield & Byers VII, KPCB VII Founders Fund and KPCB
Information Sciences Zaibatsu Fund II are affiliated entities and together are
considered a holder of more than 5% of our common stock. Messrs. Khosla and
Hearst, two of our directors, are general partners of Kleiner, Perkins, Caufield
& Byers VII, KPCB VII Founders Fund and KPCB Information Sciences Zaibatsu Fund
II. Messrs. Khosla and Hearst disclaim beneficial ownership of the securities
held by such entities, except for their proportional interests in the entities.

     SERIES A PREFERRED STOCK. On June 11, 1996, we sold 1,743,751 shares of our
Series A Preferred Stock for $1.00 per share. Each share of Series A Preferred
Stock converted into 2.25 shares of common stock at the time of our initial
public offering. The purchasers of the Series A Preferred Stock included, among
others:

<TABLE>
<CAPTION>
                                                                      AS CONVERTED
                                                       SHARES OF       SHARES OF
                     PURCHASER                       SERIES A STOCK   COMMON STOCK
                     ---------                       --------------   ------------
<S>                                                  <C>              <C>
Kleiner, Perkins, Caufield & Byers VII.............    1,513,834       3,406,127
KPCB VII Founders Fund.............................      165,333         371,999
KPCB Information Sciences Zaibatsu Fund II.........       43,056          96,876
</TABLE>

     SERIES B PREFERRED STOCK. On August 5, 1996, November 8, 1996, and December
30, 1996, we sold a total of 3,333,334 shares, 484,683 shares, and 3,958 shares,
respectively, of our Series B Preferred Stock for $2.40 per share. In addition,
on December 16, 1996, and June 18, 1997, we granted warrants exercisable for
83,333 shares and 10,000 shares, respectively, of our Series B Preferred Stock
at an exercise price of $2.40. Each share of Series B Preferred Stock

                                       59
<PAGE>   60

converted into 2.25 shares of common stock at the time of our initial public
offering. The purchasers of the Series B Preferred Stock included, among others:

<TABLE>
<CAPTION>
                                                                      AS CONVERTED
                                                       SHARES OF       SHARES OF
                     PURCHASER                       SERIES B STOCK   COMMON STOCK
                     ---------                       --------------   ------------
<S>                                                  <C>              <C>
Kleiner, Perkins, Caufield & Byers VII.............      304,688         685,548
KPCB Information Sciences Zaibatsu Fund II.........        7,812          17,577
New Enterprise Associates VI, Limited
  Partnership......................................    1,214,583       2,732,812
NEA Presidents Fund, L.P...........................       31,250          70,313
NEA Ventures 1996, L.P.............................        4,167           9,376
Kriens 1996 Trust U/T/A October 29, 1996...........      364,683         820,537
Stensrud Family Trust U/T/A September 6, 1993......      120,000         270,000
</TABLE>

     New Enterprise Associates VI, Limited Partnership and NEA Presidents Fund,
L.P. and NEA Ventures 1996, L.P. are affiliated entities and together are
considered a holder of more than 5% of our common stock. Mr. Kramlich, one of
our directors, is a partner of New Enterprise Associates VI, Limited Partnership
and NEA Presidents Fund, L.P. and NEA Ventures 1996, L.P. Mr. Kramlich disclaims
beneficial ownership of the securities held by these entities, except for his
proportional interest in the entities. Mr. Kriens, one of our directors and
executive officers and a holder of more than 5% of our common stock, is a
trustee of the Kriens 1996 Trust U/T/A October 29, 1996. Mr. Stensrud, one of
our directors, is a trustee of the Stensrud Family Trust U/T/A September 16,
1993.

     SERIES C PREFERRED STOCK. On July 1, 1997, and September 30, 1997, we sold
4,479,286 shares and 671,892 shares, respectively, of our Series C Preferred
Stock for $8.93 per share. Each share of Series C Preferred Stock converted into
2.25 shares of common stock at the time of our initial public offering. The sale
of Series C Preferred Stock included, among others, the sale of 783,875 shares
of Series C Preferred Stock (1,763,718 shares as converted to common stock) to
Ericsson Business Networks AB, which is a holder of more than 5% of our common
stock.

     SERIES D AND D-1 PREFERRED STOCK. On March 16, 1999, we sold 500,000 shares
of our Series D Preferred Stock and 2,580,000 shares of our Series D-1 Preferred
Stock for $11.03 per share to Ericsson Business Networks AB. Each share of
Series D Preferred Stock converted into one share of common stock at the time of
our initial public offering. Each share of D-1 Preferred Stock converted into
0.38166 shares of common stock at the time of our initial public offering.

STOCK OPTION GRANTS TO CERTAIN DIRECTORS

     On October 9, 1996, we granted to William Stensrud, one of our directors,
an option to purchase 45,000 shares of our common stock at $0.11 per share,
which vests over four years with 1/8 of the total number of shares vesting after
six months and the balance vesting in a series of monthly installments over the
next 42 months of service thereafter.

INDEMNIFICATION

     We have entered into indemnification agreements with each of our directors
and officers. These indemnification agreements will require us to indemnify our
directors and officers to the fullest extent permitted by Delaware law.

     All future transactions, including any loans from us to our officers,
directors, principal stockholders or affiliates, will be approved by a majority
of the board of directors, including a

                                       60
<PAGE>   61

majority of the independent and disinterested members of the board of directors
or, if required by law, a majority of disinterested stockholders, and will be on
terms no less favorable to us than could be obtained from unaffiliated third
parties.

                       PRINCIPAL AND SELLING STOCKHOLDERS

      The following table sets forth information known to us with respect to the
beneficial ownership of our common stock as of June 30, 1999, and as adjusted to
reflect the sale of common stock offered in this prospectus:

- - each stockholder known by us to own beneficially more than 5% of our common
  stock, as explained below;

- - each of the Named Executive Officers;

- - each of our directors;

- - all of our directors and executive officers as a group; and

- - all other selling stockholders.

      Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of common stock subject to options or warrants held by that person that
are currently exercisable or will become exercisable within 60 days after June
30, 1999, are deemed outstanding, while the shares are not deemed outstanding
for purposes of computing percentage ownership of any other person. Unless
otherwise indicated in the footnotes below, the persons and entities named in
the table have sole voting or investment power with respect to all shares
beneficially owned, subject to community property laws where applicable.

                                       61
<PAGE>   62

     The number and percentage of shares beneficially owned are based on the
aggregate of 49,777,014 shares of common stock outstanding as of June 30, 1999.

<TABLE>
<CAPTION>
                                                  SHARES OF                             SHARES OF
                                                COMMON STOCK                          COMMON STOCK
                                             BENEFICIALLY OWNED                    BENEFICIALLY OWNED
                                           BEFORE SALE UNDER THIS     SHARES        AFTER SALE UNDER
                                                 PROSPECTUS             TO         THIS PROSPECTUS(2)
                                           -----------------------      BE       -----------------------
                                             NUMBER     PERCENTAGE    SOLD(2)      NUMBER     PERCENTAGE
                                           ----------   ----------   ---------   ----------   ----------
<S>                                        <C>          <C>          <C>         <C>          <C>
OFFICERS AND DIRECTORS(1):
Scott Kriens(3)..........................   3,153,485       6.3%            --    3,153,485       6.1%
Steven Haley(4)..........................     375,630         *             --      375,630         *
Pradeep Sindhu(5)........................   2,251,785       4.5             --    2,251,785       4.4
Peter Wexler(6)..........................     676,020       1.4             --      676,020       1.3
Marcel Gani(7)...........................     417,165         *             --      417,165         *
William Hearst(8)........................  10,828,125      21.8             --   10,828,125      21.1
  c/o Kleiner, Perkins, Caufield & Byers
  2750 Sand Hill Road
  Menlo Park, CA 94025
Vinod Khosla(9)..........................  10,828,125      21.8             --   10,828,125      21.1
  c/o Kleiner, Perkins, Caufield & Byers
  2750 Sand Hill Road
  Menlo Park, CA 94025
C. Richard Kramlich(10)..................   2,812,501       5.7             --    2,812,501       5.5
  c/o New Enterprise Associates
  2490 Sand Hill Road
  Menlo Park, CA 94025
William R. Stensrud(11)..................     315,000         *             --      315,000         *
  c/o Enterprise Partners
  7979 Ivanhoe Ave., Suite 550
  La Jolla, CA 92037
All directors and executive officers as a
  group (11 persons)(12).................  21,585,156      43.4             --   21,585,156      42.1
5% STOCKHOLDERS:
Kleiner, Perkins, Caufield & Byers
  2750 Sand Hill Road
  Menlo Park, CA 94025(13)...............  10,828,125      21.8             --   10,828,125      21.1
New Enterprise Associates
  2490 Sand Hill Road
  Menlo Park, CA 94025(14)...............   2,812,501       5.7             --    2,812,501       5.5
Ericsson Business Networks AB
  S-131 89 Stockholm Sweden..............   3,248,401       6.5             --    3,248,401       6.3
SELLING STOCKHOLDERS:
Newbridge Networks Corporation(15).......   1,763,719       3.5      1,525,000      238,719         *
Lucent Technologies Inc.(15) ............   1,763,719       3.5      1,525,000      238,719         *
MCI WorldCom Venture Fund, Inc. .........   1,259,800       2.5        250,000    1,009,800       2.0
Anschutz Family Investment Company LLC...     599,524       1.2        200,000      399,524         *
</TABLE>

- ---------------
  *  Less than 1% of the outstanding shares of common stock.

 (1) Unless otherwise indicated, the address of each listed officer or director
     is c/o Juniper Networks, Inc., 385 Ravendale Drive, Mountain View,
     California 94043.

 (2) Assumes no exercise of underwriters' over-allotment option.

                                       62
<PAGE>   63

 (3) Includes 3,152,240 shares held in the name of the Kriens 1996 Trust of
     which Scott Kriens and his spouse are trustees. Includes 811,934 shares
     subject to our right of repurchase, as of June 30, 1999, which lapses over
     time.

 (4) Includes 20,000 shares held in the name of the Haley Family Foundation
     Trust and 30,000 shares held in the name of trusts for Mr. Haley's
     children. Includes 183,443 shares subject to our right of repurchase as of
     June 30, 1999 (which lapses over time) and 27,345 shares, options for which
     are presently exercisable or will become exercisable within 60 days of June
     30, 1999.

 (5) Includes 376,785 shares subject to our right of repurchase, as of June 30,
     1999, which lapses over time. Includes 60,000 shares gifted to Mr. Sindhu's
     children pursuant to the California Uniform Transfer to Minors Act.

 (6) Includes 281,250 shares subject to our right of repurchase, as of June 30,
     1999 (which lapses over time) and 1,020 shares, options for which are
     exercisable or will become exercisable within 60 days of June 30, 1999.

 (7) Includes 416,250 shares held in the name of the Gani 1995 Trust dated
     December 8, 1995, of which Mr. Gani and his spouse are trustees. Includes
     211,853 shares subject to our right of repurchase, as of June 30, 1999
     which lapses over time.

 (8) Comprised of 10,828,125 shares held by entities affiliated with Kleiner,
     Perkins, Caufield & Byers. Mr. Hearst is a general partner of Kleiner,
     Perkins, Caufield & Byers and is a director of Juniper. Mr. Hearst
     disclaims beneficial ownership of shares held by those entities, except to
     the extent of his proportional interest arising from his partnership
     interest in Kleiner, Perkins, Caufield & Byers.

