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. 
Mitch Wagner
50%
50%
Mitch Wagner,
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.
Mitch Wagner
50%
50%
Mitch Wagner,
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
From The Founder
It's clear to me that the communications industry is divided into two types of people, and only one is living in the real world.
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.
LRTV Documentaries
The Rise of Virtual CPE

1|27|15   |   01:38   |   (5) comments


As NFV strategies evolve from tests and trials to production telco networks, expect to hear a lot about virtual CPE (customer premises equipment) rollouts during 2015.
LRTV Documentaries
Optical Is Hot in 2015

1|23|15   |   01:56   |   (2) comments


Optical comms technology underpins the whole communications sector and there are some really hot trends set for 2015.
LRTV Custom TV
Policy Control in the Fast Lane

1|22|15   |   2:57   |   (0) comments


What's making policy control strategic in 2015 and beyond? Amdocs talks with Heavy Reading's Graham Finnie about the key factors driving change in the data services landscape. Find out what his policy management research reveals about the road ahead for policy control – and sign up for
LRTV Documentaries
Highlights From the 2020 Vision Executive Summit

1|21|15   |   4:33   |   (2) comments


In December 2014, Light Reading brought together 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, Cisco's Doug Webster shared his company's ...
LRTV Huawei Video Resource Center
Huawei Pay-TV Partner Harmonic, Helping Carriers Accelerate 4K Video Deployment with Huawei

1|20|15   |   5:42   |   (1) comment


At IBC, Peter Alexander, Senior Vice President & CMO at Harmonic, speaks about the growing interest in pay-TV service and its branching into multiple devices.
LRTV Huawei Video Resource Center
Sony Marketing Director Olivier Bovis Discusses the Outlook for 4K and Cooperation With Huawei at IBC 2014

1|20|15   |   6:50   |   (0) comments


At IBC, Olivier Bovis, Marketing Director of Sony, speaks about the coming of the 4K era.
LRTV Huawei Video Resource Center
Huawei Pay-TV Partner Envivio, Helping Carriers Accelerate 4K Video Deployment

1|20|15   |   2:57   |   (0) comments


At IBC, Olivier Bovis, Marketing Director of Sony, speaks about the coming of the 4K era.
LRTV Huawei Video Resource Center
Pay-TV's Networked Future

1|20|15   |   6:29   |   (0) comments


At IBC, Jeff Heynen, Principal Analyst at Infonetics, speaks about the future of the pay-TV industry and its transition.
LRTV Huawei Video Resource Center
Jeff Heynen: Distributed Access Will Help MSOs Compete in the Future

1|20|15   |   2:26   |   (0) comments


At IBC, Jeff Heynen, Principal Analyst at Infonetics, speaks about moving to distributed access and the future trend of cable business.
LRTV Interviews
Cisco Talks Transformation

1|20|15   |   13:02   |   (0) comments


In December 2014, Steve Saunders sat down with Cisco VP of Products & Solutions Marketing Doug Webster at Light Reading's 2020 Vision executive summit in Reykjavik, Iceland. They spoke about Cisco's approach to network virtualization as well as how service providers can begin to monetize high-capacity networks through the end of the decade.
Upcoming Live Events
February 5, 2015, Washington, DC
February 19, 2015, The Fairmont San Jose, San Jose, CA
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
September 9-10, 2015, The Westin Galleria Dallas, Dallas, TX
September 29-30, 2015, The Westin Grand Müchen, Munich, Germany
November 11-12, 2015, The Westin Peachtree Plaza, Atlanta, GA
December 1, 2015, The Westin Times Square, New York City
December 2-3, 2015, The Westin Times Square, New York City
Infographics
Hot Topics
Google Continues Gigabit Expansion
Jason Meyers, Senior Editor, Gigabit Cities/IoT, 1/27/2015
Comcast Apologizes to 'A**hole' Brown
Mitch Wagner, West Coast Bureau Chief, Light Reading, 1/29/2015
US Ops Spend $32.5M to Bring 4G to Chicago's Subways
Sarah Thomas, Editorial Operations Director, 1/30/2015
Cablevision's New WiFi Try – Freewheeling Enough?
Mari Silbey, Independent Technology Editor, 1/26/2015
Overture Builds on NFV Foundation
Mitch Wagner, West Coast Bureau Chief, Light Reading, 1/27/2015
Like Us on Facebook
Twitter Feed
Webinar Archive
BETWEEN THE CEOs - Weekly Executive Interview
Join us live for 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 has to say about the opportunities in video, as well as the outlook for cable, telco, OTT and mobile service providers.