Optical/IP Networks

Will Juniper Be Burned by the Churn?

Eight senior staffers have left Juniper Networks Inc. (NYSE: JNPR) since January 2006, but analysts disagree on whether the latest departures will be cause for worry.

On March 12, executive vice president Robert Sturgeon and CFO Robert Dykes resigned, set to leave the company at the end of March and April, respectively. Dykes is becoming CEO of startup NebuAd Inc., while the reasons behind Sturgeon's departure remain unclear. (See Juniper Loses More Execs and Dykes Joins NebuAd.)

Two senior staff resignations are noteworthy enough, but these came after Juniper saw six others leave in 2006, as tallied by analyst Mark Sue of RBC Capital Markets .

Table 1: One Long Year
Departing Juniper Exec Title Departure Announced on:
Jim Dolce VP, Wordwide Field Operations Jan. 10, 2006
Carol Mills EVP/GM, Infrastructure Products Group Jan. 10, 2006
Jef Graham EVP, Application Products Group Jan. 10, 2006
George Riedel Chief Strategy Officer Feb. 21, 2006
Tushar Kothari VP, Worldwide Distribution Channels March 8, 2006
Jeff Lindholm Chief Marketing Officer Nov. 15, 2006
Sources: RBC Capital; Juniper Networks; BigBand Networks; Nortel Networks

A Juniper spokesman says the company is undergoing serious changes, the kind of transition that often leads to some executive turnover. Dykes and Sturgeon, in particular, left after "a mutual set of bidirectional decisions," he says. "We were not at the mercy of executives who decided to leave."

Analysts agree the turnover during the past 15 months has revealed a thin bench in Juniper's upper ranks. Cisco Systems Inc. (Nasdaq: CSCO), by contrast, seems to have little trouble finding an internal replacement when an exec like Mike Volpi leaves. (See Volpi Out at Cisco.)

"Go back to someone like Jim Dolce, who had great relationships with customers. When he's gone, there's a void," says Simon Leopold, an analyst with Morgan Keegan & Company Inc.

Executive turnover is "not a showstopper, at least not at this point," Leopold says, but he thinks it's something Juniper's big carrier customers -- the likes of AT&T Inc. (NYSE: T) -- might worry about.

"Big carriers will spend a lot of time scrutinizing balance sheets. Their concern is whether this company is going to be around for years to come," Leopold says. "When they see this kind of turnover, it's the same kind of yellow flag as weakness on a balance sheet."

Other analysts see the departures as a minor bump. This week's resignations could even have a bright side.

"It's disappointing to lose two senior guys in one day, but it gives the company a good opportunity to upgrade both positions," says Tim Daubenspeck, an analyst with Pacific Crest Securities Inc.

Dykes, for example, "might have run out of steam, with the restatements," he notes. And Sturgeon, who joined Juniper from Lucent in 2001, might not have been the best fit for the job of running Juniper's enterprise group.

"What Juniper is trying to do on the enterprise side is very ambitious, and to advance that, they're probably going to need an executive that was born and bred in enterprise," Daubenspeck says.

To its credit, Juniper has done some serious patching up during the last 12 months. The MX960 answered criticisms that Juniper needed a high-density Ethernet box to properly compete, particularly in IPTV. And the company just finished correcting its books for stock-options expenses, at least theoretically. (See Juniper Antes Up on Ethernet (Finally) and Juniper Catches Up, Writes Down.)

But the company remains at a crossroads, having reached its 10th birthday and $2 billion in annual revenues, a figure that's doubled in the past three years. On yesterday's conference call with analysts, CEO Scott Kriens noted the company is going over its plans for creating the next doubling of revenues.

Maybe those plans and the completion of the earnings restatements created a good setting for Dykes and Sturgeon to step away. Juniper could be trying to "tear the band-aid off all at once," Daubenspeck says.

— Craig Matsumoto, West Coast Editor, Light Reading

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brahmos 12/5/2012 | 3:12:18 PM
re: Will Juniper Be Burned by the Churn? from table-1
Pete Baldwin 12/5/2012 | 3:12:17 PM
re: Will Juniper Be Burned by the Churn? Pray tell, who? (Or are you trying to say there's someone who *ought* to have left but didn't?)

I was going to add Krishnu Kolluri, but he left before the 12-month timeframe that RBC was talking about.
LightCycle 12/5/2012 | 3:12:14 PM
re: Will Juniper Be Burned by the Churn? ... but morale at Juniper is at an all time low. There're departures at various levels going on, not just the top Execs.
myhui 12/5/2012 | 3:12:14 PM
re: Will Juniper Be Burned by the Churn? C'mon, JNPR folks.

You work there for one reason alone: to gain market share, both in established markets and in new markets. That's the only way to increase market cap. of your Co.

The % increase of CSCO is most likely going to be less than the % increase of JNPR, so what's your rational choice? JNPR, of course!
myhui 12/5/2012 | 3:12:14 PM
re: Will Juniper Be Burned by the Churn? Why is morale at Juniper at an all time low?

1. Because Cisco has Broadcom designing their chips for them, while Juniper has to design their own chips?

2. Because there are too many employees not contributing enough, while the real contributors are burnt out from doing multiple people's work?

3. Because the follow-on to the T series is late, and it's getting later because there are bugs in the chips that no one knows how to fix?

4. Because after a few acquisitions the software code base is starting to get out of control in over-lapping functionality and awkward interfaces?

5. Because employees are scared that JNPR vs. CSCO may not turn out like INTC vs. IBM 20 years ago, and the winner may be IBM and not INTC?
marmoset 12/5/2012 | 3:12:13 PM
re: Will Juniper Be Burned by the Churn? Paulette Altmaier, EVP of Apps Products Grp and an ex Ciscoite, was done away with along with the entire division sometime last year. Those people were looking around...
lightreceding 12/5/2012 | 3:12:12 PM
re: Will Juniper Be Burned by the Churn? the products and people in the division that Paulette headed were merged in to the two other divisions. One of the products went in to the group run by Rob Sturgeon. In light of his departure letting Paulette go looks like a doubley bad idea, since she knew how to compete against Cisco and now they have a serious lack of leadership, and a further indication that the CEO can't look two moves ahead.
brahmos 12/5/2012 | 3:12:11 PM
re: Will Juniper Be Burned by the Churn? PA's division I believe now called APG, its a separate BU in the cisco sense.
fishnchips 12/5/2012 | 3:12:11 PM
re: Will Juniper Be Burned by the Churn? It seems like leadership at the top at Juniper is anemic. They try too hard to mimic cisco rather than play their own game. Which is a dangerous thing to do when you're more than an order of magnitude smaller in size/revenue.

Copying is a nice form of flattery but is certainly not leadership. Even more churn at the top is needed, IMO.
att_dna 12/5/2012 | 3:12:09 PM
re: Will Juniper Be Burned by the Churn? Kurt Melden (not sure how much impact he had at JNPR).
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