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CEO has a new plan of action in mind, but in the meantime a strong fourth quarter gives Juniper some relief from activist investor pressure.

Juniper CEO Preps New Roadmap

Ray Le Maistre
1/24/2014
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Juniper Networks CEO Shaygan Kheradpir, who is only days into his new job, is set to unveil what he calls an "Integrated Operating Plan" during the next few weeks following a review of the vendor's business. (See Juniper Names New CEO.)

Kheradpir told analysts during Juniper Networks Inc. (NYSE: JNPR)'s fourth-quarter earnings conference call that he would reveal a plan focused on "profitable growth and shareholder value creation."

The CEO said the plan would include a greater focus on product innovation, a more efficient cost structure -- that will have the company's near 9,500 staff wondering what's coming down the line, as more than 230 employees were axed during the fourth quarter -- and an evaluation of a "capital returns policy," which could involve share repurchasing and dividends.

The reference to "shareholder value creation" will have been heard loud and clear at activist investor Elliott Management, which tore into Juniper earlier this month and demanded major changes, including a greater focus on the service provider sector and an exit from the security market. (See Investor to Juniper: 'You Suck'.)

Elliott, which has had a very busy start to 2014, isn't happy with Juniper's financial performance, but there seemed little wrong with the router vendor's performance towards the end of 2013, as Juniper reported record sales and strong margin growth for the fourth quarter, as the table below shows. (See Riverbed Spurns Takeover Offer.)

Table 1: Juniper's Fourth-Quarter 2013 Key Financials

In US$ millions Q4 2013 Q4 2012 Change Full Year 2013 Full Year 2012 Change
Revenues $1,274 $1,141 12% $4,669 $4,365 7%
Operating margin 15.3% 11.5% Up by 3.8 percentage points 12.1% 7.1% Up by 5 percentage points
Net Income $151.80 $95.70 58.6% $439.80 $186.50 135.8%

Of the company's fourth-quarter revenues, $827 million (about 65% of the total) came from service provider customers. Those service provider sales are 12% better than a year earlier and 5% better than in the third quarter, while the full year's total revenues from service providers of $3 billion was 9% better than in 2012.

CFO Robyn Denholm noted on the conference call that Juniper also had strong bookings from service provider customers in the Americas, with particularly strong demand from cable operators and Web 2.0 customers. In Europe, service provider demand was strong in Germany, the UK, and Eastern Europe.

Denholm also noted that fourth-quarter router revenues were at $618 million, up 16% compared with a year earlier, and that bookings were "very strong," ramping by more than 30% year-on-year "driven by MX and PTX product lines," while demand for the new MX104 router is "off to a solid start." (See Juniper Aims Big With 100G Optical and SDN Middleman: A Second Look at Juniper's MetaFabric.)

Although revenues from security products were down 7% year-on-year to $157 million, the CFO noted that Juniper had seen encouraging signs that suggest a turnaround in the market.

Now Juniper's staff, customers, partners, and investors will wait for Kheradpir's new plan to see if he has anything radical up his sleeve. The company has already axed its mobile packet core line (MobileNext) in recent months: Will it be joined by any other product lines? (See Juniper Puts a Virtual Spin on MobileNext.)

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

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DOShea
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DOShea,
User Rank: Blogger
1/24/2014 | 12:45:02 PM
The "You Suck" Singers...
Looks like another investor, Jana Partners, has joined the "You Suck" chorus, though it's done so while increasing its investment in Juniper... I guess everyone want to make sure their voices are heard by Kheradpir.

http://www.marketwatch.com/story/juniper-networks-microsoft-rally-igt-sinks-2014-01-24?reflink=MW_news_stmp

 
Ray@LR
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Ray@LR,
User Rank: Blogger
1/24/2014 | 12:14:42 PM
Re: Juniper's security sales down 7% YoY
Great insights Patrick!

Of course, we have to wait and see if Kheradpir will give the security team time to push back at all... 
pdonegan67
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pdonegan67,
User Rank: Light Sabre
1/24/2014 | 11:22:55 AM
Juniper's security sales down 7% YoY
The 7% YoY decline in Juniper's security sales lends credibility to F5's claims to be taking share from Juniper with its push into the security space with DNS security, Firewall, DDoS protection and other security capabilities.

The network security space is very dynamic at the moment. A lot of vendors with large footprints - folks like F5, Nominum, Infoblox - are looking to leverage large installed bases of networking equipment and evolve them to meet the operator's security goals.

Incumbent security specialists like Juniper are not having things all their own way in the telco space any more. There's some intense strategy and R&D work going on on this area. I'm expecting some epic contests for carrier mind (and wallet) share in 2014.

Juniper has suffered from indecisiveness in some carrier network segments of late but in the case of security where they have been - still are - the market leader I fully expect them to push back hard.
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