Light Reading

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
From The Founder
The New IP is actually bigger even than business. Like another hugely important tech that Light Reading is digging into right now, the New IP has the potential to change the world by fundamentally advancing what it is possible for people to achieve with communications.
LRTV Huawei Video Resource Center
Huawei Shares Its Vision of the Future of Mobile Networks Innovations

2|26|15   |   2:30   |   (0) comments


Mobile broadband is changing our lives. It's reshaping the Internet, industry, and society. It allows us to freely connect with one another anytime, anywhere. At this year's Mobile World Congress, Huawei will share its latest insights and newest ideas and technologies that will shape the future of MBB. They will showcase their end-to-end MBB solutions that will ...
LRTV Huawei Video Resource Center
Accelerate Digitizing, Boost Digital Business

2|26|15   |   6:14   |   (0) comments


A new digital revolution is leading us to a better connected world. Together with millions of digital partners, Huawei will help CSPs to build their digital service ecosystem and aggregate a wide variety of digital services. In this video, we find out how Huawei is going to help CSPs implement digital operations.
LRTV Huawei Video Resource Center
The Secret Recipe to Enabling Hyper-Growth Industries

2|26|15   |   3:38   |   (0) comments


With a number of successful cases on network capability exposure, Huawei is going to share the secret recipe to enabling hyper-growth markets with a step-by-step approach.
LRTV Documentaries
BTE 2015 Is Bigger & Even Better

2|25|15   |   03:13   |   (4) comments


This year's Big Telecom Event (BTE) in Chicago is going to provide more opportunities than ever for networking, getting to grips with key industry challenges and opportunities and, equally as important, having some fun.
LRTV Interviews
Light Reading ICT Leaders Roundtable at MWC 2015

2|12|15   |   1:07   |   (2) comments


On Sunday March 1, 2015, Light Reading will host an ICT Leaders Roundtable in partnership with Huawei. At this half-day event, CIOs, analysts and researchers will discuss key industry trends like virtualization in the cloud with a specific focus on new business models. Located at the luxurious Renaissance Hotel near the Fira Barcelona, space is limited so please ...
LRTV Documentaries
Going Green in 2015

2|12|15   |   02:04   |   (0) comments


Energy efficiency is set to be an incredibly hot topic in the telecom industry this year.
LRTV Custom TV
SDN & NFV: Where Are We Going From Here?

2|11|15   |   11:27   |   (0) comments


Vitesse Semiconductor CTO Martin Nuss gives his perspective on why SDN and NFV should be tightly interconnected and how he sees the industry moving forward.
LRTV Documentaries
Time for Gigabit Europe?

2|9|15   |   01:27   |   (4) comments


Gigabit broadband networks are springing up all around the US and they'll soon become more commonplace in Europe.
LRTV Interviews
Brocade Brings New IP Vision to 2020 Vision Executive Summit

2|3|15   |   4:23   |   (0) comments


In December 2014, Light Reading gathered telecom executives in Reykjavik, Iceland to discuss their vision for high-capacity networks through the end of the decade. The intimate, interactive meeting was set against the backdrop of Iceland's spectacular natural beauty. As one of the event's founding sponsors, Brocade's Kelly Herrell shared his company's strategy at ...
LRTV Interviews
Brocade's Kelly Herrell on the New IP

2|2|15   |   12:36   |   (0) comments


In December 2014, Steve Saunders sat down with Brocade VP of Software Networking Kelly Herrell at Light Reading's 2020 Vision executive summit in Reykjavik, Iceland. They spoke about Brocade's approach to the New IP, the future of the telecom industry, and more.
LRTV Huawei Video Resource Center
Dr. Dong Sun Talks About Carriers' Digital Transformation & Huawei’s Telco OS

1|29|15   |   6:28   |   (0) comments


Dr. Dong Sun, Chief Architect of Digital Transformation Solutions at Huawei, discusses how telecom operators can become digital ecosystem enablers and deliver optimal user experiences that are in real-time, on-demand, all-online, DIY and social (ROADS).
LRTV Huawei Video Resource Center
Huawei's Chief Network Architect Talks about Network Experience & Operators’ Strategies

1|29|15   |   3:39   |   (0) comments


In the digital age, network experience has become the primary productivity especially for telecom operators. In this video, Wenshuan Dang, Huawei’s Chief Network Architect, discusses how carriers can tackle the challenge of infrastructure complexity in order to enhance business agility and improve user experience.
Upcoming Live Events
March 17, 2015, The Cable Center, Denver, CO
April 14, 2015, The Westin Times Square, New York City, NY
May 12, 2015, Grand Hyatt, Denver, CO
May 13-14, 2015, The Westin Peachtree, Atlanta, GA
June 8, 2015, Chicago, IL
June 9-10, 2015, Chicago, IL
June 9, 2015, Chicago, IL
June 10, 2015, Chicago, IL
All Upcoming Live Events
Infographics
Net neutrality, broadband services and the current outlook on data consumption, as presented by the New Jersey Institute of Technology.
Hot Topics
Cyber Security Expert Warns: You're Doing It Wrong
Sarah Thomas, Editorial Operations Director, 2/23/2015
10 Weirdly Useful IoT Devices
Eryn Leavens, Copy Desk Editor, 2/24/2015
Small Cells Enabling Location Services
Sarah Thomas, Editorial Operations Director, 2/25/2015
MWC: Let the Madness Begin
Ray Le Maistre, Editor-in-chief, 2/23/2015
Is FCC Weighing Net Neutrality Changes?
Mari Silbey, Independent Technology Editor, 2/25/2015
Like Us on Facebook
Twitter Feed
Webinar Archive
BETWEEN THE CEOs - Executive Interviews
Check out Light Reading's interview with Jay Samit, the newly appointed CEO of publicly traded SeaChange International Inc. With a resume that includes Sony, EMI, and Universal, Samit brings a reputation as an entrepreneur and a disruptor to his new role at the video solutions company. Hear what he had to say about the opportunities in video, as well as the outlook for cable, telco, OTT and mobile service providers.
G'day! And welcome to an entirely new feature on Light Reading -- our weekly "CEO-to-CEO" interview.