Scott Kriens

The Light Reading Interview

In The Spotlight: Scott Kriens

This just in: Scott Kriens, Juniper Networks Inc.'s (Nasdaq: JNPR) CEO, watches Blue's Clues.

And yes, that's about as exciting as his extracurricular activities get, these days. But that's what happens when you're an old-fashioned guy running a big router company, and you have two young kids at home.

If you're looking for tales of the swashbuckling life of a buccaneer on the Silicon Main -- maybe someone who races yachts, crafts his own wine, dabbles in feature filmmaking, or fancies himself an advisor to heads of state -- then you'll be disappointed by our talk with Nickelodeon afficionado Kriens. He's none of the above.

In fact, in an era where many high-tech industry CEOs have seemingly inherited the birthright of rock stars, Kriens is a bit of an anomaly -- a humble, modest businessman (albeit one with a brain the size of a planet) who doesn't disparage his competitors, even after repeated prodding from conflict-seeking journalists. Mostly, Kriens allows his company's performance to do the talking -- and so far, Juniper's has been a mighty powerful message.

Even though the stock has faded from its nosebleed high of last year (Juniper peaked around $245 per share this fall), the company still holds, as of this week, about a $30 billion market capitalization, a number few five-year-old firms can match. A port of calm amidst a general networking market tsunami, Juniper has earned its way to stability by delivering cutting-edge products (large-scale Internet routers) to a well-heeled customer base (large service providers) that's steadily increasing.

With everything going its way, don't look for Juniper or Kriens to change course anytime soon. Even as newcomers like Avici Systems Inc. (Nasdaq: AVCI; Frankfurt: BVC7) or Procket Networks Inc. (which stole IP routing wizard Tony Li away from Juniper [see New Kid on the Cisco/Juniper Block]) sail into the terabit router market, Kriens says Juniper will focus on customers, not competitors, and let the market pick the winners.

And as the dreadnought known as Cisco Systems Inc. (Nasdaq: CSCO) sounds its "general quarters" klaxon, and tries to right its course and bring its behemoth firepower to bear against Juniper (see Cisco and Juniper: It's War), Kriens says he will keep Juniper's path a simple one, and will not try to expand to offer products in all parts of the networking market.

"The principles upon which we've built this company remain sensible to us, so we will continue to execute on those principles," Kriens says. "History will write the results."

The company itself reflects Krien's conservative nature, as tidy cubes in a spanking-new office building all sport orderly numeric location codes, not unlike an in-house IP addressing scheme. Conference rooms are named after cities in which Juniper has offices, instead of whimsical cartoon creatures or faded ice-hockey stars.

Juniperians, including Kriens, work hard, but are comfortably rewarded -- even in vacant cubes, comfy Aeron chairs await the bottoms of soon-to-be employees. Top-of-the-line espresso machines can be found on every floor of Juniper's offices, and a Peet's Coffee outlet sits beside the company's "Junos Cafe" on the ground level, ensuring that Juniper workers are always fully caffeinated.

And when it's time to go home, the Berkeley native Kriens says he spends as much time as he can with his family (which includes two young children), a wholesome pursuit that explains his affinity for Blue's Clues, and leaves no time for a flashy, paparazzi lifestyle.

"And I wouldn't want it any other way," he says.

Read on as Scott Kriens talks about:

Organic Growth
Juniper+Optical
The Investor's Dilemma
Play Time (Lack Of)


Light Reading: You've kind of garnered this reputation as a guy who's very leery of acquisitions... and organically built your company to quite a size. What's your philosophy on acquisitions?

Scott Kriens: We've made acquistions, made three of them, in the company's life. Where I think people get into trouble with acquisitions is by confusing them with strategies, when really they're tactics. Our strategy is to build IP infrastructure for a very targeted, focused market that needs it. To this point, we've seen our way to do that by building it with our own two hands.