 (9) Comprised of 10,828,125 shares held by entities affiliated with Kleiner,
     Perkins, Caufield & Byers. Mr. Khosla is a general partner of Kleiner,
     Perkins, Caufield & Byers and is a director of Juniper. Mr. Khosla
     disclaims beneficial ownership of shares held by those entities, except to
     the extent of his proportional interest arising from his partnership
     interest in Kleiner, Perkins, Caufield & Byers.

(10) Comprised of 2,812,500 shares held by entities affiliated with New
     Enterprise Associates. Mr. Kramlich is a general partner of New Enterprise
     Associates and is a director of Juniper. Mr. Kramlich disclaims beneficial
     ownership of shares held by those entities, except to the extent of his
     proportional interest in New Enterprise Associates.

(11) Includes 270,000 shares held in the name of the Stensrud Family Trust U/T/A
     September 16, 1993, as community property.

(12) Includes all shares referenced in notes 3 through 11 above, except that the
     shares beneficially owned by Messrs. Hearst and Khosla are counted only
     once in this calculation. Includes 755,445 shares beneficially owned by two
     other executive officers and, 350,236 shares subject to our right of
     repurchase as of June 30, 1999 (which lapses over time) and 39,195 shares,
     options for which are exercisable or will become exercisable within 60 days
     of June 30, 1999.

(13) Includes (i) 9,585,423 shares held by Kleiner, Perkins, Caufield & Byers
     VII, (ii) 972,000 shares held by KPCB VII Founders Fund, and (iii) 270,702
     shares held by KPCB Information Sciences Zaibatsu Fund II.

(14) Includes (i) 2,732,812 shares held by New Enterprise Associates VI, Limited
     Partnership, (ii) 70,313 shares held by NEA Presidents Fund, L.P., and
     (iii) 9,376 shares held by NEA Ventures 1996, L.P.

(15) If the underwriters exercise their over-allotment option in full, Newbridge
     Networks Corporation and Lucent Technologies, Inc. will sell all of their
     shares of our common stock.

                                       63
<PAGE>   64

                          DESCRIPTION OF CAPITAL STOCK

                                    GENERAL

      We are authorized to issue 200,000,000 shares of common stock, $0.00001
par value, and 10,000,000 shares of undesignated preferred stock, $0.00001 par
value. The following description of our capital stock does not purport to be
complete and is subject to and qualified by our certificate of incorporation and
bylaws, which are included as exhibits to the Registration Statement of which
this prospectus forms a part, and by the provisions of applicable Delaware law.

                                  COMMON STOCK

      As of June 30, 1999, there were 49,777,014 shares of common stock
outstanding which were held of record by approximately 300 stockholders.

      The holders of common stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may be
applicable to any outstanding preferred stock, the holders of common stock are
entitled to receive ratably such dividends, if any, as may be declared from time
to time by the board of directors out of funds legally available for that
purpose. See "Dividend Policy." In the event of a liquidation, dissolution or
winding up of Juniper Networks, the holders of common stock are entitled to
share ratably in all assets remaining after payment of liabilities, subject to
prior distribution rights of preferred stock, if any, then outstanding. The
common stock has no preemptive or conversion rights or other subscription
rights. There are no redemption or sinking fund provisions applicable to the
common stock. All outstanding shares of common stock are fully paid and
nonassessable, and the shares of common stock to be issued upon the closing of
this offering will be fully paid and nonassessable.

                                PREFERRED STOCK

      The board of directors has the authority, without action by the
stockholders, to designate and issue preferred stock in one or more series and
to designate the rights, preferences and privileges of each series, any or all
of which may be greater than the rights of the common stock. We cannot state the
actual effect of the issuance of any shares of preferred stock upon the rights
of holders of the common stock until the board of directors determines the
specific rights of the holders of such preferred stock. However, the effects
might include, among other things, restricting dividends on the common stock,
diluting the voting power of the common stock, impairing the liquidation rights
of the common stock and delaying or preventing a change in control of Juniper
Networks without further action by the stockholders. There are no shares of
preferred stock outstanding as of June 30, 1999. We have no present plans to
issue any shares of preferred stock.

                                    WARRANTS

      At June 30, 1999, there were warrants outstanding to purchase a total of
240,410 shares of common stock. Subsequent to June 30, 1999, the warrants were
net exercised for 237,932 shares of common stock.

                              REGISTRATION RIGHTS

      The holders of 25,597,714 shares of common stock, as converted, and the
holders of warrants to purchase 22,290 shares of common stock or their permitted
transferees are entitled to certain rights with respect to registration of the
shares under the Securities Act. Under the terms of the agreements between us
and the holders of the registrable securities, at any time 180 days after the
effective date of this offering, by written consent of at least 40% of the
registrable securities then outstanding, the holders may require on one occasion
that we, at our expense, file a registration statement under the Securities Act,
with respect to the registrable securities, provided that at least 20% of the
registrable securities would be included in the proposed registration or

                                       64
<PAGE>   65

the anticipated public offering price of the
proposed registration would be at least $10,000,000. In addition, holders of
registrable securities may, at any time twelve months after the closing of this
offering and at their expense, require on three separate occasions that we
register their shares for public resale on Form S-3 or similar short-form
registration, provided that we are eligible to use Form S-3 or similar
short-form registration, and provided further that the value of the securities
to be registered is at least $5,000,000. Furthermore, in the event we elect to
register any of our shares of common stock after this offering for purposes of
effecting any public offering, the holders of registrable securities are
entitled, at our expense, to include their shares of common stock in the
registration, subject to the right of the underwriter to reduce the number of
shares proposed to be registered in view of market conditions. The selling
stockholders have exercised their right to include up to 3,977,438 shares of
registrable securities in this offering. See "Principal and Selling
Stockholders."

                     DELAWARE ANTI-TAKEOVER LAW AND CERTAIN
                          CHARTER AND BYLAW PROVISIONS

      Certain provisions of Delaware law and our certificate of incorporation
and bylaws could make it more difficult to acquire us by means of a tender
offer, a proxy contest or otherwise and the removal of incumbent officers and
directors. These provisions, summarized below, are expected to discourage
certain types of coercive takeover practices and inadequate takeover bids and to
encourage persons seeking to acquire control of us to first negotiate with us.
We believe that the benefits of increased protection of our potential ability to
negotiate with the proponent of an unfriendly or unsolicited proposal to acquire
or restructure us outweigh the disadvantages of discouraging takeover or
acquisition proposals because, among other things, negotiation of these
proposals could result in an improvement of their terms.

      We are subject to Section 203 of the Delaware General Corporation Law, an
anti-takeover law. In general, Section 203 prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years following the date the person became an
interested stockholder, unless (with certain exceptions) the "business
combination" or the transaction in which the person became an interested
stockholder is approved in a prescribed manner. Generally, a "business
combination" includes a merger, asset or stock sale, or other transaction
resulting in a financial benefit to the interested stockholder. Generally, an
"interested stockholder" is a person who, together with affiliates and
associates, owns (or within three years prior to the determination of interested
stockholder status, did own) 15% or more of a corporation's voting stock. The
existence of this provision would be expected to have an anti-takeover effect
with respect to transactions not approved in advance by the board of directors,
including discouraging attempts that might result in a premium over the market
price for the shares of common stock held by stockholders.

      Our certificate of incorporation and bylaws require that any action
required or permitted to be taken by our stockholders must be effected at a duly
called annual or special meeting of the stockholders and may not be effected by
a consent in writing. In addition, special meetings of our stockholders may be
called only by the board of directors or certain of our officers. Our
certificate of incorporation and bylaws also provide that, beginning upon the
closing of this offering, our board of directors will be divided into three
classes, with each class serving staggered three-year terms, and that certain
amendments of the certificate of incorporation and of the bylaws require the
approval of holders of at least 66 2/3% of the voting power of all outstanding
stock. These provisions may have the effect of deterring hostile takeovers or
delaying changes in control or management of Juniper Networks.

                                       65
<PAGE>   66

                          TRANSFER AGENT AND REGISTRAR

      The transfer agent and registrar for the common stock is Norwest Bank
Minnesota, N.A.

                           HOLDING COMPANY STRUCTURE

      On May 13, 1999 our stockholders approved a proposal to reorganize into a
holding company structure in which we would become a wholly-owned subsidiary of
a new corporation which would be owned by our existing stockholders. Our board
of directors subsequently decided to abandon the formation of this holding
company structure. Although we currently do not have any plans to implement a
holding company structure, we may at any time decide to do so. In addition, as
permitted by Delaware law, we may implement this structure without submitting it
to our stockholders for approval.

                                       66
<PAGE>   67

                        SHARES ELIGIBLE FOR FUTURE SALE

      Upon completion of this offering, we will have outstanding 51,277,014
shares of common stock, assuming the issuance of 1,500,000 shares of common
stock offered by us and no exercise of options after June 30, 1999, and assuming
no exercise of the underwriters' over-allotment option. All of the 5,000,000
shares sold in this offering will be freely tradable without restriction or
further registration under the Securities Act; provided, however, that if shares
are purchased by "affiliates" as that term is defined in Rule 144 under the
Securities Act, their sales of shares would be subject to certain limitations
and restrictions that are described below. In addition, in our recent initial
public offering 5,520,000 shares of our common stock were sold and such shares
are freely tradable without restriction except for the "affiliate" restrictions
described immediately above.

      Of the outstanding shares of common stock following this offering,
40,757,014 shares will be subject to "lock-up" agreements described below on the
effective date of this offering. All of our officers and directors, as well as
certain stockholders, who together in the aggregate hold 62.4% of our common
stock, have agreed not to sell or otherwise dispose of any of their shares for
the 90 day period following this offering. In addition, stockholders
collectively holding an additional 17.1% of our outstanding common stock entered
into lock-up agreements at the time of our initial public offering with the
underwriters that provide that the shares set forth in the table below will
become eligible for sale during the period ending December 21, 1999. Goldman,
Sachs & Co., however, may in its sole discretion, at any time without notice,
release all or any portion of the shares subject to lock-up agreements. The
number of shares which become eligible for sale at various dates are subject in
most cases to the limitations of Rule 144.

<TABLE>
<CAPTION>
                                        APPROXIMATE
                                      SHARES ELIGIBLE
           RELEVANT DATES             FOR FUTURE SALE                   COMMENT
           --------------             ----------------                  -------
<S>                                   <C>                 <C>
June 25, 1999.......................      5,520,000       Initial public offering
On effective date(1)................      5,000,000       Shares sold in this offering
                                                          (1,500,000 shares offered by us)
2 days after September 30, 1999
  quarterly results are
  released(2).......................      1,316,722       Release of shares pursuant to
                                                          initial public offering lockup
30 days after September 30, 1999
  quarterly results are
  released(2).......................      2,194,536       Additional release of shares
                                                          pursuant to initial public offering
                                                          lockup
December 21, 1999(2)................      5,266,886       180 days after initial public
                                                          offering
90 days after effective date and
  thereafter(2)(3)..................     31,978,870       All shares subject to lock up
                                                          released
</TABLE>

- ---------------
(1) Assumes no exercise of underwriters' over-allotment option.

(2) Reflects the total number of shares available for release, some of which
    cannot be sold because they are subject to a right of repurchase by us.

(3) Reflects the total number of shares available for release, approximately
    21,975,000 of which cannot be sold under corporate black-out restrictions
    until two days following the release of the December 31, 1999 quarterly
    results.

