Light Reading
Frustrated investor slams Juniper's track record and suggests remedies that involve cost-cutting and a slimmer product portfolio.

Investor to Juniper: 'You Suck'

Ray Le Maistre
1/14/2014
50%
50%

Shaygan Kheradpir must wonder what he has let himself in for.

Only days after he settled into the CEO's chair at Juniper Networks Inc. (NYSE: JNPR), the vendor has found itself on the sharp end of a scathing appraisal of its shortcomings by significant investor Elliott Management, which has issued a detailed report into what it feels is wrong at the network equipment vendor and suggested how Juniper can put things right. (See Juniper Names New CEO.)

Hedge fund firm Elliott, which holds a 6.2% stake in Juniper, says Juniper has: an unnecessarily large cost base; an inefficient capital structure; a lousy mergers and acquisitions record; and a bloated portfolio, having failed to properly execute its moves into security and enterprise switching.

The activist investor believes Juniper has been ignoring calls for significant changes for years, and is now seeking meetings with the Juniper board and management team to discuss the actions it feels are necessary to improve Juniper's valuation.

In essence, Elliott wants Juniper to cut its annual operating costs by $200 million, instigate a $3.5 billion stock repurchasing scheme, and "streamline" its product portfolio to focus on service provider routing and exit some other areas, most notably security. The hedge fund believes such measures could send Juniper's share price to the $35-$40 range, significantly higher than its current price.

Elliott notes that its analysis shows that "Juniper’s assets are valuable and strategic and that the business possesses several fundamental upside drivers over the medium-term but that its future will be increasingly difficult if Juniper continues with its existing strategy."

News of the move, and the publication of Elliott's "Value Plan" (which you can see here in all its glory), gave hope to Juniper's other shareholders Monday, as the vendor's stock jumped nearly 7.6% to close the day at $25.32, its highest price since July 2011.

Juniper responded with the following statement late Monday:

    Juniper welcomes open communications with its shareholders and values their input.

    Juniper continues to deliver improved financial and operational performance as evidenced by five consecutive quarters of year-over-year revenue growth and our continued efforts to streamline the Company's cost base. We have a proven record of generating and returning cash to shareholders having returned approximately 105% of Juniper's free cash flow to shareholders in the last three years (fourth quarter of 2010 through third quarter of 2013) representing a total return of approximately $1.7 billion. Juniper continues to focus on returning capital to our shareholders. We believe Juniper has an innovative and robust product portfolio and is well positioned to deliver enhanced shareholder value and we are optimistic about the growth opportunities in the key markets we serve.

    The Elliott presentation was received this morning and we have not had any discussions with Elliott with respect to its content. The Company intends to review it carefully.

In its Value Plan, Elliott cited historical statements from financial analysts supporting its views. And indeed, MKM Partners analyst Mike Genovese issued a research note early Tuesday noting that MKM broadly agrees with the hedge fund's views, particularly with respect to cost-cutting and a greater focus on service provider routing, but feels the proposed size of the stock buyback might weaken Juniper's balance sheet, which in turn might make it less attractive to major network operators.

Overall, though, Genovese is in favor of Elliott's suggestions. Based on the expectation that Juniper's fourth-quarter 2013 results will be "upbeat" and that first quarter 2014 guidance will be favorable, plus the "likelihood that at least some of Elliott's suggestion will be implemented," Genovese has increased his target price on Juniper's stock from $26 to $30.

Juniper is set to report its financials on January 23.

Elliot is clearly in the mood to shake the networking sector in 2014, as it made an unsolicited bid to acquire application delivery controller (ADC) specialist Riverbed Technology Inc. (Nasdaq: RVBD) for nearly $3.1 billion on January 8. (See Riverbed Receives Takeover Bid .)

— Ray Le Maistre, Editor-in-Chief, Light Reading

(8)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View
Ray@LR
50%
50%
Ray@LR,
User Rank: Blogger
1/29/2014 | 6:12:47 AM
Re: long term no good
And that's part of the risk of being a listed company - investors can get on your back and put you undeer pressure in the public eye....

