Light Reading

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        ADD A COMMENT
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
Last week I dropped in on "Hotlanta," Georgia to moderate Light Reading's inaugural DroneComm conference – a unique colloquium investigating the potential for drone communications to disrupt the world's telecom ecosystem. As you will see, it was a day of exploration and epiphany...
LRTV Documentaries
Cable Eyeing SDN for Headend, Home Uses

5|26|15   |   05:57   |   (1) comment


CableLabs is looking at virtualizing CMTS and CCAP devices in the headend, as well as in-home devices, says CableLabs' Karthik Sundaresan.
LRTV Documentaries
Verizon's Emmons: SDN Key to Cost-Effective Scaling

5|22|15   |   03:53   |   (0) comments


For Verizon and other network operators to ramp up available bandwidth cost effectively, they need to move to SDN and agree on how to do that.
LRTV Documentaries
Lack of Universal SDN a Challenge

5|21|15   |   04:51   |   (3) comments


Heavy Reading Analyst Sterling Perrin talks about how uncertainty about SDN standards and approaches may be slowing deployment.
LRTV Custom TV
Steve Vogelsang Interview: Carrier SDN

5|20|15   |   05:02   |   (0) comments


Sterling Perrin speaks to Steve Vogelsang, Alcatel-Lucent CTO for IP Routing & Transport business, about the new Carrier SDN-enabling Network Services Platform and the operator challenges it solves.
LRTV Custom TV
Carrier SDN: On-Demand Networks for an On-Demand World

5|20|15   |   20:52   |   (0) comments


Steve Vogelsang, Alcatel-Lucent CTO for IP Routing & Transport business, talks about requirements and benefits of Carrier SDN during the keynote address at the Light Reading Carrier SDN event May 2015.
LRTV Documentaries
The Security Challenge of SDN

5|19|15   |   02:52   |   (0) comments


CenturyLink VP James Feger discusses concerns that virtualization could create new vulnerabilities unless network operators build in safeguards.
LRTV Custom TV
NFV Elasticity – Highly Available VNF Scale-Out Architectures for the Mobile Edge

5|18|15   |   5:50   |   (0) comments


Peter Marek and Paul Stevens from Advantech Networks and Communications Group talk about their NFV Elasticity initiative and the company's latest platforms for deploying virtual network functions at the edge of the network. Packetarium XL and the new Versatile Server Module: 'designed to reach parts of the network that other servers cannot reach.'
LRTV Huawei Video Resource Center
Bay Area Spark Meetup 2015

5|14|15   |   3:54   |   (0) comments


Developed in 2009, Apache Spark is a powerful open source processing engine built around speed, ease of use and sophisticated analytics. This spring, Huawei hosted a meetup for Spark developers and data scientists in Santa Clara, California. Light Reading spoke with organizers and attendees about Huawei's code contributions and long-term commitment to Spark.
LRTV Custom TV
The Transport SDN Buzz

5|12|15   |   06:01   |   (1) comment


Sterling Perrin, senior analyst at Heavy Reading, speaks with Peter Ashwood-Smith of Huawei and Guru Parulkar of ON.Lab about the evolution of transport SDN and the integration of technologies.
LRTV Custom TV
Next-Generation CCAP: Cisco cBR-8 Evolved CCAP

5|5|15   |   04:49   |   (0) comments


John Chapman, Cisco's CTO of Cable Access Business Unit and Cisco Fellow, explained the innovation design of Cisco's cBR-8, the industry's first Evolved CCAP, including DOCSIS 3.1 design from ground-up, distributed CCAP with Remote PHY and path to virtualization. Cisco's cBR-8 Evolved CCAP is the platform that will last through the transitions.
LRTV Custom TV
Meeting the Demands of Bandwidth & Service Group Growth

5|1|15   |   5:35   |   (0) comments


Jorge Salinger, Comcast's Vice President of Access Architecture, explains how DOCSIS 3.1 and multi-service CCAP can meet the demands of the bandwidth and service group growth.
LRTV Custom TV
DOCSIS 3.1: Transforming Cable From Hardware-Defined Network to Software-Defined Network

4|29|15   |   03:48   |   (0) comments


John Chapman, Cisco's CTO of Cable Access Business Unit and Cisco Fellow, explains how DOCSIS 3.1 can transform cable HFC network to a more agile software-defined network.
Upcoming Live Events
June 8, 2015, Chicago, IL
June 9, 2015, Chicago, IL
June 9-10, 2015, Chicago, IL
June 10, 2015, Chicago, IL
September 29-30, 2015, The Westin Grand Müchen, Munich, Germany
October 6, 2015, The Westin Peachtree Plaza, Atlanta, GA
October 6, 2015, Westin Peachtree Plaza, Atlanta, GA
All Upcoming Live Events
Infographics
Procera has gathered facts, stats and customer experience feedback from a survey of 540 users from across the globe.
Hot Topics
10 Alternate Uses for Tablets
Eryn Leavens, Copy Desk Editor, 5/22/2015
Bidding War for TWC Looks Likelier
Alan Breznick, Cable/Video Practice Leader, 5/22/2015
Charter Seals Deals for TWC, Bright House
Mari Silbey, Senior Editor, Cable/Video, 5/26/2015
Eurobites: Alcatel-Lucent Trials 400G in Czech Republic
Paul Rainford, Assistant Editor, Europe, 5/26/2015
Comcast Targets 6 New Gigabit Markets
Mari Silbey, Senior Editor, Cable/Video, 5/21/2015
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
On May 29th 10 AM ET, Steve Saunders, founder and CEO of Light Reading, will be drilling into the "pains and gains" of NFV with Saar Gillai, SVP & GM for NFV at Hewlett-Packard Co. (NYSE: HPQ) (HP). He has defined a four-step NFV model describing a sequence of technology innovation. It's a must-read doc for any network architect looking to get to grips with their NFV migration strategy. Join us for the interview, and the chance to ask Saar your NFV questions directly!
With 200 customers in 60 countries, Stockholm-based Net Insight has carved out a solid leadership position in one of the hottest vertical markets going in comms right now: helping service providers and broadcasters deliver video and other multimedia traffic over IP networks. How has Net Insight managed to achieve this success in the face of immense competition from the industry giants?
My ongoing interview tour of the leading minds of the telecom industry recently took me to Richardson, Texas, where I met with Rod Naphan, CTO and SVP, Solutions, ...
Cats with Phones
Too Fluffy to Talk Click Here
Elmer found that his bountiful fur got in the way of meaningful conversation.