                                       67
<PAGE>   68

      In addition, holders of stock options could exercise such options and sell
certain of the shares issued upon exercise as described below. As of June 30,
1999, there were a total of 5,007,695 shares of common stock subject to
outstanding options under our 1996 Stock Plan, 647,146 of which were vested, and
all of which are subject to lock-up agreements. The Company has filed a
registration statement on Form S-8 to register all of the shares of common stock
issued or reserved for future issuance under our 1996 Stock Plan, as amended,
and 1999 Employee Stock Purchase Plan. On December 25, 1999, a total of
1,298,496 shares of common stock subject to outstanding options will be vested
and generally would be available for resale in the public market.

RULE 144

      In general, under Rule 144 as currently in effect, beginning September 22,
1999, a person who has beneficially owned shares of our common stock for at
least one year would be entitled to sell, within any three-month period, a
number of shares that does not exceed the greater of:

- - 1% of the number of shares of common stock then outstanding, which will equal
  approximately 512,770 shares immediately after this offering; or

- - the average weekly trading volume of the common stock on the Nasdaq National
  Market during the four calendar weeks preceding the filing of a notice on Form
  144 with respect to such sale.

      Sales under Rule 144 are also subject to certain other requirements
regarding the manner of sale, notice filing and the availability of current
public information about us.

RULE 144(K)

      Under Rule 144(k), a person who is not deemed to have been one of our
"affiliates" at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years,
including the holding period of any prior owner other than an "affiliate," is
entitled to sell such shares without complying with the manner of sale, notice
filing, volume limitation or notice provisions of Rule 144. Therefore, unless
otherwise restricted, "144(k) shares" may be sold immediately upon the
completion of this offering.

RULE 701

      In general, under Rule 701, any of our employees, directors, officers,
consultants or advisors who purchased shares from us in connection with a
compensatory stock or option plan or other written agreement before the June 24,
1999 is entitled to resell such shares beginning September 22, 1999 in reliance
on Rule 144, without having to comply with certain restrictions, including the
holding period, contained in Rule 144.

      The SEC has indicated that Rule 701 will apply to typical stock options
granted by an issuer before it becomes subject to the reporting requirements of
the Securities Exchange Act of 1934, along with the shares acquired upon
exercise of such options. Securities issued in reliance on Rule 701 are
restricted securities and, subject to the contractual restrictions described
above, beginning September 22, 1999, may be sold by persons other than
"affiliates," as defined in Rule 144, subject only to the manner of sale
provisions of Rule 144 and by "affiliates" under Rule 144 without compliance
with its one year minimum holding period requirement.

                   WHERE YOU MAY FIND ADDITIONAL INFORMATION

      We filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act for the shares of common stock in
this offering. This prospectus does not contain all of the information in the
registration statement and the exhibits and schedule that were filed with the
registration statement. For

                                       68
<PAGE>   69

further information with respect to Juniper
Networks and our common stock, we refer you to the registration statement and
the exhibits and schedule that were filed with the registration statement.
Statements contained in this prospectus about the contents of any contract or
any other document that is filed as an exhibit to the registration statement are
not necessarily complete, and we refer you to the full text of the contract or
other document filed as an exhibit to the registration statement. A copy of the
registration statement and the exhibits and schedule that were filed with the
registration statement may be inspected without charge at the public reference
facilities maintained by the Securities and Exchange Commission in Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549, and copies of all or any part of
the registration statement may be obtained from the SEC upon payment of the
prescribed fee. The Securities and Exchange Commission maintains a World Wide
Web site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Securities
and Exchange Commission. The address of the site is http://www.sec.gov.

      Juniper Networks is subject to the information and periodic reporting
requirements of the Securities Exchange Act of 1934, and, in accordance with the
requirements of the Securities Exchange Act of 1934, files periodic reports,
proxy statements and other information with the Securities and Exchange
Commission. These periodic reports, proxy statements and other information will
be available for inspection and copying at the regional offices, public
reference facilities and web site of the Securities and Exchange Commission
referred to above.

                                 LEGAL MATTERS

      The validity of the common stock offered hereby will be passed upon for us
by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto,
California. Certain legal matters will be passed upon for the underwriters by
Brobeck Phleger & Harrison LLP, San Francisco, California. As of the date of
this prospectus, WS Investment Company 96A and WS Investment Co. 96B, each an
investment partnership composed of certain current and former members of and
persons associated with Wilson Sonsini Goodrich & Rosati, Professional
Corporation, in addition to certain current individual members of Wilson Sonsini
Goodrich & Rosati, Professional Corporation, beneficially own an aggregate of
159,374 of Juniper Networks' common stock.

                                    EXPERTS

      Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements at December 31, 1997 and 1998, for the period from February
2, 1996 (inception) to December 31, 1996, and for each of the two years in the
period ended December 31, 1998, as set forth in their report. We have included
our financial statements in the prospectus and elsewhere in the registration
statement in reliance on Ernst & Young LLP's report, given upon the authority of
such firm as experts in accounting and auditing.

                                       69
<PAGE>   70

                             JUNIPER NETWORKS, INC.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S>                                                           <C>
Report of Ernst & Young LLP, Independent Auditors...........  F-2
Consolidated Balance Sheets.................................  F-3
Consolidated Statements of Operations.......................  F-4
Consolidated Statement of Stockholders' Equity..............  F-5
Consolidated Statements of Cash Flows.......................  F-6
Notes to Consolidated Financial Statements..................  F-7
</TABLE>

                                       F-1
<PAGE>   71

               REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Juniper Networks, Inc.

     We have audited the accompanying consolidated balance sheets of Juniper
Networks, Inc. as of December 31, 1997 and 1998, and the related consolidated
statements of operations, stockholders' equity, and cash flows for the period
from inception (February 2, 1996) to December 31, 1996 and for each of the two
years in the period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Juniper
Networks, Inc. at December 31, 1997 and 1998, and the consolidated results of
its operations and its cash flows for the period from inception (February 2,
1996) to December 31, 1996 and for each of the two years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.

                                      /s/ Ernst & Young LLP

Palo Alto, California
February 26, 1999

                                       F-2
<PAGE>   72

                             JUNIPER NETWORKS, INC.

                          CONSOLIDATED BALANCE SHEETS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                             DECEMBER 31,
                                                         --------------------    JUNE 30,
                                                           1997        1998        1999
                                                         --------    --------   -----------
                                                                                (UNAUDITED)
<S>                                                      <C>         <C>        <C>
ASSETS
Current assets:
  Cash and cash equivalents............................  $ 30,442    $ 20,098    $ 92,429
  Short-term investments...............................    15,785          --      15,372
  Accounts receivable..................................        --       8,056      17,312
  Prepaid expenses and other current assets............       543         680         881
                                                         --------    --------    --------
     Total current assets..............................    46,770      28,834     125,994
Property and equipment, net............................     3,315       7,702       9,098
Long-term investments and other assets.................       125         135       8,039
                                                         --------    --------    --------
     Total assets......................................  $ 50,210    $ 36,671    $143,131
                                                         ========    ========    ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable.....................................  $    661    $  4,245    $  6,380
  Accrued warranty liability...........................        --         684       3,346
  Accrued milestone payment............................       423          --          --
  Accrued compensation and related liabilities.........       245       1,114       1,809
  Other accrued liabilities............................        --         500       1,085
  Deferred revenue.....................................        --       5,639      12,815
  Current obligations under capital leases.............       750       2,220       1,201
                                                         --------    --------    --------
     Total current liabilities.........................     2,079      14,402      26,636
Long-term liabilities..................................     2,083       5,204       2,521
Commitments
Stockholders' equity:
Convertible preferred stock, $0.00001 par value,
  issuable in series: 10,859 shares authorized at
  December 31, 1997 and 1998; 10,000 shares authorized
  at June 30, 1999; 10,717 shares issued and
  outstanding at December 31, 1997 and 1998, and none
  as of
  June 30, 1999........................................        --          --          --
Common stock, $0.00001 par value, 67,500 shares
  authorized at December 31, 1997 and 1998, and 200,000
  shares authorized at June 30, 1999; 19,121, 20,577,
  and 49,777 issued and outstanding at December 31,
  1997 and 1998 and June 30, 1999, respectively........        --          --          --
  Additional paid-in capital...........................    58,210      65,351     172,106
  Deferred stock compensation..........................        --      (5,153)     (4,472)
  Accumulated deficit..................................   (12,162)    (43,133)    (53,660)
                                                         --------    --------    --------
Stockholders' equity...................................    46,048      17,065     113,974
                                                         --------    --------    --------
                                                         $ 50,210    $ 36,671    $143,131
                                                         ========    ========    ========
</TABLE>

                            See accompanying notes.
                                       F-3
<PAGE>   73

                             JUNIPER NETWORKS, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                      PERIOD FROM
                                       INCEPTION                               SIX MONTHS
                                     (FEBRUARY 2,        YEAR ENDED               ENDED
                                       1996) TO         DECEMBER 31,            JUNE 30,
                                     DECEMBER 31,    -------------------   -------------------
                                         1996          1997       1998       1998       1999
                                     -------------   --------   --------   --------   --------
                                                                               (UNAUDITED)
<S>                                  <C>             <C>        <C>        <C>        <C>
Net revenues.......................     $    --      $     --   $  3,807   $     --   $ 27,600
Cost of revenues...................          --            --      4,416        219     14,393
                                        -------      --------   --------   --------   --------
Gross profit (loss)................          --            --       (609)      (219)    13,207
Operating expenses:
  Research and development.........       1,850         9,406     23,987      9,558     14,172
  Sales and marketing..............          --         1,149      4,216      1,283      6,452
  General and administrative.......          89         1,043      2,223        779      1,753
  Amortization of deferred stock
     compensation..................          --            --      1,235        213      1,795
                                        -------      --------   --------   --------   --------
     Total operating expenses......       1,939        11,598     31,661     11,833     24,172
                                        -------      --------   --------   --------   --------
Operating loss.....................      (1,939)      (11,598)   (32,270)   (12,052)   (10,965)
Interest income, net...............         140         1,235      1,301        946        560
                                        -------      --------   --------   --------   --------
Loss before income taxes...........      (1,799)      (10,363)   (30,969)   (11,106)   (10,405)
Provision for income taxes.........          --            --          2          2        122
                                        -------      --------   --------   --------   --------
Net loss...........................     $(1,799)     $(10,363)  $(30,971)  $(11,108)  $(10,527)
                                        =======      ========   ========   ========   ========
Basic and diluted net loss per
  share............................     $ (0.46)     $  (1.21)  $  (2.39)  $  (0.98)  $  (0.64)
                                        =======      ========   ========   ========   ========
Shares used in computing basic and
  diluted net loss per share.......       3,958         8,591     12,957     11,372     16,436
                                        =======      ========   ========   ========   ========
Pro forma basic and diluted net
  loss per share (unaudited).......                             $  (0.84)             $  (0.26)
                                                                ========              ========
Shares used in computing pro forma
  basic and diluted net loss per
  share (unaudited)................                               37,070                40,816
                                                                ========              ========
</TABLE>

                            See accompanying notes.
                                       F-4
<PAGE>   74

                             JUNIPER NETWORKS, INC.

