Light Reading
Juniper Networks unveils a new operating plan that pleases activist investor Elliott Management and brings Kevin DeNuccio on board.

Juniper Bows to Investor Pressure, Refocuses

Dan O'Shea
2/21/2014
50%
50%

Juniper Networks has unveiled a new corporate plan that mollifies activist investor Elliott Management. But the real test for Juniper remains in the market, where it faces a stiffer fight from competitors old and new.

Juniper Networks Inc. (NYSE: JNPR) announced its much-anticipated integrated operating plan (IOP) late Thursday. CEO Shaygan Kheradpir, less than two months into the top job, said the company would focus on "high IQ networks" and "cloud builders," while also cutting costs and moving to a streamlined One Juniper organizational structure aimed at "more quickly responding to market dynamics" and ensuring that the vendor stays on top of customer needs. (See Juniper Announces 'Integrated Operating Plan' and Juniper CEO Preps New Roadmap.)

Kheradpir described high IQ networks as those requiring "an integrated ensemble of routing, security network intelligence, and control, and characterized by rapid service creation," which are "highly automated and operationally efficient, super secure, hyperscale, can deliver coherent and actionable intelligence and insight, and virtualization with cloud control."

He also said Juniper will combine these efforts into one product-portfolio that it will continue to review. Regarding cost management, Kheradpir said Juniper is aiming for "$160 million in annualized operating savings" by 2015. He added that the company will realign R&D focus around "innovations that matter," and that this likely will result in some decline of R&D costs over time.

The new plan already has won the support of Elliott Management, the hedge fund that complained about Juniper's performance and demanded changes. Although Juniper hasn't met the full extent of Elliott's demands, it has gone far enough to pacify the investor, which put a lot of pressure on the vendor's management and board in January. (See Investor to Juniper: 'You Suck'.)

Also, Juniper is nominating two new board members: Kevin DeNuccio, the former Cisco Systems Inc. (Nasdaq: CSCO) executive, Redback Networks CEO, and Metaswitch Networks CEO, and Gary Daichendt, also a former Cisco executive. Both are believed to have been suggested by the hedge fund. (See DeNuccio Replaced as Metaswitch CEO and DeNuccio Replaced at Redback.) Meanwhile former Juniper CEO Kevin Johnson will be stepping down from his board seat at the end of this month.

Mixed reaction
Reactions from financial analysts who follow Juniper ranged from cautiously optimistic to somewhat concerned. The positive side is that the new plan settles recent controversy and gets Juniper back to focusing on the fundamentals of its business. Michael Genovese at MKM Partners wrote in a research note that the IOP is a positive development, but that much of the future outlook for Juniper depends on the current belief that the router market is due for an uptick on increasing service provider and enterprise capacity demands.

Others noted the difficulty Juniper could face in meeting its goals. George Notter, managing director of equity research for communications infrastructure at Jefferies & Company Inc. , pointed out in a research note, "Juniper had originally planned to remove $150 million in cost from the business back in 2013. They wound up getting less than $50 million."

The real test of Kheradpir's plan, however, will come in Juniper's market segments. The company is facing tougher competition from rising bare-metal networking devotees such as Big Switch Networks , Vello Systems , Cumulus Networks, and even old-school converts, such as Brocade Communications Systems Inc. (Nasdaq: BRCD) and Dell Inc. (Nasdaq: DELL). Juniper also has lost key engineering talent in recent months to some competitors. (See SDN: A Particular Set of Skills Much in Demand and Murray Leads Big Switch Into Bare Metal Battle.)

"The market Juniper is competing in is changing radically," Needham & Co. analyst Alex Henderson wrote in a research note. "The growth in cloud is driving moves to massive scaled out datacenters where the buyers are focused on low cost and commercial off the shelf designs."

Even Cisco, traditionally the Goliath to Juniper's David, has renewed its own efforts to defend its market share from Juniper and others with last fall's unveiling of its Application-Centric Infrastructure approach. Henderson further wrote that Juniper appears to be behind Cisco in virtualization, security, and in the switching/datacenter, and is increasing price pressure on Juniper. He also noted that Kheradpir's insistence that Juniper will maintain its gross margins could be its biggest challenge. (See Cisco's ACI Gets Physical With SDN.)

Now that Juniper has satisfied Elliott, the race is on for the vendor to satisfy everyone else.

— Dan O'Shea, Managing Editor, Light Reading

(6)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View
pcharles09
50%
50%
pcharles09,
User Rank: Light Beer
2/26/2014 | 9:07:29 PM
Re: Juniper Unbowed
Unfortunately, that's what happens when companies grow too fast & overcommit resources. It's more sad for the people that lose their jobs.
mhhf1ve
50%
50%
mhhf1ve,
User Rank: Light Sabre
2/26/2014 | 6:19:59 PM
It's not easy being a hardware manufacturer...
Competition in this market is enormous, especially from foreign players that have access to big markets and scale (ahem, China). So these moves don't look like they're "bowing to pressure" as much as trying to adapt to a fast moving tech industry where it is difficult to develop hardware without also developing custom software to bring additional value to the table. (Steve Jobs once said something along the lines of tech companies needing to develop both hardware and software if they were really serious, and that statement seems to be more true each day.)

Software defined networking is reducing the equipment to commodity status.... And hardware makers need to focus on how to make their products more valuable.
danielcawrey
50%
50%
danielcawrey,
User Rank: Light Sabre
2/22/2014 | 10:11:31 PM
Re: Juniper Unbowed
I don't think Juniper has any choice but to placate these investors. But the example of where the company was only able to wrangle $50 million out of a supposed $150 million in cost savings is telling. 