We will never replace primary innovation as our strategy. That will always be the way Juniper works. We will also always look opportunistically in the market for relationships, which to us can mean anything from marketing to joint development to joint ventures, such as the one we're doing with Ericsson in the wireless space, to acquistions, such as the Micro Magic acquisition (see Juniper Buys Micro Magic) we made a couple months ago.

Light Reading: What was that deal about?

Kriens: [Micro Magic] was a very talented team, with some intellectual property and very capable tools, in the engineering space and on the development side, that have been fully integrated into our own engineering staff. So it's an example of an acquisition that's not one which will produce products of its own, but will contribute the skills.

Light Reading: What particularly were the tools and intellectual property?

Kriens: Some of it was in software; the tools were in design, and large-scale chip design. And [Micro Magic employees] have significant experience in that area as well.

It's very valuable to incorporate learning from past experience into the next products that a company designs and delivers. And you can't substitute for real-world learning, because we're all building things here that have never been built. No one knows how an intelligent, 500 million-user network is going to operate, because there's never been one.

The closest thing we have to it is the telephone network. But to use that, I have to know every digit to get to a country, and a town, and a building, and a desk, and a person. And even then, if the person that picks up the telephone doesn't speak my language, I can have no communication at all.

By contrast, in the Internet, we have a network of hundreds of millions of users who have no idea where any of the other users are located, with a whole variety of media and means to communicate, either pictorially or musically or any number of ways, with somebody who doesn't speak the same language. There's never been a network on the planet that even resembles this complexity.

So the learning that takes place from bringing products to this market, this is a condition we call the Internet classroom. And only in the classroom of the real world does one learn what works, and what's needed. And then, only by taking the learning and incorporating it, does one really gain advantage.

Light Reading: Talk about the learning process... In the process, you've managed to compete with Cisco, pretty substantially, unlike anybody ever before. What's the secret?

Kriens: Focus on customers. Ultimately, it's not about what vendors want to sell, it's about what customers want to buy. And by remaining focused on customers, listening carefully to the needs they have, and delivering answers to their questions, we've been successful.

Light Reading: Have you seen other routing companies, maybe startups, make mistakes in that department?

Kriens: Again, we spend more of our time focused on customers than competitors. We're certainly aware of the attempts of others, and respect anyone's ability to compete for the market. It's a very large market, and it's growing very quickly. So it's going to invite attempts. And if we remain focused and we execute, then we will win the opportunities that we're focused on, and the rest of the market will take care of itself.

Light Reading: So you say you try not to pay attention to competitors, but you must have heard about Procket and Tony Li...

Kriens: I didn't say, wouldn't say, that we don't pay attention to competitors, or that we aren't aware -- simply that our focus remains on customers.

Light Reading: But what do you know about Procket? Is there anything about them that makes you nervous? There seems to be a little bit of a buzz going on around them now, especially since [Randall] Kruep just left to go there (see Kruep Leaves Redback for Procket).

Kriens: There's really no way to analyze a pre-product condition. The world is full of smart people that are going to make legitimate attempts to enter the market, and successful companies will be respectful of competiton, and focused on customers.

Light Reading: Speaking of the customer thing... Where are your customers coming from? Is there perhaps some eventual limit at the high end?

Kriens: Research on this in terms of market size is varied. But market opportunity for Juniper in 2000 appears, by most accounts, to be in the $2 billion to $2.5 billion range. Guesstimates for '01 appear to be anywhere from $4 billion to $8 billion, depending on how opportunities are classified. Then opportunities go up and to the right after that, into the $10 billion to $15 billion range.

Light Reading: So, you think you can become a $10 billion company pretty easily just by being focused on IP routing technology?

Kriens: Anyone who thought that becoming a $10 billion company is easy would never get there. None of this is easy.

Given the market that we see, and the opportunity that we have to serve it, there's certainly a lot of money that's going to change hands. Our issue is not so much the specifics of what is expected of us; we measure ourselves on the basis of taking full advantage of our opportunity as a company. And if there's no one individual market that will allow us to do that, then the balance in all of this is remaining focused.

