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