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                    CONVERTIBLE
                                  PREFERRED STOCK     COMMON STOCK     ADDITIONAL                                    TOTAL
                                  ----------------   ---------------    PAID-IN       DEFERRED     ACCUMULATED   STOCKHOLDERS'
                                  SHARES    AMOUNT   SHARES   AMOUNT    CAPITAL     COMPENSATION     DEFICIT        EQUITY
                                  -------   ------   ------   ------   ----------   ------------   -----------   -------------
<S>                               <C>       <C>      <C>      <C>      <C>          <C>            <C>           <C>
Issuance of common stock to
  founders......................       --      --     4,050      --     $      9      $    --       $     --       $      9
  Issuance of Series A preferred
    stock to investors, net of
    issuance costs..............    1,744      --        --      --        1,738           --             --          1,738
  Issuance of common stock......       --      --    11,844      --          603           --             --            603
  Issuance of Series B preferred
    stock to investors, net of
    issuance costs..............    3,818      --        --      --        9,157           --             --          9,157
  Issuance of Series B preferred
    stock in exchange for
    consulting services.........        4      --        --      --            9           --             --              9
  Issuance of warrants to
    purchase Series B preferred
    stock.......................       --      --        --      --           11           --             --             11
  Net loss......................       --      --        --      --           --           --         (1,799)        (1,799)
                                  -------    ----    ------    ----     --------      -------       --------       --------
Balance at December 31, 1996....    5,566      --    15,894      --       11,527           --         (1,799)         9,728
  Issuance of warrants to
    purchase Series B preferred
    stock.......................       --      --        --      --            1           --             --              1
  Issuance of Series C preferred
    stock to investors..........    5,151      --        --      --       45,953           --             --         45,953
  Issuance of warrants to
    purchase Series C preferred
    stock.......................       --      --        --      --            3           --             --              3
  Issuance of common stock, net
    of repurchases..............       --      --     3,227      --          375           --             --            375
  Compensation expense related
    to stock options............       --      --        --      --          351           --             --            351
  Net loss......................       --      --        --      --           --           --        (10,363)       (10,363)
                                  -------    ----    ------    ----     --------      -------       --------       --------
Balance at December 31, 1997....   10,717      --    19,121      --       58,210           --        (12,162)        46,048
  Exercise of stock options by
    employees, net of
    repurchases.................       --      --     1,456      --          753           --             --            753
  Deferred stock compensation...       --      --        --      --        6,388       (6,388)            --             --
  Amortization of deferred stock
    compensation................       --      --        --      --           --        1,235             --          1,235
  Net loss......................       --      --        --      --           --           --        (30,971)       (30,971)
                                  -------    ----    ------    ----     --------      -------       --------       --------
Balance at December 31, 1998....   10,717      --    20,577      --       65,351       (5,153)       (43,133)        17,065
  Issuance of Series D and D-1
    preferred stock to investors
    (unaudited).................    3,080      --        --      --       33,948           --             --         33,948
  Conversion of preferred stock
    to common stock
    (unaudited).................  (13,797)     --    25,598      --           --           --             --             --
  Issuance of common stock, net
    of issuance
    costs(unaudited)............       --      --     2,098      --       65,225           --             --         65,225
  Exercise of common stock
    warrants (unaudited)........       --      --        22      --           --           --             --             --
  Exercise of stock options by
    employees, net of
    repurchases (unaudited).....       --      --     1,482      --        6,468           --             --          6,468
  Deferred stock compensation
    (unaudited).................       --      --        --      --        1,114       (1,114)            --             --
  Amortization of deferred stock
    compensation (unaudited)....       --      --        --      --           --        1,795             --          1,795
  Net loss (unaudited)..........       --      --        --      --           --           --        (10,527)       (10,527)
                                  -------    ----    ------    ----     --------      -------       --------       --------
Balance at June 30, 1999
  (unaudited)...................       --    $ --    49,777    $ --     $172,106      $(4,472)      $(53,660)      $113,974
                                  =======    ====    ======    ====     ========      =======       ========       ========
</TABLE>

                            See accompanying notes.
                                       F-5
<PAGE>   75

                             JUNIPER NETWORKS, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                        PERIOD FROM
                                                         INCEPTION                               SIX MONTHS
                                                        (FEBRUARY 2,       YEAR ENDED               ENDED
                                                          1996) TO        DECEMBER 31,            JUNE 30,
                                                        DECEMBER 31,   -------------------   -------------------
                                                            1996         1997       1998       1998       1999
                                                        ------------   --------   --------   --------   --------
                                                                                                 (UNAUDITED)
<S>                                                     <C>            <C>        <C>        <C>        <C>
OPERATING ACTIVITIES:
Net loss..............................................    $(1,799)     $(10,363)  $(30,971)  $(11,108)  $(10,527)
Adjustments to reconcile net loss to net cash used in
  operating activities:
  Depreciation and lease amortization.................         47           712      2,171        781      2,350
  Amortization of prepaid maintenance contracts.......         --           238        367         24        273
  Amortization of deferred stock compensation.........         --           351      1,235        213      1,795
  Loss on disposal of property, equipment, and
    purchased software................................         --            59         --         --         --
  Issuance of stock for consulting services...........         18            21         30         --         --
  Issuance of warrants in connection with certain
    leasing arrangements..............................         28            14         --         --         --
  Changes in operating assets and liabilities:
    Accounts receivable...............................         --            --     (8,056)    (1,644)    (9,256)
    Prepaid expenses and other current assets.........        (82)         (699)      (504)      (250)      (474)
    Other long-term assets............................        (49)         (104)       (10)       (41)      (403)
    Accounts payable and other current liabilities....        172           489      4,084        828      2,725
    Accrued warranty liability........................         --            --        684         --      2,662
    Accrued milestone payment.........................         --           423       (423)      (423)        --
    Accrued compensation and related liabilities......         --           245        869        252        695
    Deferred revenue..................................         --            --      5,639      1,644      7,176
    Other long-term liabilities.......................         --            --         43         --         --
                                                          -------      --------   --------   --------   --------
Net cash used in operating activities.................     (1,665)       (8,614)   (24,842)    (9,724)    (2,984)

INVESTING ACTIVITIES:
Purchases of property and equipment, net..............       (864)       (3,110)    (6,531)    (2,372)    (3,746)
Purchases of short-term investments...................     (5,870)      (20,715)    (3,501)        --    (22,873)
Maturities of short-term investments..................         --        10,800     19,286     12,785         --
                                                          -------      --------   --------   --------   --------
Net cash provided by (used in) investing activities...     (6,734)      (13,025)     9,254     10,413    (26,619)

FINANCING ACTIVITIES:
Proceeds from sale leaseback liabilities..............        535         2,603      5,705      2,187         --
Payments on lease obligations.........................        (25)         (439)    (1,157)      (477)    (3,707)
Proceeds from issuance of preferred stock.............     10,895        45,953         --         --     33,948
Proceeds from issuance of common stock................        592           396        699         21     71,740
Repurchase of common stock............................         --           (30)        (3)        (3)       (47)
                                                          -------      --------   --------   --------   --------
Net cash provided by financing activities.............     11,997        48,483      5,244      1,728    101,934
                                                          -------      --------   --------   --------   --------
Net increase (decrease) in cash and cash
  equivalents.........................................      3,598        26,844    (10,344)     2,417     72,331
Cash and cash equivalents at beginning of period......         --         3,598     30,442     30,442     20,098
                                                          -------      --------   --------   --------   --------
Cash and cash equivalents at end of period............    $ 3,598      $ 30,442   $ 20,098   $ 32,859   $ 92,429
                                                          =======      ========   ========   ========   ========

SUPPLEMENTAL DISCLOSURES OF CASHFLOW INFORMATION
Cash paid for interest................................    $    --      $    210   $    592   $    197   $    331
                                                          =======      ========   ========   ========   ========

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
  FINANCING ACTIVITIES
Acquisition of property and equipment.................    $   535      $  2,243   $  5,692   $    863   $     --
                                                          =======      ========   ========   ========   ========
Deferred stock compensation...........................    $    --      $     --   $  6,388   $  2,549   $  1,114
                                                          =======      ========   ========   ========   ========
</TABLE>

                            See accompanying notes.
                                       F-6
<PAGE>   76

                             JUNIPER NETWORKS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

      Juniper Networks, Inc. ("Juniper Networks") was incorporated in the state
of California on February 2, 1996. Juniper Networks was reincorporated in the
state of Delaware on March 15, 1998. Juniper Networks was established for the
purpose of providing Internet infrastructure solutions to Internet service
providers and other telecommunication service providers. Juniper Networks
develops next generation Internet backbone routers.

      From inception, in February 1996, through September 1998, Juniper
Networks' operating activities were primarily devoted to increasing research and
development capabilities, designing ASICs, developing software, developing and
testing the M40 and other products which are currently in development, staffing
the administrative, marketing and sales organizations and establishing strategic
relationships. Accordingly, Juniper Networks was classified as a development
stage company through that date. Juniper Networks commenced product shipments in
October 1998 and therefore emerged from the development stage.

INTERIM FINANCIAL INFORMATION

      The financial information at June 30, 1999 and for the six months ended
June 30, 1998 and 1999 is unaudited but includes all adjustments, consisting
only of normal recurring adjustments, that Juniper Networks considers necessary
for a fair presentation of its financial position, operating results, and cash
flows for the interim date and periods presented. Results for the six-month
period ended June 30, 1999 are not necessarily indicative of the results to be
expected for the entire fiscal year or future periods.

PRINCIPLES OF CONSOLIDATION

      The consolidated financial statements include the accounts of Juniper
Networks and its wholly-owned subsidiaries. All significant inter-company
balances and transactions have been eliminated.

USE OF ESTIMATES

      The preparation of the consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ materially from
those estimates.

CASH, CASH EQUIVALENTS, SHORT-TERM AND LONG-TERM INVESTMENTS

      Juniper Networks considers all highly liquid investment securities with
maturities from date of purchase of three months or less to be cash equivalents.
Short- and long-term investments consist of debt securities with original
maturities between three months and sixteen months.

      Management determines the appropriate classification of debt and equity
securities at the time of purchase and evaluates such designation as of each
balance sheet date. To date, all marketable securities have been classified as
available-for-sale and are carried at fair value with material unrealized gains
and losses, if any, included in stockholders' equity. Unrealized gains and
losses were not material for all periods presented. Realized gains and losses
and declines in value of securities judged to be other than temporary are
included in interest income. Interest and dividends on all securities are
included in interest income.

                                       F-7
<PAGE>   77
                             JUNIPER NETWORKS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONCENTRATIONS

      Financial instruments that potentially subject Juniper Networks to
concentrations of credit risk consist principally of investments in debt
securities and trade receivables. Juniper Networks is exposed to credit risks in
the event of default by the financial institutions or issuers of investments to
the extent recorded on the balance sheet. Juniper Networks generally does not
require collateral. For the year ended December 31, 1998, two customers, A and
B, accounted for 78% and 22% of Juniper Networks' net revenues. For the six
months ended June 30, 1999, two customers, A and C, accounted for 35% and 27% of
Juniper Networks' net revenues.

      Juniper Networks receives certain custom semiconductor chips from a sole
supplier. Additionally, Juniper Networks relies on one hardware manufacturer for
the production of its product. The inability of the supplier or manufacturer to
fulfill supply requirements of Juniper Networks could negatively impact future
results.

FAIR VALUE OF FINANCIAL INSTRUMENTS

      The fair value of Juniper Networks' short-term and long-term investments
is based on quoted market prices. The carrying value of those investments
approximates their fair value.