Light Reading: A lot of people ask us why we write so much about Juniper. They say Juniper's not an optical company. Is Juniper going to become more of an optical company in the future? Is that demarcation line between electronics and optical moving?

Scott Kriens: The distinction that we make is that optics is the technology behind transport, and electronics is the technology behind processing. A network has to process information in order to know its source and destination and priority and such. And then it has to transport the information, physically, to get it there.

We are in the processing business. And we work in harmony with those in the transport business. We need one another to deliver the results to the end user of the network service. So that's the way that we make the distinction.

Light Reading: Hugh Martin at ONI Systems describes a similar segmentation. He also says that companies put themselves at great risk by trying to think they can straddle the line. He mentioned the fact that that seems to be Cisco's big move right now; in fact their latest marketing slogan is "IP plus optical." Do you think Cisco's making a mistake? Are you going to wait and see how that plays out before you try to do more transport stuff?

Kriens: It's not for us to comment on strategies of others. In a market this competitive, first of all, it's going to attract very smart people. And one should never underestimate smart people tackling big opportunities.

Having said that, the principles upon which we've built this company remain sensible to us; so we will continue to execute on those principles, and history will write the results.

Light Reading: That principle is to stay in the processing business and partner in the transport?

Kriens: That principle is to recognize the fact that there are natural boundaries that will separate natural markets from one another. And to respect those boundaries in developing our own business model.

The computer industry's a good example of this. As it turns out, there is a market between software and hardware, between databases and applications, between PCs and minicomputers and mainframes and microprocessors. And there are companies that have built franchises, and industries, around those natural markets as they have evolved.

However, there's not been a company in the computer history books that's succeeded on the premise that it would be the market leader in every one of those. It's unlikely that there will be any single company that is the only successful networking company, and there isn't any company I know of who claims that objective. So the issue is not biggest or smallest, it's about being right-sized for the opportunities you can legitimately compete successfully for.

Light Reading: Does optical networking make it possible to overbuild capacity?

Kriens: Bandwidth is very much like processor cycles. The more that technology makes available, the more that people will put to use. And the likelihood that bandwidth will become free is not very likely.

Here's a glass of water [holds up bottled water]. Water's the most abundant resource on the planet, and this little bottle is 99 cents. Valuable resources do not go to zero in price.

Light Reading: For your customers, where are the purchasing bottlenecks? With financing tough all around, what are their biggest barriers to growth?

Kriens: The largest issue around moving the networking industry forward is common knowledge and education across the community of participants. If consumers understood all the potential of networking and how to use it, things would be easier for everybody.

If suppliers -- either service providers or equipment companies -- could understand and educate and explain all these opportunities, or if they could learn these opportunities from customers who could describe articulately what they want, then we would all be participating in a much more efficient process.

Tactically, there's issues of technology advances and finance and industry realignment. Strategically, the gate to the growth in this industry is going to be education and understanding by all the parties of how to take full advantage of the phenomenon that is this new network.

Light Reading: So you're saying it's really a marketing problem?

Kriens: In a way. Or an experiential one, because most of education and learning happens by experience. So it's not really about how it's pitched; it's about how it's used.

It's one of these things that gains momentum over time. As a given company observes a competitor of theirs, in banking or manufacturing or what have you, building this virtual value chain, of suppliers, partners, customers, employers, online sharing resources -- all of those participants will gain a more efficient utilization of shared assets than if they were forced to own them outright. And they will then gain competitive advantage. And then others will observe that, and they'll learn by necessity of survival how to do it.

So, the education process isn't one that can be pushed, it has to be pulled. And it will be pulled by people in their self-interest, competing to either gain advantage or survive. We can all help to make that happen faster, but ultimately it will be driven by economic necessity.

Light Reading: Is some of that education related to IP [Internet Protocol]? There are probably a lot of people who don't think IP can scale, even to where it is now.

Kriens: It's knowledge of IP, and how to design the products and then the networks, and then to deploy and operate them. There aren't enough people on the planet who understand IP well enough to satisfy all the needs, in either the equipment or service-provider communities.

