Juniper Rolls Out New Operating Plan, $3 Billion Buy Back Plan
Juniper Networks officials, under pressure from shareholders to make changes to its business operations, is unveiling a new plan that calls for streamlining its product portfolio, reducing operating expenses and returning more money to investors.
Shaygan Kheradpir, who took over as CEO of the networking technology vendor in January after being hired in November 2013, introduced the company's integrated operating plan Feb. 18, saying during a conference call that "this plan is focused on accelerating growth and increasing shareholder value." It will lead to a "more focused, connected, agile and execution-oriented company," he said.
Kheradpir said the company will look to leverage its expertise in networking routing and switching, security, control and network management to offer solutions for what the CEO called highly automated and secure "high-IQ networks" found in the growing numbers of private and public clouds that are being built. In addition, the company will grow its margins, reduce the percentage of revenues being spent on R&D and return as much as $3 billion to investors.
The moves dovetail with demands put forth last month by Elliot Management, an activist investment firm that owns about 6.2 percent of Juniper's stock. In a statement and presentation released in January, Elliot officials said that Juniper's product lineup was strong, but that its stock was underperforming, and outlined steps they wanted the networking vendor to take to improve its financials and give more money back to investors.
Those steps range from reviewing the product portfolio—including its security offerings—to cutting $200 million in expenses by squeezing costs from R&D, salaries and other areas. The hedge fund operator also suggested the company not make any more acquisitions for a while in order to focus more on executing on current strategies.
Soon after Elliot made its views on Juniper known, another activist head fund, Jana Partners, also called on the networking company to improve its financials and return more money to shareholders. Like their Eliot counterparts, Jana officials said they saw an opportunity for change with a new CEO taking over.
The new plan also came out the same day reports surfaced that Nokia Solutions and Networks was might be interested in merging with Juniper. A Juniper spokesperson said the company does not comment on rumors.
Kheradpir hinted Jan. 23 that a plan was on the way while announcing the company's fourth-quarter financial numbers. Juniper officials included four parts in the integrated operating plan, with one focusing on leveraging its broad product portfolio of switches, routers, security offerings and management software to create more integrated solutions.
During the conference call, the CEO rattled off a list of Juniper products and said that "the way this company is structured today, these are thought of as individual units." Under the new plan, Juniper will bring these products more closely market these products together as broader solutions. The effort is part of what the vendor is calling its One-Juniper structure to create a more agile, focused and connected company.
"It’s a much [better] line of attack and product line than we've ever had before," Kheradpir said.
The One-Juniper strategy also will lead to reduced operating expenses and improved operating margins, with the goal of saving $160 million in expenses and reaching margins of 25 percent. Operating expenses will come in at 39 percent of revenue. Juniper also is creating a committee to oversee cost controls that will be led by Kheradpir and is hiring a cost consultant—McKinsey Technology Cost Structure Team—to help with the plan.
In addition, Juniper will return at least $3 billion to shareholders over the next three years through share repurchases and dividends. In addition, investors will see a quarterly 10 cents-per-share dividend starting in the third quarter.