      The fair value of short-term and long-term capital lease obligations is
estimated based on current interest rates available to Juniper Networks for debt
instruments with similar terms, degrees of risk, and remaining maturities. The
carrying values of these obligations approximate their respective fair values.

PROPERTY AND EQUIPMENT

      Property and equipment, including equipment leased under capital leases,
are stated at cost less accumulated depreciation and amortization. Depreciation
and amortization are provided on a straight-line basis over the lesser of the
estimated useful life, generally three to five years, or the lease term of the
respective assets.

REVENUE RECOGNITION

      Juniper Networks generally recognizes product revenue at the time of
shipment, assuming that collectibility is probable, unless Juniper Networks has
future obligations for installation or has to obtain customer acceptance in
which case revenue is deferred until these obligations are met. Revenue from
service obligations is deferred and recognized on a straight-line basis over the
contractual period. Amounts billed in excess of revenue recognized are included
as deferred revenue in the accompanying consolidated balance sheets.

WARRANTY RESERVES

      Juniper Networks' product generally carries a one-year warranty that
includes factory repair services as needed for replacement of parts. Estimated
expenses for warranty obligations are accrued when revenue is recognized.

RESEARCH AND DEVELOPMENT

      Costs to develop Juniper Networks' products are expensed as incurred in
accordance with the Financial Accounting Standards Board's Statement of
Financial Accounting Standards No. 2, "Accounting for Research and Development
Costs," which establishes accounting and reporting standards for research and
development.

COMPREHENSIVE INCOME

      Effective January 1, 1998, Juniper Networks adopted Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" (FAS 130). Juniper

                                       F-8
<PAGE>   78
                             JUNIPER NETWORKS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Networks has no material components of other comprehensive income and
accordingly the comprehensive loss is the same as net loss for all periods
presented.

STOCK-BASED COMPENSATION

      Juniper Networks accounts for its stock options and equity awards in
accordance with the provisions of the Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees," and has elected to follow the
"disclosure only" alternative prescribed by Financial Accounting Standards
Board's Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" (FAS 123).

NET LOSS PER SHARE

      Basic net loss per share and diluted net loss per share are presented in
conformity with Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 128, "Earnings Per Share" (FAS 128), for all periods
presented. Pursuant to the Securities and Exchange Commission Staff Accounting
Bulletin No. 98, common stock and convertible preferred stock issued or granted
for nominal consideration prior to the anticipated effective date of the initial
public offering must be included in the calculation of basic and diluted net
loss per common share as if they had been outstanding for all periods presented.
To date, Juniper Networks has not had any issuances or grants for nominal
consideration.

      In accordance with FAS 128, basic and diluted net loss per share has been
computed using the weighted-average number of shares of common stock outstanding
during the period, less the weighted average number of shares of common stock
issued to founders, investors and employees that are subject to repurchase (see
Notes 5 and 6). Basic and diluted pro forma net loss per share, as presented in
the consolidated statements of operations, has been computed as described above
and also gives effect to the conversion of the convertible preferred stock
(using the if-converted method) from the original date of issuance, using the
initial public offering price of $34.00 per share to calculate the conversion
ratio for Series D-1 convertible preferred stock.

                                       F-9
<PAGE>   79
                             JUNIPER NETWORKS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The following table presents the calculation of basic and diluted and pro
forma basic and diluted net loss per share (in thousands, except per share
data):

<TABLE>
<CAPTION>
                                    PERIOD FROM
                                     INCEPTION                                  SIX MONTHS
                                 (FEBRUARY 2, 1996)       YEAR ENDED               ENDED
                                         TO              DECEMBER 31,            JUNE 30,
                                    DECEMBER 31,      -------------------   -------------------
                                        1996            1997       1998       1998       1999
                                 ------------------   --------   --------   --------   --------
                                                                                (UNAUDITED)
<S>                              <C>                  <C>        <C>        <C>        <C>
Net loss.......................       $(1,799)        $(10,363)  $(30,971)  $(11,108)  $(10,527)
                                      =======         ========   ========   ========   ========
Basic and diluted:
  Weighted-average shares of
     common stock outstanding..        11,030           18,623     19,691     19,157     22,111
  Less: weighted-average shares
     subject to repurchase.....        (7,072)         (10,032)    (6,734)    (7,785)    (5,675)
                                      -------         --------   --------   --------   --------
  Weighted-average shares used
     in computing basic and
     diluted net loss per
     share.....................         3,958            8,591     12,957     11,372     16,436
                                      =======         ========   ========   ========   ========
  Basic and diluted net loss
     per share.................       $ (0.46)        $  (1.21)  $  (2.39)  $  (0.98)  $  (0.64)
                                      =======         ========   ========   ========   ========
Pro forma:
  Net loss.....................                                  $(30,971)             $(10,527)
                                                                 ========              ========
  Shares used above............                                    12,957                16,436
  Pro forma adjustment to
     reflect weighted effect of
     assumed conversion of
     convertible preferred
     stock.....................                                    24,113                24,380
                                                                 --------              --------
  Shares used in computing pro
     forma basic and diluted
     net loss per common share
     (unaudited)...............                                    37,070                40,816
                                                                 ========              ========
  Pro forma basic and diluted
     net loss per common share
     (unaudited)...............                                  $  (0.84)             $  (0.26)
                                                                 ========              ========
</TABLE>

      Juniper Networks has excluded all convertible preferred stock, warrants
for convertible preferred stock, outstanding stock options and shares subject to
repurchase from the calculation of diluted loss per share because all such
securities are antidilutive for all periods presented. The total number of
shares excluded from the calculations of diluted net loss per share were
10,810,000, 28,937,000, 33,923,000, 34,219,000 and 34,113,000 for the period
from inception (February 2, 1996) through December 31, 1996 for the two years
ended December 31, 1997 and 1998 and for the six months ended June 30, 1998 and
1999, respectively.

                                      F-10
<PAGE>   80
                             JUNIPER NETWORKS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

SEGMENT INFORMATION

      Effective January 1, 1998, Juniper Networks adopted the Financial
Accounting Standards Board's Statement of Financial Accounting Standards No.
131, "Disclosures About Segments of an Enterprise and Related Information" (FAS
131). FAS 131 changes the way companies report financial and descriptive
information about reportable operating segments in annual financial statements
and interim financial reports issued to stockholders. Juniper Networks operates
solely in one segment, the development and marketing of Internet infrastructure
equipment, and therefore there is no impact to Juniper Networks' consolidated
financial statements due to the adoption of FAS 131. Approximately, $4.4 million
of Juniper Networks' net revenues in the six-months ended June 30, 1999 were
from export sales. These sales primarily were made to Europe and Asia. The
operations and assets of Juniper Networks' foreign subsidiaries were immaterial
in all periods presented.

RECENT ACCOUNTING PRONOUNCEMENTS

      In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" (SOP 98-1). SOP 98-1 requires
that entities capitalize certain costs related to internal-use software once
certain criteria have been met. Juniper Networks adopted SOP 98-1 in January
1999, with no material impact on its consolidated financial position, results of
operations, or cash flows.

      In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5, "Reporting on the Costs of Start-Up
Activities" (SOP 98-5). SOP 98-5, which is effective for fiscal years beginning
after December 31, 1998, provides guidance on the financial reporting of
start-up costs and organization costs. It requires the costs of start-up
activities and organization costs to be expensed as incurred. Juniper Networks
adopted SOP 98-5 in January 1999, with no significant impact on consolidated
operating results, financial position or cash flows.

      In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (FAS 133), which will be effective for the fiscal year
ended December 31, 2000. This statement establishes accounting and reporting
standards requiring that every derivative instrument, including certain
derivative instruments embedded in other contracts, be recorded in the balance
sheet as either an asset or liability measured at its fair value. The statement
also requires that changes in the derivative's fair value be recognized in
earnings unless specific hedge accounting criteria are met. Juniper Networks has
not evaluated the impact of FAS 133, however, it believes the adoption of FAS
133 will not have a material effect on the financial position, consolidated
results of operations, or cash flows as Juniper Networks has not entered into
any derivative contracts.

                                      F-11
<PAGE>   81
                             JUNIPER NETWORKS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. CASH EQUIVALENTS, SHORT-TERM AND LONG-TERM INVESTMENTS

     Cash equivalents, short-term and long-term investments consist of the
following (in thousands):

<TABLE>
<CAPTION>
                                                            DECEMBER 31,
                                                        ---------------------    JUNE 30,
                                                          1997        1998         1999
                                                        --------    ---------   -----------
                                                                                (UNAUDITED)
<S>                                                     <C>         <C>         <C>
Money market funds....................................  $ 14,351    $   3,037    $ 84,563
Commercial paper......................................    12,536       16,520          --
Government securities.................................     9,205           --          --
Corporate debt securities.............................     7,061           --      24,403
Municipal bonds.......................................        --           --       5,000
Certificates of deposit...............................     3,066           --          --
                                                        --------    ---------    --------
          Total available-for-sale investments........    46,219       19,557     113,966
Less amounts classified as cash equivalents...........   (30,434)     (19,557)    (91,093)
                                                        --------    ---------    --------
          Total investments...........................  $ 15,785    $      --    $ 22,873
                                                        ========    =========    ========
</TABLE>

3. PROPERTY AND EQUIPMENT, NET

     Property and equipment consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                                              -----------------
                                                               1997      1998
                                                              ------    -------
<S>                                                           <C>       <C>
Computers and equipment.....................................  $2,242    $ 7,435
Purchased software..........................................   1,394      2,540
Furniture and fixtures......................................     424        594
                                                              ------    -------
          Total.............................................   4,060     10,569
Less accumulated depreciation and lease amortization........    (745)    (2,867)
                                                              ------    -------
Property and equipment, net.................................  $3,315    $ 7,702
                                                              ======    =======
</TABLE>

4. CAPITAL LEASE OBLIGATIONS

      Juniper Networks enters into various capital leases, including sale and
leaseback transactions, to finance purchases of property, equipment and
software. As of December 31, 1997 and 1998, under various lease lines of credit,
Juniper Networks had $4,861,000 and $1,891,000 available for future purchases of
property and equipment that expired June 30, 1999. Under the terms of certain
lease agreements, warrants to purchase the Company's preferred stock have been
granted as described in Note 5. Capitalized costs of $2,778,000 and $8,470,000,
and accumulated amortization of $690,000 and $905,000 are included in property
and equipment at December 31, 1997 and 1998.

                                      F-12
<PAGE>   82
                             JUNIPER NETWORKS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Future minimum payments under capital leases consist of the following (in
thousands):

<TABLE>
<CAPTION>
                                                                 AS OF
                                                              DECEMBER 31,
                                                                  1998
                                                              ------------
<S>                                                           <C>
1999........................................................    $ 2,974
2000........................................................      2,859
2001........................................................      2,449
2002........................................................        582
                                                                -------
Total minimum lease payments................................      8,864
Less amount representing interest...........................     (1,483)
                                                                -------
Present value of net minimum lease payments.................      7,381
Less current portion........................................     (2,220)
                                                                -------
Long-term portion...........................................    $ 5,161
                                                                =======
</TABLE>

5. STOCKHOLDERS' EQUITY

CONVERTIBLE PREFERRED STOCK

<TABLE>
<CAPTION>
                                                                SHARES ISSUED
                                                             AND OUTSTANDING AT
                                                   ---------------------------------------
                                                         DECEMBER 31,
                                       SHARES      ------------------------     JUNE 30,
                                     AUTHORIZED       1997          1998          1999
                                     ----------    ----------    ----------    -----------
                                                                               (UNAUDITED)
<S>                                  <C>           <C>           <C>           <C>
Series A...........................  1,743,751      1,743,751     1,743,751          0
Series B...........................  3,915,308      3,821,975     3,821,975          0
Series C...........................  5,200,000      5,151,178     5,151,178          0
Series D (unaudited)...............    600,000             --            --          0
Series D-1 (unaudited).............  2,580,000             --            --          0
                                     ----------    ----------    ----------        ---
          Total preferred stock....  14,039,059    10,716,904    10,716,904          0
                                     ==========    ==========    ==========        ===
</TABLE>

      Holders of Juniper Networks' preferred stock are entitled to one vote for
each share of common stock into which the preferred stock is convertible.
Holders of Juniper Networks' preferred stock shall also be entitled to vote
separately as a class with regard to customary protective provisions.