Light Reading: Is that a challenge to the growth you're having, finding IP-savvy people?

Kriens: Finding good people and attracting them to Juniper has gotten much easier in the last several months, because people are interested in working for progressive companies, learning new things, and building their own careers. And, also managing risk. Juniper and other companies like Juniper, I assume, present a sweet spot in the market right now, because it's a great place to build a career and learn in this classroom, lessons that aren't taught anywhere else. It's obviously a company that's going to be there when your mortgage is due.

Light Reading: So, you think of the company as a university in and of itself?

Kriens: We do a lot of teaching here. Out of necessity. But also out of strategy. Because taking what we learn in building very large networks, and disseminating it, either in on-the-job training or in structured ways, throughout the company, helps everyone in what they do. It helps us as a company, to integrate the learning into better products and support, going forward.

Light Reading: So there's no shortage of resumés coming in?

Kriens: More than ever.

Light Reading: Especially in the last three months, we're guessing, as some of these startups start looking shaky...

Kriens: It looked a lot easier [to run a networking company] six to nine months ago than it does today. I think that's because reality is returning.

Light Reading: We've heard that you have a theory about the risks inherent in investing in networking technology: the investor's dilemma?

Scott Kriens: We lived in a world, over the last couple of years, where there were more winners than losers. We're in a world today where there's gonna be more losers than winners. The challenge is that the winners are going to win more than all of the losers combined will lose. So picking winners is going to become difficult again, and important. That's the way capitalism has worked for 200 years. It's unsurprising to see it return to these markets, today.

Light Reading: Are you sometimes dismayed at how much attention you get on Wall Street?

Kriens: Juniper itself?

Light Reading: Yes. Just the market capitalization... It's hard to think of a startup that after a year and a half had a market cap like yours. Is there pressure from this attention? Do you actually think about these things, or try to ignore them?

Kriens: We have always had the philosophy with investors that says: Those who take the time to learn the company, and have the same long-term view of our opportunities that we do, deserve the respect and attention being given in return. After that, there's a whole 'nother community of participants out there who aren't interested in the long term, and actually don't ask us that many questions, because they're buying and selling off of charts, not on the company.

We make a conscious effort to support people who have a similar interest in building a long-term investment, as we have in building a long-term company. After that, which is really done primarily by our investor-relations department, those of us who run the business focus on running the business.

Wall Street's a different place, for a different community of participants, none of whom buy large-scale IP routers. So we're not confused about where our primary attention should be, and I don't think there's anyone on Wall Street who would expect us to think differently.

Light Reading: In the past, you've expressed some skepticism about the risk that people take in high-tech investing, how challenging it is, how dynamic. Is your stock fairly valued?

Kriens: The challenge of investing of any type, is trying to pick the top and the bottom. Trying to make good long-term decisions, in my opinion, is actually not nearly as hard. The discipline to stick with those convictions challenges some, but again we're not in the business of helping people understand tops and bottoms, and picking January's favorites over February's. We're building a business here that will be standing 20 years from now.

Light Reading: Do you think a lot about what the venture capitalists were doing a year ago? The networking sector in particular -- it seems like they were plowing money into company after company. Were you thinking: are these guys insane?

Kriens: Venture capitalists are smart people... and they're playing a percentage game. Remember, 12 months ago a losing investment was one on which they only doubled their money at the time of an acquisition. Today it's harder, because losing means... losing. Zero is a real possibility.

Those were probably proper strategies, given the market at that time. And their prudence today is equally proper in today's market.

Light Reading: Lately there's been a lot of publicity surrounding Vinod Khosla (see Khosla: Optical Market's Still Huge). Is it getting overdone? How's your relationship with him changed, do you still talk to him about the startups he's doing? Is there any connection there?

Kriens: Both Vinod and KP [Kleiner Perkins Caufield & Byers] are a great partner to have, because he and his partners are very smart. They're deep into the market and the technology on many, many fronts and have very good insight. Vinod and I have had a very good relationship for five years now, and he continues to be a source of insight and an advisor, and someone who helps with the business of building Juniper on a regular basis.

