Elliott Seeks Greater Influence in Juniper Networking Business

By Jeffrey Burt  |  Posted 2014-12-15 Print this article Print
tech business

The company and the major investor are discussing adding Elliott-suggested people to the vendor's board of directors, according to a report.

Activist investor Elliott Management reportedly is continuing to push its agenda at Juniper Networks.

According to a report in the Wall Street Journal, Juniper executives are considering adding new directors to its board to address a demand from Elliott officials, who have recommended several new director candidates. Juniper has begun evaluating the proposed candidates, though the report said it is unclear who will be named to the 11-member board, or how many new directors will be appointed.

The move also could help Juniper avoid a proxy fight, according to the Wall Street Journal, which quoted unnamed sources. Elliott's goal is to bring a wider range of industry experience to the board, and may also begin to pressure Juniper directors to consider selling the company, which the newspaper said has a market value of more than $9 billion.

The report comes at the end of a difficult year for Juniper, which in January became a focus of Elliott officials, who went public with demands for the networking equipment vendor to shore up its business and return more money to shareholders. In a statement and presentation, the investment firm urged Juniper officials to re-evaluate its switching and routing businesses, slow down on buying other companies, cut expenses by $200 million and buy back $3.5 billion worth of stock.

Elliott's demands came just as new CEO Shaygan Kheradpir took the reins. A month later, Kheradpir announced a new operating plan designed to accelerate growth and increase shareholder value, focus more of the company's efforts in such areas as networks for cloud environments, and reduce the percentage of revenues that were being spent on R&D. The CEO also said he wanted to return $3 billion to investors.

Elliott was soon joined by another major investor, Jana Partners, in pressuring Juniper executives to cut costs.

Kheradpir's announcement kicked off a series of moves, including announcing a plan in April to cut 6 percent of the company's workforce of more than 9,000 employees, and selling its Junos Pulse security business in July to private equity firm Siris Capital for $250 million.

During the year, Elliott also has increased its stake in Juniper, from about 6.2 percent in January to about 9 percent now.

In November, Kheradpir abruptly resigned after a review by directors found fault with his conduct during negotiations with an unnamed customer, bringing into question the CEO's leadership of the company. Few details were given about the conduct or the customers, and neither Juniper board members nor Kheradpir has commented on it since.

Rami Rahim, a 17-year veteran of Juniper who had been executive vice president and general manager of development and innovation at the company, was named to replace Kheradpir as CEO. Rahim takes over a company that is still a significant player in a networking space that is being rapidly changed by such new technologies as software-defined networking (SDN) and network-functions virtualization (NFV), but also a company that has had disappointing financial numbers the past couple of quarters. Juniper officials have pointed to slowing demand among service providers—particularly in the United States—as a key reason for the hit their business has taken.

Juniper executives in October reported that in the third quarter, revenues came in at more than $1.12 billion, a 5 percent drop from the same period in 2013.

Elliott also has been a vocal investor in other tech companies, such as Riverbed Technology and EMC. With EMC, Elliott officials have been pushing the storage giant to sell off its 80 percent share of VMware and to do away with the federation management model put in place by CEO Joe Tucci.



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