      The stockholders of Series A, B, and C preferred stock are entitled to
annual noncumulative dividends per share of $0.05, $0.12, and $0.45 when and if
declared by the board of directors. Under the terms of certain lease agreements,
Juniper Networks is prohibited from declaring or paying any dividends on its
capital stock. In the event of any voluntary or involuntary liquidation of
Juniper Networks, Series A, B, and C stockholders are entitled to a liquidation
preference per share of $1.00, $2.40, and $8.93 plus any declared but unpaid
dividends, all in preference to the holders of the common stock. Upon the
completion of this distribution, the holders of the common stock will receive
any and all remaining assets of Juniper Networks.

      The stockholders of Series A, B, and C preferred stock have the right at
any time after the date of issuance to convert each of their shares into 2.25
shares of common stock, which equals the initial offering price per share of
Series A, B, and C preferred stock of $1.00, $2.40 and $8.93, respectively,

                                      F-13
<PAGE>   83
                             JUNIPER NETWORKS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

divided by $0.4444, $1.07, and $3.97. Each of
these conversion rates is subject to adjustments for dilution. Each share of
preferred stock shall be automatically converted into shares of common stock at
the then effective conversion rate upon (a) the closing of the issuance of
shares following the effectiveness of a registration statement under the
Securities Act of 1933, pursuant to a firm commitment public offering of Juniper
Networks' common stock at a price per share of not less than three times the
applicable conversion price for the Series A and B preferred stock and at a
price per share of not less than one-and-a-half times the then applicable
conversion price for the Series C preferred stock, subject to adjustments for
dilution, with aggregate proceeds in excess of $10,000,000 or (b) the
affirmative vote of the holders of 66 2/3 of the then outstanding shares of
preferred stock.

      See description of Series D and D-1 preferred stock in Note 10. At the
time of Juniper Networks' initial public offering, all outstanding shares of
preferred stock converted into 25,598,000 shares of common stock. No shares of
preferred stock were outstanding at June 30, 1999.

WARRANTS
     Juniper Networks periodically grants warrants in connection with certain
lease arrangements. Juniper Networks had the following warrants to purchase
shares of preferred stock outstanding at December 31, 1998 and to purchase
shares of common stock outstanding at June 30, 1999:

<TABLE>
<CAPTION>
       DECEMBER 31, 1998         PREFERRED    EXERCISE
       NUMBER OF SHARES            STOCK      PRICE PER                     EXPIRATION OF
       (PREFERRED STOCK)          SERIES        SHARE       DATE ISSUED       WARRANTS
       -----------------         ---------    ---------    -------------    -------------
<S>                              <C>          <C>          <C>              <C>
 83,333........................  Series B       $2.40      December 1996    December 2003
 10,000........................  Series B        2.40      June 1997        December 2003
 23,516........................  Series C        8.93      June 1997        December 2003
- -------------------------------
116,849
===============================
</TABLE>

<TABLE>
<CAPTION>
   JUNE 30, 1999 (UNAUDITED)                  EXERCISE
       NUMBER OF SHARES                       PRICE PER                     EXPIRATION OF
        (COMMON STOCK)                          SHARE       DATE ISSUED       WARRANTS
   -------------------------                  ---------    -------------    -------------
<S>                              <C>          <C>          <C>              <C>
187,499........................                 $1.07      December 1996    December 2003
 52,911........................                  3.97      June 1997        December 2003
- -------------------------------
240,410
===============================
</TABLE>

     All of the outstanding warrants are exercisable immediately. The fair value
of the warrants are amortized as interest expense over the life of the
respective lease arrangements.

COMMON STOCK

      Juniper Networks is authorized to issue up to 200,000,000 shares of its
common stock. At December 31, 1997 and 1998 and June 30, 1999, 19,121,347,
20,577,328, and 49,777,014 shares were issued and outstanding. Prior to the
adoption of the 1996 Stock Option Plan (see Note 6), Juniper Networks issued
shares of common stock to

                                      F-14
<PAGE>   84
                             JUNIPER NETWORKS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

founders, investors, and employees. The shares issued to investors were fully
vested upon purchase. Generally, shares issued to founders and employees were
sold pursuant to restricted stock purchase agreements containing provisions
established by the board of directors. These provisions give Juniper Networks
the right to repurchase the shares at the original sales price. This right
expires at the rate of 25% after one year and 2.0833% per month thereafter. At
December 31, 1997 and 1998 and June 30, 1999, 2,564,063, 1,382,813, and 642,188
of these shares, issued outside of the 1996 Stock Option Plan, remained subject
to repurchase. See Note 6 for shares subject to repurchase under the 1996 Stock
Option Plan.

      Juniper Networks effected a three-for-two stock split of its common stock
on June 27, 1997 and October 2, 1998. All share and per share amounts have been
adjusted to reflect the splits.

     Common stock reserved for future issuance consists of the following:

<TABLE>
<CAPTION>
                                                              DECEMBER 31,     JUNE 30,
                                                                  1998           1999
                                                              ------------    -----------
                                                                              (UNAUDITED)
<S>                                                           <C>             <C>
Common stock reserved for:
  Conversion of preferred stock.............................   24,113,034             --
  Conversion of preferred stock issuable on exercise of
     warrants...............................................      262,910             --
  Exercise of common stock warrants.........................           --        240,410
  Stock option plan.........................................    6,663,292      8,181,683
  Employee stock purchase plan..............................           --        500,000
                                                               ----------      ---------
Total common stock reserved for future issuance.............   31,039,236      8,922,093
                                                               ==========      =========
</TABLE>

6. STOCK OPTION PLAN

      Juniper Networks' 1996 Stock Option Plan (the "Plan") provides for the
granting of incentive stock options to employees and nonstatutory stock options
to employees, directors and consultants. Incentive stock options are granted at
an exercise price of not less than the fair value per share of the common stock
on the date of grant as determined by the board of directors. Nonstatutory stock
options are granted at an exercise price of not less than 85% of the fair value
per share on the date of grant as determined by the board of directors. Options
granted to consultants are in consideration for the fair value of services
previously rendered and are not contingent upon future events. No options have
been granted to consultants to date. Vesting and exercise provisions are
determined by the board of directors. Options granted under the Plan generally
become exercisable over a four-year period beginning on the date of grant.
Options granted under the Plan have a maximum term of ten years.

                                      F-15
<PAGE>   85
                             JUNIPER NETWORKS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Option activity under the Plan is summarized as follows:

<TABLE>
<CAPTION>
                                                         OUTSTANDING OPTIONS
                                           ------------------------------------------------
                                             NUMBER         PRICE PER      WEIGHTED-AVERAGE
                                           OF SHARES          SHARE         EXERCISE PRICE
                                           ----------    ---------------   ----------------
<S>                                        <C>           <C>               <C>
Options granted..........................   1,797,750    $0.11 to $ 0.40        $ 0.22
                                           ----------
Balance at December 31, 1997.............   1,797,750     0.11 to   0.40          0.22
Options granted..........................   3,512,480     0.53 to   4.90          1.86
Options exercised........................  (1,507,316)    0.11 to   4.90          0.49
Options canceled.........................    (121,676)    0.11 to   1.67          0.27
                                           ----------
Balance at December 31, 1998.............   3,681,238     0.11 to   4.90          1.67
Options granted (unaudited)..............   3,085,087     8.80 to  28.00         18.13
Options exercised (unaudited)............  (1,627,590)    0.11 to  21.00          3.98
Options canceled (unaudited).............    (131,040)    0.40 to  21.00         11.29
                                           ----------
Balance at June 30, 1999 (unaudited).....   5,007,695     0.11 to  28.00         10.59
                                           ==========
</TABLE>

      The Plan also provides for the sale of shares of common stock to employees
and consultants at the fair value per share of the common stock as determined by
the board of directors. Shares issued to consultants are for the fair value of
services previously rendered and are not contingent upon future events. Shares
sold to employees are made pursuant to restricted stock purchase agreements
containing provisions established by the board of directors. These provisions
give Juniper Networks the right to repurchase the shares at the original sales
price. This right expires at a rate determined by the board of directors,
generally at the rate of 25% after one year and 2.0833% per month thereafter.

      During the period from inception (February 2, 1996) to December 31, 1996
and the year ended December 31, 1997, Juniper Networks issued 4,840,884 and
3,572,433 shares under the Plan. No shares were issued under the Plan in the
year ended December 31, 1998 and the six month period ended June 30, 1999. At
December 31, 1997 and 1998 and June 30, 1999, 6,340,994, 4,685,104, and
4,728,716 shares were subject to repurchase rights under the Plan. At December
31, 1997, December 31, 1998 and June 30, 1999, 345,095, 396,425 and 542,405
shares, respectively, had been repurchased under the Plan.

      Juniper Networks has reserved 16,187,500 shares of common stock for
issuance under the Plan. At December 31, 1998, 2,982,054 shares were available
for future option grants or stock sales under the Plan. At June 30, 1999,
3,173,988 shares were available for future option grants or stock sales under
the Plan.

      In 1997, Juniper Networks recorded compensation expense of $351,000
representing the difference between the deemed fair value and the exercise price
of certain option grants made during the year.

      During the year ended December 31, 1998 and the three months ended March
31, 1999, in connection with the grant of certain stock options to employees,
Juniper Networks recorded deferred stock compensation of $6,388,000 and
$1,114,000 representing the difference between the exercise price and the deemed
fair value of Juniper Networks' common stock on the date such stock options were
granted. Such amount is included as a reduction of stockholders' equity and is
being amortized by charges to operations on a graded vesting method. Juniper
Networks recorded amortization of deferred stock compensation expense of
$1,235,000 for the year ended December 31, 1998 and $1,795,000 for the six
months ended June 30, 1999. At

                                      F-16
<PAGE>   86
                             JUNIPER NETWORKS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

December 31, 1998 and June 30, 1999, Juniper Networks had a total of $5,153,000
and $4,472,000 remaining to be amortized over the corresponding vesting period
of each respective option, generally four years. The amortization expense
relates to options awarded to employees in all operating expense categories.
This amount has not been separately allocated to these categories.

STOCK-BASED COMPENSATION

      The Company has elected to follow APB 25 and related interpretations in
accounting for its employee stock-based compensation plans. Because the exercise
price of Juniper Networks' employee stock options equals the market price of the
underlying stock on the date of grant, no compensation expense was recognized.

      Pro forma information regarding net loss has been determined as if Juniper
Networks had accounted for its employee stock options under the fair value
method prescribed by FAS 123. The resulting effect on pro forma net loss
disclosed is not likely to be representative of the effects on net (loss) on a
pro forma basis in future years, due to subsequent years including additional
grants and years of vesting.