Light Reading: Your previous employer, Stratacom, was sold to Cisco. Were you ever a Cisco employee?

Kriens: No. By pure coincidence, I left Stratacom a couple of months before the acquisition and took nine months off as a self-imposed sabbatical. The acquisition happened during that time, pure coincidence. It happened very quickly when it did happen, and that was after I left.

Light Reading: What was Stratacom like? A more normal type of startup?

Kriens: Stratacom was a fantastic company and, more important, collection of people. There was just a mini-reunion of sorts last week, a dinner of people who have gone on to form an investment company, called Storm Ventures. It's amazing how many Stratacom people are a part of so many other companies today.

Light Reading: Like Charles Corbalis?

Kriens: Yes. He's over at Calient, and we're an investor (see Juniper Grows Closer to Calient). Charles is a very good example of someone who, like me, grew up at Stratacom, learned great lessons from Dick Moley, who was the CEO for the whole tenure of Stratacom, and today practices the craft in other companies.

Light Reading: What was so interesting about Calient to Juniper?

Kriens: Calient is a very smart collection of people, building very interesting technology in the optical switching arena. And that's a marketplace which is going to be large and also important to the processing world in which we live, so it's a great opportunity for us to understand the adjacent space, in a better way.

Light Reading: Do you like being CEO of Juniper? What did you do during your nine months off? [Kriens took a 9-month sabbatical between leaving Stratacom and joining Juniper.]

Scott Kriens: Our first child was born, my son...

Light Reading: Did that take the whole nine months?

Kriens: He was born about the middle of it, after which I discovered that this [being CEO] was easier. [laughs]

Light Reading [Scott Raynovich, Light Reading executive editor, who also has a young child]: I hear ya.

Kriens: This is tremendous fun! It's a very exciting market, it's a very exciting time. Any dislocation and resulting opportunity of this magnitude in the past has produced great companies that stand, years later, and change some things fundamentally. And undoubtedly, great companies will be built during this time.

One of the things about Juniper, that we are very mindful of, is we have great respect for the combination of circumstances that created our opportunity. The world is full of smart people, and there's lots of great markets. Having change and opportunity and demand come together is a significant element behind our success.

Certainly, we've executed and we've learned... We believe our focus has served us well. But we're also quite aware of the circumstances beyond our control that had to also align to give us the opportunity.

Light Reading: So you're not just the smartest people around?

Kriens: We believe we're no smarter than anyone else... hopefully, as smart.

Light Reading: Do you still have plans to take any time off? To have any fun?

Kriens: Fortunately, this is fun. And I try to protect a day on each weekend, and I try to be home by my kids' bedtime, which is eight o'clock, nine o'clock... but that's part of what it takes to compete. Because that's the time that others are putting in. There are people here at Juniper putting more time than that in. But that's the standard that's required.

Light Reading: What would you do if you had time off? Scuba dive? Ski? Don't you do anything outlandish? Like race boats?

Kriens: Juniper is an example of a company built in a new age with very old-fashioned techniques. We don't, and I don't, look for ways to make that any more exciting than it already is.

Light Reading: So what about skiing, or scuba diving?

Kriens: I do both those things, but there's an age after the birth of your children, and before they become old enough -- my son's 4 1/2 -- before they become old enough to do things, you basically do what they do.

So my hobbies are Blue's Clues, reading Dr. Seuss. We're just getting into board games. Today I've got two-year-old and four-year-old hobbies. And I wouldn't want it any other way.

Light Reading: Do you read Light Reading?

Kriens: Yeah, I do! I told Steve [Saunders, Light Reading U.S. editor], it won't be long before he's on the other side of one of these interviews, as a famous CEO... having to defend his own state of mind.

Light Reading: Well, we already have to do that, quite frequently.

-- Paul Kapustka, editor at large, and R. Scott Raynovich, executive editor, Light Reading http://www.lightreading.com