Hard to say whether Juniper can actually deliver at this point, other than statisfying big investors' demands in the short term. 
FakeMitchWagner
50%
50%
FakeMitchWagner,
User Rank: Lightning
2/21/2014 | 3:00:43 PM
Re: Juniper Unbowed
Indeed, Kheradpir and Elliott  could be playing good cop/bad cop. 
DOShea
50%
50%
DOShea,
User Rank: Blogger
2/21/2014 | 2:57:29 PM
Re: Juniper Unbowed
Yeah, it has been becoming clear that with the executive/engineering/sales defections that the organization needs a kick in the pants. I think Elliott saw the opportunity to emphasize that with Kheradpir coming in and let him know immediately after he got off the plane, figuratively speaking (but possibly also literally). Externally and internally, I think it's been clear some change has been coming.

Ok, I will cross "Juniper Unbowed" off the list of titles I'd considered for the business book I'll write if Juniper surprises under Kheradpir and beats the crap out of everyone at SDN.
FakeMitchWagner
50%
50%
FakeMitchWagner,
User Rank: Lightning
2/21/2014 | 2:29:06 PM
Juniper Unbowed
I don't know if I would necessarily characterize this as bowing to Elliott. It seems more likely that both Elliott and Juniper are recognizing industry trends toward service providers and the cloud. And they're both also seeing that Juniper is a bit bloated and could use some trimming down.

Also: Juniper Unbowed will be the name of my debut power heavy metal progressive rock album.
Flash Poll
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   |   (6) comments


Our fourth annual Salary Survey paints a picture of who's hiring, firing, earning, and yearning for a change in the telecom industry.
LRTV Custom TV
Driving the Network Transformation

7|23|14   |   4:29   |   (0) comments


Intel's Sandra Rivera discusses network transformation and how Intel technologies, programs, and standards body efforts have helped the industry migration to SDN and NFV.
LRTV Custom TV
Distributed NFV-Based Business Services by RAD

7|18|14   |   5:38   |   (0) comments


With the ETSI-approved Distributed NFV PoC running in the background, RAD's CEO, Dror Bin, talks about why D-NFV makes compelling sense for service providers, and about the dollars and cents RAD is putting behind D-NFV.
LRTV Custom TV
MRV Accelerating Packet Optical Convergence

7|15|14   |   6:06   |   (0) comments


Giving you network insight to make your network smarter.
LRTV Custom TV
NFV-Enabled Ethernet for Generating New Revenues

7|15|14   |   5:49   |   (0) comments


Cyan's Planet Orchestrate allows service providers and their end-customers to activate software-based capabilities such as firewalls and encryption on top of existing Ethernet services in just minutes.
LRTV Custom TV
Symkloud NVF-Ready Video Transcoding, Big Data

7|9|14   |   3:41   |   (0) comments


Kontron and ISV partner Vantrix demonstrate high-performance video transcoding and data analytic solutions on same 2U standard platform that is ready for SDN and NFV deployments made by mobile, cable and cloud operators.
LRTV Huawei Video Resource Center
The Evolving Role of Hybrid Video for Competitive Success

7|4|14   |   4:09   |   (0) comments


At Huawei's Global Analysts Summit in Shenzhen, China, Steven C. Hawley from TV Strategies speaks to us about the evolving role of hybrid video for competitive success.
LRTV Huawei Video Resource Center
How CSPs Leverage Big Data in the Digital Economy

7|4|14   |   4:48   |   (2) comments


Justin van der Lande from Analysys Mason shares with us his views on how telecom operators can leverage customer asset monetization with big data. His discusses the current status of big data applications and the challenges and opportunities for telecom operators in the digital economy era.
LRTV Huawei Video Resource Center
Accelerator for Digital Business Future Oriented BSS

7|4|14   |   3:08   |   (0) comments


Mobile and internet are becoming intertwined; IT and CT are integrating; and leading CSPs have begun to transform to information service and entertainment providers. How should the BSS system evolve to enable this transformation? Karl Whitelock, an analyst at Frost & Sullivan, shares his views.
LRTV Huawei Video Resource Center
Orange Tunisia Discusses Multi-Band Antenna With EasyRET Solution

7|4|14   |   2:45   |   (0) comments


As new site acquisition becomes more difficult, Orange Tunisia has requested multi-band antenna to support UMTS and LTE innovation. Some things considered include reducing the cost of antenna maintenance and having high reliability antenna and EasyRET solution.
Upcoming Live Events!!
September 16, 2014, Santa Clara, CA
September 16, 2014, Santa Clara, CA
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
Packet Design asks network professionals how they handle the cloud, SDN, and network management.
Hot Topics
The Municipal Menace?
Jason Meyers, Senior Editor, Utility Communications/IoT, 7/22/2014
Cisco Puts a Fog Over IoT
Sarah Reedy, Senior Editor, 7/23/2014
Apple Earnings: Strong iPhone Sales, iPad Sales Slump, $7.8B Profit
Mitch Wagner, West Coast Bureau Chief, Light Reading, 7/22/2014
Salary Survey Report 2014
Sarah Reedy, Senior Editor, 7/23/2014
Facebook: 30% of Users Are Mobile-Only
Mitch Wagner, West Coast Bureau Chief, Light Reading, 7/24/2014
Like Us on Facebook
Twitter Feed