Juniper Networks is the latest networking vendor to catch the eye of Elliot Management, which a week ago put in a $3 billion bid to buy WAN optimization solution provider Riverbed Technology.
Officials with the activist investment firm, which owns about 6.2 percent of Juniper's common stock, outlined in a statement Jan. 13 and a presentation several steps that the networking vendor should take, including possibly ditching its security business, re-evaluating its switching and router strategies, slowing its acquisition initiatives, cut operating expenses by $200 million and buy back $3.5 billion worth of stock.
The moves would push the company's stock price to $35 to $40 a share, up about 70 percent of the current price, according to Elliott Management officials.
Echoing their views on Riverbed's situation, Elliott officials said Juniper has solid products and a strong reputation in the market, but that its stock is underperforming and the company should take advantage of having a new CEO on board to make these changes.
"Juniper's new CEO along with its existing management team and Board have a unique opportunity to immediately unlock significant value at the Company through three straightforward and much-requested courses of action," Jesse Cohn, portfolio manager at Elliott, said in a statement.
A spokesman for Juniper said in an email that the company "welcomes the opinions and insights of its shareholders and is always open to constructive input toward the goal of enhancing shareholder value."
Juniper in November 2013 named Shaygan Kheradpir, a former executive with financial services provider Barclays, as its new CEO, replacing Kevin Johnson, who four months earlier announced his intent to resign after a successor was found. Elliott officials see the change in leadership as a chance to sway the direction of the company.
One of those steps is reviewing parts of its portfolio, including its security business. Elliott officials in their presentation said the business is underperforming, and that it's also lacking leadership now that Bob Muglia, executive vice president of Juniper's software unit, resigned in December.
In addition, Elliott officials said Juniper executives "overpromised and underdelivered" on its QFabric technology, which was introduced in 2011 and designed to reduce the number of networking layers in the data center from three to one. The hedge fund operators noted that Juniper had seen little return on its $100 million, two-year investment in QFabric, and that in the intervening time, competitors like Cisco Systems, Brocade and Avaya have introduced their own fabric solutions.
Juniper officials in October 2013 unveiled MetaFabric, a networking solution aimed at both corporate data centers and cloud computing environments that integrates a number of products in the company's portfolio, including QFabric.
Overall, Juniper has been unable to gain much market share since entering the switch market five years ago, Elliott officials said.
In streamlining the finances and cutting $200 million in expenses, the head fund operators said Juniper executives should look at squeezing costs from such areas as research and development and salaries. The company also should consider not making any more acquisitions to focus more on executing on current strategies, Elliott officials said.
Juniper has a market cap of about $12.87 billion.
The hedge fund firm made headlines last week when it announced a plan to buy Riverbed, which had been the subject of buyout rumors for several months. Again, Elliott officials praised Riverbed's technology and products, but questioned whether company officials had done enough to increase Riverbed's value to stockholders.
Riverbed executives had met with Elliott in November and December to hear the hedge fund firm's recommendations, and Elliott officials noted there also had been "significant" interest in acquiring Riverbed from several parties, including them. However, they were concerned that Riverbed executives did not show enough interest in those overtures.