     The fair value of each option granted through June 30, 1999 was estimated
on the date of grant using the Black-Scholes method with the following
weighted-average assumptions:

<TABLE>
<CAPTION>
                              PERIOD FROM
                               INCEPTION              YEAR ENDED                SIX MONTHS
                           (FEBRUARY 2, 1996)        DECEMBER 31,             ENDED JUNE 30,
                            TO DECEMBER 31,     -----------------------   -----------------------
                                  1996             1997         1998         1998         1999
                           ------------------   ----------   ----------   ----------   ----------
                                                                                (UNAUDITED)
<S>                        <C>                  <C>          <C>          <C>          <C>
Dividend yield...........       --                  --           --           --           --
Volatility factor........       --                  --           --           --           .6
Risk-free interest
  rate...................      6.20%              6.20%        5.23%        5.23%        5.23%
Expected life............    4.5 years          4.5 years    4.5 years    4.5 years    4.0 years
Weighted average fair
  value of options
  granted in the
  period.................      $0.02              $0.03        $0.37        $0.15        $9.01
</TABLE>

                                      F-17
<PAGE>   87
                             JUNIPER NETWORKS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     For purposes of pro forma disclosures, the estimated fair value of options
is amortized to pro forma expense over the options' vesting period. Pro forma
information follows (in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                     PERIOD FROM
                                      INCEPTION                               SIX MONTHS
                                     (FEBRUARY 2,       YEAR ENDED               ENDED
                                       1996) TO        DECEMBER 31,            JUNE 30,
                                     DECEMBER 31,   -------------------   -------------------
                                         1996         1997       1998       1998       1999
                                     ------------   --------   --------   --------   --------
                                                                              (UNAUDITED)
<S>                                  <C>            <C>        <C>        <C>        <C>
Net Loss:
  As reported......................    $(1,799)     $(10,363)  $(30,971)  $(11,108)  $(10,527)
  Pro forma........................     (1,805)      (10,403)   (31,143)   (11,154)   (12,082)
Basic and Diluted Net Loss Per
  Share:
  As reported......................      (0.46)        (1.21)     (2.39)     (0.98)     (0.64)
  Pro forma........................      (0.46)        (1.21)     (2.40)     (0.98)     (0.74)
</TABLE>

7. 401(k) PLAN

      Juniper Networks maintains a savings and retirement plan under Section
401(k) of the Internal Revenue Code. All employees are eligible to participate
on their first day of employment with Juniper Networks. Under the plan,
employees may contribute up to 20% of their pretax salaries per year but not
more than the statutory limits. Juniper Networks does not contribute to the
plan.

8. COMMITMENTS

      Juniper Networks leases its facilities under operating leases that expire
in 2001. Rental expense for the period from inception (February 2, 1996) to
December 31, 1996 and for the years ended December 31, 1997 and 1998, were
$145,000, $529,000, and $937,000.

     Future minimum payments under the noncancellable operating leases consist
of the following (in thousands):

<TABLE>
<CAPTION>
                                             DECEMBER 31,      JUNE 30,
                                                 1998            1999
                                             ------------    -------------
                                                              (UNAUDITED)
<S>                                          <C>             <C>
1999.......................................     $1,422          $   872
2000.......................................      1,071            3,692
2001.......................................        721            4,418
2002.......................................         --            4,572
2003.......................................         --            4,733
Thereafter.................................         --           46,970
                                                ------          -------
  Total minimum lease payments.............     $3,214          $65,257
                                                ======          =======
</TABLE>

      Juniper Networks has outstanding purchase order commitments for materials
of approximately $2,442,000 at December 31, 1998 and $2,600,000 at June 30,
1999. Juniper Networks expects the purchase orders to be fulfilled in 1999. Of
this amount, Juniper Networks has accrued approximately $295,000 and $120,000 of
the outstanding commitments for obsolete inventory as of December 31, 1998 and
June 30, 1999. These
                                      F-18
<PAGE>   88
                             JUNIPER NETWORKS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

expenses are included within cost of revenue in the year ended December 31, 1998
and the six months ended June 30, 1999.

9. INCOME TAXES

      Due to operating losses and the inability to recognize the benefits
therefrom, there is no provision for income taxes for the period from inception
(February 2, 1996) to December 31, 1996, or for the years ended December 31,
1997, and 1998.

     Significant components of Juniper Networks' deferred tax assets as of
December 31, 1997 and 1998 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                           DECEMBER 31,
                                                        -------------------
                                                         1997        1998
                                                        -------    --------
<S>                                                     <C>        <C>
Deferred tax assets:
  Net operating loss carryforwards....................  $ 4,600    $ 13,470
  Research credit carryforwards.......................      600       1,490
  Deferred revenue....................................       --       2,700
  Other temporary differences.........................       --         390
                                                        -------    --------
     Total deferred tax assets........................    5,200      18,050
Valuation allowance...................................   (5,200)    (18,050)
                                                        -------    --------
Net deferred tax assets...............................  $    --    $     --
                                                        =======    ========
</TABLE>

      FASB Statement No. 109 provides for the recognition of deferred tax assets
if realization of such assets is more likely than not. Based upon the weight of
available evidence, which includes Juniper Networks' historical operating
performance and the reported cumulative net losses in all prior years, Juniper
Networks has provided a full valuation allowance against its net deferred tax
assets.

      The net valuation allowance increased by $5,200,000 during the year ended
December 31, 1997.

      At December 31, 1998, Juniper Networks had net operating loss
carryforwards for federal and California tax purposes of approximately
$34,000,000 and $33,000,000. Juniper Networks also had federal and state
research and development tax credit carryforwards of approximately $950,000 and
$815,000. The net operating loss and tax credit carryforwards will expire at
various dates beginning in 2004, if not utilized.

      Utilization of net operating loss and credit carryforwards may be subject
to a substantial annual limitation due to the ownership change limitations
provided by the Internal Revenue Code of 1986 and similar state provisions. The
annual limitation may result in the expiration of the net operating loss and
credit carryforwards before utilization.

10. EVENTS SUBSEQUENT TO DATE OF AUDITOR'S REPORT

1999 EMPLOYEE STOCK PURCHASE PLAN

      In April 1999, the board of directors approved the adoption of Juniper
Networks' 1999 Employee Stock Purchase Plan (the "purchase plan"). A total of
500,000 shares of common stock has been reserved for issuance under the 1999
purchase plan, plus, commencing on January 1, 2000, annual increases equal to
the lesser of 500,000 shares, 1% of the outstanding common shares on such date
or a lesser amount determined by the board of directors. The purchase plan
permits eligible employees to

                                      F-19
<PAGE>   89
                             JUNIPER NETWORKS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

acquire shares of Juniper Networks' common stock through periodic payroll
deductions of up to 10% of base compensation. No more than 1,000 shares may be
purchased by each employee in any twelve month period, and in no event, may an
employee purchase more than $25,000 worth of stock, determined at the fair
market value of the shares at the time such option is granted, in one calendar
year. The purchase plan will be implemented in a series of offering periods,
each approximately six months in duration; provided, however, that the first
offering period will be approximately thirteen months in duration, ending on the
last trading day on or before July 31, 2000. The price at which the common stock
may be purchased is 85% of the lesser of the fair market value of Juniper
Network's common stock on the first day of the applicable offering period or on
the last day of the respective purchase period. The initial offering period will
commence on the effectiveness of the initial public offering and will end on
July 31, 2000.

ISSUANCE OF SERIES D AND D-1 CONVERTIBLE PREFERRED STOCK

      In March 1999, Juniper Network's board of directors approved an increase
in the authorized number of shares of preferred stock to 14,039,059 shares.

      In March 1999, the Company issued 500,000 shares of Series D preferred
stock and 2,580,000 shares of Series D-1 preferred stock at $11.03 per share,
resulting in cash proceeds of $33,972,400.

      Holders of Juniper Networks' Series D and D-1 preferred stock are entitled
to one vote for each share of common stock into which the preferred stock is
convertible. Holders of Juniper Networks' preferred stock shall also be entitled
to vote separately as a class with regard to customary protective provisions.

      The holders of Series D and D-1 preferred stock are entitled to annual
noncumulative dividends per share of $0.55 per share when and if declared by the
board of directors. In the event of any voluntary or involuntary liquidations of
Juniper Networks, Series D and D-1 shareholders are entitled to a liquidation
preference per share of $11.03 per share plus any declared but unpaid dividends,
all in preference to the holders of the common stock. Upon the completion of
this distribution, the holders of the common stock will receive any and all
remaining assets of Juniper Networks.

      The holders of Series D and D-1 preferred stock have the right at any time
after the date of issuance to convert each of their shares into a number of
shares of common stock determined by dividing the initial offering price per
share of the Series D and D-1 preferred stock by the conversion price, which is
$11.03. This conversion rate is subject to adjustments for dilution. Each share
of preferred stock shall be automatically converted into shares of common stock
at the then effective conversion rate upon (a) the closing of the issuance of
shares following the effectiveness of a registration statement under the
Securities Act of 1933, pursuant to a firm commitment offering of Juniper
Networks' common stock at a price per share of not less than three times the
applicable conversion rate for the Series A and B preferred stock, a price per
share of not less than one-and-a-half times the then applicable conversion rate
for the Series C preferred stock, and a price per share of not less than one
times the then applicable conversion rate for the Series D and D-1 preferred
stock, subject to adjustments for dilution, with aggregate proceeds in excess of
$10,000,000 or (b) the affirmative vote of the holders of 66 2/3 of the then
outstanding shares of preferred stock.

      If within one hundred and eighty days of the original issue date of the
Series D-1 preferred stock Juniper Networks files a registration statement under
the Securities Act of 1933 covering an underwritten initial

                                      F-20
<PAGE>   90
                             JUNIPER NETWORKS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

public offering, the Series D-1 conversion rate will be modified to equal the
original issue price per share of the Series D-1 preferred stock divided by 85%
of the initial public offering price. If, between 180 days and one year from the
original issue date of the Series D-1 preferred stock, Juniper Networks files a
registration statement under the Securities Act of 1933 covering an underwritten
initial public offering, the Series D-1 conversion rate will be modified to
equal the original issue price per share of the Series D-1 preferred stock
divided by 75% of the initial public offering price. If, between one year and
fifteen months from the original issue date of the Series D-1 preferred stock,
Juniper Networks files a registration statement under the Securities Act of 1933
covering an underwritten initial public offering, the Series D-1 conversion rate
will be modified to equal the original issue price per share of the Series D-1
preferred stock divided by 65% of the initial public offering price. If Juniper
Networks files a registration statement under the Securities Act of 1933
covering an underwritten initial public offering after 15 months from the
original issue date of the Series D-1 preferred stock there will be no
adjustment to the Series D-1 conversion rate.

AMENDMENT TO 1996 STOCK OPTION PLAN

      On April 19, 1999, the board of directors approved the following
amendments to the 1996 Stock Option Plan:

            (i) The number of shares reserved for issuance under the Plan was
      increased by 3,000,000 to 19,187,500 shares.

            (ii) An annual increase to the Plan will be added on the first day
      of each fiscal year, beginning in 2000, equal to the lesser of (1)
      3,000,000 shares, (2) 5% of the outstanding shares on that date, or (3) a
      lesser amount determined by the board of directors.

