Juniper Gains on Microsoft Loss

Much of the debate about Kevin Johnson has been focused on his departure from Microsoft, a key part of the software giant's latest reorganization as it tries to figure out how to compete against Google.

However, Microsoft's loss could be a huge gain for networking hardware maker Juniper Networks, where Johnson will land as its new CEO.

When he takes the reins in September, Johnson will adopt a $3 billion company that analysts say has been stuck in neutral for a while trying to figure out how to make the jump to the next level in its competition against much larger rival Cisco Systems.

For customers and partners, that will mean a Juniper that is more aggressive in gaining technology through acquisitions, more willing to listen to suggestions from its talented engineering staff and more serious about adopting the idea that the network is becoming a platform.

Johnson will take over for Scott Kriens, the current chairman and CEO who has been with the 6,000-employee company for 12 years, Juniper announced July 24. Kriens will remain as chairman. Silicon Alley Insider's Henry Blodget said the two driving factors in the move were Microsoft CEO Steve Ballmer's insistence on splitting up the company's online business and Johnson's desire to be a CEO.

During a conference call with analysts July 24 to review quarterly earnings, Kriens said Juniper was looking for a C-level executive, particularly since the loss of Chief Operating Officer Stephen Elop, who left in January for Microsoft to replace Jeff Raikes as head of that company's Office software business. The initial idea was to find an executive who could be groomed to become CEO. Kriens said Johnson's abilities to take over immediately quickly became apparent.

"Kevin is a world-class executive," Kriens said, citing Johnson's experience in various business areas, including sales and engineering. "Kevin will enhance this company in many ways."

Kriens said Juniper's goal is to rapidly grow well beyond the $3 billion in annual revenues it makes now. He pointed out that Johnson joined Microsoft when it had 6,000 employees and $2 billion in revenue, even smaller than Juniper is now, and he stayed with Microsoft through its rapid growth as it became the dominant software company it is today.

"He's seen both side[s] and beyond of what we're trying to do here," Kriens said. "When [having Johnson as CEO] became possible, it was simply obvious."

Analysts earlier in the day said Juniper needed new management.

"There comes a time in every company's history when they need new leadership," said Zeus Kerravala, an analyst with Yankee Group. "That time is now for Juniper."

Kriens did a good job steering Juniper through the 1990s and building it to the point it's at today, Kerravala and other analysts said. However, he didn't have the right set of skills to take the next step to grow the company and expand its reach beyond the networking hardware business.

"To some extent, [Kriens] held Juniper back," IDC analyst Eve Griliches said. "He's been M&A [mergers and acquisitions]-shy, too conservative. He's been cautious and stuck with what he knows."

The result has been a somewhat stagnant company in a dynamic sector of the IT industry.

Johnson comes to the company with a different set of skills built during his 15 years at Microsoft, where he was most recently the president of the company's Platforms and Services unit. That experience included helping Microsoft acquire companies and integrating them into the business, and helping Microsoft expand its reach and build ecosystems around its products.

That platform experience will be key, Yankee Group's Kerravala said.

"If it's true [that the network is becoming a platform], then you need the skill sets around how to become a platform," he said.

Platform companies—like Microsoft—build a strong ecosystem around their products and let that ecosystem lead them, Kerravala said. "You support, they lead," he said. By contrast, Juniper is still a product company whose partners build technologies to support Juniper's offerings.

The M&A experience also will be important. Juniper did a good job of integrating NetScreen technologies after buying the company in 2004 (as illustrated in Juniper's NetScreen-Security Manager offering), but more recent acquisitions such as the 2007 purchases of Peribit Networks and Redline Networks have been less successful. The company needs to develop a better track record in its acquisitions.

"If Juniper's going to grow … there's only so much it can do organically," Kerravala said.

To adequately compete against Cisco, Juniper needs to adopt the platform mentality that its rival has already embraced.

Kriens' approach has to been to focus on what the company already did well, at the expense of seeing other areas where Juniper could expand, such as the optical space and WLANs, IDC's Griliches said.

To grow, a company needs its CEO to not only look externally at what companies it could buy, but also to actively listen to those inside the company who might have good ideas.

"This will really open up a more positive atmosphere internally," Griliches said. "[The change in CEOs] would have been nice if it had happened a year ago or two years ago."