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Juniper, Lehman & OS Frag Wars

Craig Matsumoto
9/29/2010

2:25 PM --

Last night, Silicon Valley's Churchill Club held its annual dinner, featuring Juniper Networks Inc. (NYSE: JNPR) CEO Kevin Johnson being interviewed by Mary Meeker, the star analyst from Morgan Stanley . Selected highlights:

  • On running Juniper, after something like 16 years at Microsoft Corp. (Nasdaq: MSFT): "Microsoft was more of a conflict-driven culture," Johnson said. "Coming into Juniper, sometimes it was so collaborative, they wouldn't make the hard decisions." Predictably, he says he's trying to find a medium between the two philosophies.

  • Johnson came to Juniper in September 2008, one week before the Lehman Brothers bankruptcy that heralded the big bad recession. "Within 15 days, I had major investors saying, 'You've got to lay off 15 percent of your workforce! You're way too slow!' " (See Kriens Steps Aside as Juniper CEO.)

    One Juniper staffer reports seeing a small stack of books on Johnson's desk at the time; Johnson was doing his homework, learning how past recessions had panned out. His decision, which came out in February 2009, was to increase the R&D budget, figuring that stashing ammunition during the figurative winter would pay off in the spring. (John Chambers at Cisco Systems Inc. (Nasdaq: CSCO) says the same kinds of things.)

    Johnson said last night that the stated plan was to raise R&D budgets and find ways to cut operating expenses. "But all they heard was, 'You're going to raise R&D,' and that caused an amount of consternation in investors and in the press." (See Juniper Tightens Its Belt.)

  • Johnson had told me he was going to stick Meeker back with a couple of questions, and he made good at the end. An audience member asked about smartphones, and Johnson deflected it by asking Meeker about OS fragmentation. How many OSs will survive with more than, say, 2 percent market share?

    "I'd say two, maybe three, depending on what companies like Nokia Corp. (NYSE: NOK) end up doing," Meeker said.

    Her reasoning comes from the number of cellphone stores -- brick-and-mortar type -- that still exist: "The vast majority of Americans do not buy their mobile phones on the Web. They buy them from the cellphone store, and they buy what the carrier tells them to buy." And on top of that, she said, most buyers get only one phone.

    By that analysis, the OS wars wouldn't be fought directly on the consumer front. Rather, the dominant smartphone providers would simply pick winners.

    — Craig Matsumoto, West Coast Editor, Light Reading

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