I's harder when the activist investor has a long list of evidence and a comms strategy that appeals to other investors that want a return ASAP -- I wonder how many JNPR investors have a long-term position? Or maybe that long-term doesn't look so hot....
cassis
50%
50%
cassis,
User Rank: Light Beer
1/29/2014 | 5:17:59 AM
long term no good
Investors want ROI, yes, in short period of time. 

They wanna cut the opex and boost up the stock price for more money. Quick Money. 

It won't do anything good for J from a long-term perspective.....products, etc.  
David Dines
50%
50%
David Dines,
User Rank: Blogger
1/14/2014 | 6:38:47 PM
Re: Software
Being a sailor I love the cliche about the wind blowing.  

It is curious about the timing of this, they hit the new guy before seeing what he is going to do.  I guess they did not think the old regime would act.

In theory Elliot's plan is rational, but I have observed that nearly every one of these get well plans are executed with a very broad brush and the cuts will be to the bone. As someone once said, you can't shrink yourself to greatness. 

 
TomNolle
50%
50%
TomNolle,
User Rank: Light Sabre
1/14/2014 | 3:42:17 PM
Re: Software
I don't know whether getting some key Microsoft execs in makes you a software company or even proves you have a commitment to be one.  It takes more to be a clown than a paint job and a funny nose.
brookseven
50%
50%
brookseven,
User Rank: Light Sabre
1/14/2014 | 2:15:01 PM
Re: Software
 

Ray,

 

Uh....that is the goal of investors.  Maximize their ROI.  One thing that happens is that Management Teams lose their focus on that goal.  That IS the job of management - Return the Maximum ROI to their shareholders.  They get caught up in maximizing their ROI on their job.

Now all the thoughts around strategy and execution are definitely debatable.  But BoDs and Executive Management are not always incented to provide maximum return to the owners.  

seven

 
Ray@LR
50%
50%
Ray@LR,
User Rank: Blogger
1/14/2014 | 1:37:16 PM
Re: Software
SO, it's worth remembering that Elliott wants to make as much money from its investment as possible - that is its motivation. It has no other agenda. 

It's also clear, though, that it is not a lone voice. And it's hardly likely to have its views kicked back by other investors. 

Juniper needs to be smart.
sam masud
50%
50%
sam masud,
User Rank: Light Sabre
1/14/2014 | 12:15:22 PM
Re: Software
Leaving aside everything else, Juniper is the place to work for software engineers: the average base salary for software engineers at Juniper is about $160K, compared with about $110K at Brocade or Cisco. Go figure...
DOShea
50%
50%
DOShea,
User Rank: Blogger
1/14/2014 | 10:49:24 AM
Software
If you look back at the headlines of a few years ago, you would think Juniper was ahead of the game in trying to become more of a software-focused company and importing several Microsoft people. I guess it shows in part that determining which way the wind is blowing doesn't make you a great sailor, or you know, insert your own cliche here...
Flash Poll
LRTV Custom TV
Why SPs Should Consider Cisco's EPN

8|27|14   |   5:40   |   (0) comments


Sultan Dawood from Cisco discusses Cisco's EPN, which enables SPs to build agile and programmable networks delivering new network virtualized services using Cisco's Evolved Services Platform (ESP).
LRTV Huawei Video Resource Center
Huawei’s Showcase @ Big Telecom Event 2014

8|26|14   |   2.56   |   (0) comments


SoftCOM is Huawei's framework for telecom business and network transformation. Haofei Liu, Solution Marketing Manager, Carrier Business Group, Huawei, showcases Huawei's SoftCOM architecture in this video.
LRTV Huawei Video Resource Center
Huawei @ BTE 2014: Director of Integrated Solutions on SoftCOM & NFV Monetization

8|26|14   |   4.43   |   (0) comments


Libin Dai, Director of Integrated Solutions, Carrier Business Group, discusses Huawei's SoftCOM and NFV monetization. Huawei believes that NFV monetization should be service-driven rather than network-driven, and that operators should have network transformation, service transformation and a compatible and collaborative ecosystem in place in order to deploy NFV.
LRTV Huawei Video Resource Center
Huawei @ BTE 2014: Director of US NFV Lab on CloudEdge & the Future of NFV