                                      F-21
<PAGE>   91

                                  UNDERWRITING

     Juniper Networks, the selling stockholders and the underwriters for this
offering named below have entered into an underwriting agreement with respect to
the shares being offered. Subject to certain conditions, each underwriter has
severally agreed to purchase the number of shares indicated in the following
table. Goldman, Sachs & Co., Credit Suisse First Boston Corporation, BancBoston
Robertson Stephens Inc., Dain Rauscher Wessels, a division of Dain Rauscher
Incorporated, SG Cowen Securities Corporation and Warburg Dillon Read LLC are
the representatives of the underwriters.

<TABLE>
<CAPTION>
                                                              Number of
                        Underwriters                           Shares
                        ------------                          ---------
<S>                                                           <C>
Goldman, Sachs & Co.........................................  1,680,000
Credit Suisse First Boston Corporation......................    714,000
BancBoston Robertson Stephens Inc...........................    714,000
Dain Rauscher Wessels
  a division of Dain Rauscher Incorporated..................    546,000
SG Cowen Securities Corporation.............................    273,000
Warburg Dillon Read LLC.....................................    273,000
ABN AMRO Incorporated.......................................    100,000
Deutsche Bank Securities Inc................................    100,000
Hambrecht & Quist LLC.......................................    100,000
Lehman Brothers Inc.........................................    100,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated..........    100,000
Charles Schwab & Co., Inc...................................    100,000
Thomas Weisel Partners LLC..................................    100,000
Wit Capital Corporation.....................................    100,000
                                                              ---------
  Total.....................................................  5,000,000
                                                              =========
</TABLE>

                           -------------------------

      If the underwriters sell more shares than the total number set forth in
the table above, the underwriters have an option to buy up to an additional
272,562 shares from Juniper Networks and an option to buy an additional 477,438
shares from the selling stockholders to cover such sales. They may exercise that
option for 30 days. If any shares are purchased pursuant to this option, the
underwriters will severally purchase shares in approximately the same proportion
as set forth in the table above.

      The following table shows the per share and total underwriting discounts
and commissions to be paid to the underwriters by Juniper Networks and the
selling stockholders. Such amounts are shown assuming both no exercise and full
exercise of the underwriters' option to purchase 750,000 additional shares.

                            Paid by Juniper Networks

<TABLE>
<CAPTION>
                       No Exercise   Full Exercise
                       -----------   --------------
<S>                    <C>           <C>
Per Share............  $      6.65   $         6.65
Total................  $ 9,975,000   $11,787,537.30
</TABLE>

                        Paid by the Selling Stockholders

<TABLE>
<CAPTION>
                       No Exercise   Full Exercise
                       -----------   --------------
<S>                    <C>           <C>
Per Share............  $      6.65   $         6.65
Total................  $23,275,000   $26,449,962.70
</TABLE>

      Shares sold by the underwriters to the public will initially be offered at
the initial price to public set forth on the cover of this prospectus. Any
shares sold by the underwriters to securities dealers may be sold at a discount
of up to $4.00 per share from the initial price to public. Any such securities
dealers may resell any shares purchased from the underwriters to certain other
brokers or dealers at a discount of up to $0.10 per share from the initial price
to public. If all the shares are not sold at the initial price to public, the
representatives may change the offering price and the other selling terms.

      Juniper Networks, the officers, the directors and certain stockholders who
hold 5% or more beneficial interests in Juniper Networks' common stock have
agreed with the underwriters not to dispose of or hedge any of their shares of
common stock or

                                       U-1
<PAGE>   92

securities convertible into or exchangeable for shares of common stock during
the period from the date of this prospectus continuing through the date 90 days
after the date of this prospectus except with the prior written consent of the
representatives. In addition, certain other stockholders entered into lock up
agreements in connection with Juniper Networks' initial public offering. See
"Shares Eligible for Future Sale" for a discussion of certain transfer
restrictions.

      In connection with the offering, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offering. Stabilizing
transactions consist of certain bids or purchases made for the purpose of
preventing or retarding a decline in the market price of the common stock while
the offering is in progress.

      The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares sold
by or for the account of such underwriter in stabilizing or short covering
transactions.

      These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on the Nasdaq
National Market, in the over-the-counter market or otherwise.

      As permitted by Rule 103 under the Exchange Act, certain underwriters (and
selling group members, if any) that are market makers ("passive market makers")
in the common stock may make bids for or purchases of common stock in the Nasdaq
National Market until a stabilizing bid has been made. Rule 103 generally
provides:

- - a passive market maker's net daily purchases of the common stock may not
  exceed 30% of its average daily trading volume in such securities for the two
  full consecutive calendar months, or any 60 consecutive days ending within the
  10 days, immediately preceding the filing date of the registration statement
  of which this prospectus forms a part,

- - a passive market maker may not effect transactions or display bids for the
  common stock at a price that exceeds the highest independent bid for the
  common stock by persons who are not passive market makers, and

- - bids made by passive market makers must be identified as such.

      Juniper Networks estimates that the total expenses of the offering payable
by Juniper Networks, excluding the underwriting discounts and commissions, will
be approximately $800,000.

      Juniper Networks and the selling stockholders have agreed to indemnify the
several underwriters against certain liabilities, including liabilities under
the Securities Act of 1933.

                                       U-2
<PAGE>   93

                            [Inside Back Cover Art]
<PAGE>   94
                      APPENDIX -- DESCRIPTION OF GRAPHICS

PROSPECTUS COVER

Juniper Networks, Inc. Logo

INSIDE FRONT COVER

A diagram that shows the M40 providing the critical links in the Internet
backbone to the fiber optic core of a Service Provider's Network. Four different
links showing the M40 and other pictures are depicted with the tag lines as
follows: 1) The hub of the diagram has the tag line "Controlling the Fiber-Optic
Core"; "Connecting the Service Provider" and "Servers"; 2) "Concentrating
Network Access," "Home" and "Business"; 3) "Managing Exploding Traffic Demands,"
"Cyber Cafe," "ATM" and "Cellular"; 4) "Differentiated Services for Multimedia
Applications," and "Multimedia Web Pages,"; 5) At the bottom of the page is the
text "Juniper Networks M40 Internet backbone routers are linking users and
applications across the new public network."

PAGE 32

Diagram showing areas of bottleneck when packet/cell switching and fiber optic
technologies are deployed together. The left side of the diagram is labeled
"Electronic Packet/Cell Switching" above pictures of computers. To the right of
the diagram is the text "Electronic Packet/Cell Switching" above pictures of
servers which are labeled "Servers." Between these pictures are links labeled
"Fiber Optic Core" and the text "Bottleneck" at the edges of the Fiber Optic
Core links.

PAGE 35

Diagram showing a typical architecture for a service provider's network
backbone, including the placement of network routes, switches and access
concentration points. Diagram contains the text "Enterprise Routers," "DS3,"
"DS1," "DS0," "OC-12," "OC-3," "ATM," "OC-12 ATM or OC-12 SONET or OC-48
SONET," "Core Backbone," "Intra-POP," "Access," "Router," "Switch" and "Access
Concentration Point."

PAGE 38

Diagram showing traffic path between router points labeled "San Francisco" and
"New York." Below the diagram is a legend of icons in the diagram which are
labeled "Shortest Path," "Traffic Engineered Path" and "Router."

PAGE 40

Diagram showing the JUNOS Routing Engine with the text "Forwarding Table"
contained in the diagram. Also includes a diagram below this diagram of the
Packet Forwarding Engine containing the text "Forwarding Table," "Internet
Processor," "Memory-Based Switch Fabric" and "I/O Card."

PAGE 42

Picture of our M40 Internet backbone router together with a data table of rack
configuration information. The data table includes the following configuration
data:

  Interface                   Ports Per M40         Ports per 7ft. Rack
- ------------------------------------------------------------------------
OC-48 STM-16 SONET/SDH              8                      16
- ------------------------------------------------------------------------
OC-12/STM-4 ATM                    32                      64
- ------------------------------------------------------------------------
OC-12/STM-4 SONET/SDH              32                      64
- ------------------------------------------------------------------------
OC-3/STM-1 ATM                     64                     128
- ------------------------------------------------------------------------
OC-3/STM-1 SONET/SDH              128                     256
- ------------------------------------------------------------------------
DS3                               128                     256
- ------------------------------------------------------------------------
Gigabit Ethernet                   32                      64

INSIDE BACK COVER

A diagram showing a photograph of our M40 Internet backbone with the three
critical ASIC components of the M40. Surrounding the photo of the M40 is the
following text listed in counter clockwise order starting from the top: 1)
"Purpose-built wire speed system for scaling the new public network growth"; 2)
"Using the IP infrastructure to manage our business of delivering the new
public network"; 3) "Services for customers to harness technology for
competitive advantage"; 4) "creating the fiber optic new public network with
greater bandwidth and richer services"; and 5) "JUNOS Internet Software for
traffic engineering, network optimization and control." Also includes a diagram
on the lower left hand portion showing the JUNOS Routing Engine with the text
"Forwarding Table" contained in the diagram. To the right of this diagram is
the text "Routing Engine uses knowledge of network to construct a forwarding
table." Also includes a diagram below this diagram of the Packet Forwarding
Engine  containing the text "Forwarding Table," "Internet Processor,"
"Memory-Based Switch Fabric" and "I/O Card." To the right of this diagram is
the text "Packet Forwarding Engine (PFE) directs packets from an input
interface to an output interface based on the forwarding table."

PROSPECTUS BACK COVER

Juniper Networks, Inc. Logo
<PAGE>   95

- ------------------------------------------------------
- ------------------------------------------------------

     No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You must
not rely on any unauthorized information or representations. This prospectus is
an offer to sell only the shares offered hereby, but only under circumstances
and in jurisdictions where it is lawful to do so. The information contained in
this prospectus is current only as of its date.

                             ----------------------

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                       Page
                                       ----
<S>                                    <C>
Prospectus Summary...................    3
Risk Factors.........................    6
Note Regarding Forward-Looking
  Statements.........................   16
How We Intend to Use the Proceeds
  from this Offering.................   16
Price Range of Common Stock..........   17
Dividend Policy......................   17
Capitalization.......................   18
Dilution.............................   19
Selected Consolidated Financial
  Data...............................   20
Management's Discussion and Analysis
  of Financial Condition
  and Results of Operations..........   21
Business.............................   31
Management...........................   49
Certain Transactions.................   59
Principal and Selling Stockholders...   61
Description of Capital Stock.........   64
Shares Eligible for Future Sale......   67
Where You May Find Additional
  Information........................   68
Legal Matters........................   69
Experts..............................   69
Index to Consolidated Financial
  Statements.........................  F-1
Underwriting.........................  U-1
</TABLE>

- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------

                                5,000,000 Shares
                             JUNIPER NETWORKS, INC.
                                  Common Stock
                             ----------------------

                                 [Juniper logo]
                             ----------------------
                              GOLDMAN, SACHS & CO.

                           CREDIT SUISSE FIRST BOSTON

                                   BANCBOSTON
                               ROBERTSON STEPHENS

                             DAIN RAUSCHER WESSELS
                    A DIVISION OF DAIN RAUSCHER INCORPORATED

                                    SG COWEN

                            WARBURG DILLON READ LLC

                      Representatives of the Underwriters

- ------------------------------------------------------
- ------------------------------------------------------


© 2022 IncJournal is not affiliated with or endorsed by the U.S. Securities and Exchange Commission