8|26|14   |   4.06   |   (0) comments


Sean Chen, Director of US NFV Lab at Huawei, discusses Huawei's new approach to NFV in open collaboration. Huawei believes that through Proof of Concept tests, it could help operators learn and communicate with the industry more effectively. Sean believes that successful implementation of NFV should have its values reaching to end users and discusses how Huawei's ...
LRTV Huawei Video Resource Center
Huawei's Highlights @ Big Telecom Event 2014

8|26|14   |   3.34   |   (0) comments


At the Big Telecom Event in Chicago Huawei showcases its high-level strategy, the SoftCOM architecture, which helps operators reduce the cost of ownership of their network infrastructure and generate additional revenue in the ICT service environment. Huawei showcases over 30 pilot programs from across the globe, focusing on the industry-leading commercial ...
LRTV Custom TV
VeEX – Live from the Show

8|21|14   |   5:58   |   (0) comments


An overview of VeEX Test and Measurement solutions including TX300S multi-service test set with VeExpress cloud-based management system, UX400 universal modular platform supporting 100G testing, and the redesigned RXT modular platform.
LRTV Custom TV
Transitioning CE 2.0 Networks Into the SDN & NFV Era With Telco Systems

8|19|14   |   5:19   |   (0) comments


Telco Systems' Ariel Efrati (CEO) and Moshe Shimon (VP of Product Management) discuss virtualization and how the company's new Open Metro Edge solution utilizes the SDN and NFV concepts to accelerate and orchestrate service delivery through its innovative product portfolio and software applications.
LRTV Custom TV
NFV Myths: Is NFV Still Several Years Away?

8|11|14   |   1:13   |   (0) comments


Some say that NFV (network functions virtualization) is still several years away from being implemented on mobile operator networks. This isn't the case. Operators can get started on their paths to NFV now, as this short video from Skyfire shows.
LRTV Custom TV
A New Security Paradigm in SDN/NFV

7|28|14   |   02:54   |   (0) comments


Paul Shaneck, Global Director Network Solutions for Symantec, discusses the evolving virtualized network, explaining how Symantec is leading the security discussion as it relates to SDN and NFV, and helping to ensure the network is protected and compliant.
LRTV Documentaries
Sprint's Network Evolution

7|24|14   |   14:59   |   (0) comments


Sprint's Jay Bluhm gives a keynote speech at the Big Telecom Event (BTE) about Sprint's network and services evolution strategy, including Spark.
LRTV Documentaries
BTE Keynote: The Software-Defined Operator

7|24|14   |   18:43   |   (1) comment


Deutsche Telekom's Axel Clauberg explains the concept of the software-defined operator to the Big Telecom Event (BTE) crowd.
Light Reedy
Numbers Are In: LR's 2014 Salary Survey

7|24|14   |   1:25   |   (7) comments


Our fourth annual Salary Survey paints a picture of who's hiring, firing, earning, and yearning for a change in the telecom industry.
Upcoming Live Events!!
September 16, 2014, Santa Clara, CA
September 16, 2014, Santa Clara, CA
September 23, 2014, Denver, CO
October 29, 2014, New York City
November 6, 2014, Santa Clara
November 11, 2014, Atlanta, GA
December 9-10, 2014, Reykjavik, Iceland
June 9-10, 2015, Chicago, IL
Infographics
Hot Topics
Comcast Streams Back to School
Mari Silbey, Independent Technology Editor, 8/21/2014
Level 3 Does Big Data Differently
Carol Wilson, Editor-at-large, 8/21/2014
T-Mobile: Small Cells? We're Dense Already
Dan Jones, Mobile Editor, 8/22/2014
Verizon Launches QR Code Security Solution
Carol Wilson, Editor-at-large, 8/26/2014
Utilities to Pump $11.2B Into Smart Grid – Study
Jason Meyers, Senior Editor, Utility Communications/IoT, 8/26/2014
Like Us on Facebook
Twitter Feed