Juniper Details Restructuring Plan to Satisfy InvestorsJordan Robertson
Juniper Networks Inc. Chief Executive Officer Shaygan Kheradpir is making good on his promise to streamline the company.
The networking-equipment maker is cutting 6 percent of its workforce and ceasing development of products that help deliver Web pages over the Internet. That and related steps will result in total charges of about $130 million in the first quarter, the Sunnyvale, California-based company said in a filing yesterday. Juniper had about 9,500 employees at the end of 2013.
Since taking over in January, Kheradpir has faced pressure from activist investors seeking cost cuts and cash payouts. In February, the company bowed to demands from hedge funds Elliot Management Corp. and Jana Partners LLC to return at least $3 billion to shareholders and cut $160 million in expenses. When announcing a new operating plan in conjunction with the buyback and dividend that month, the CEO said he joined “as an agent of change” and that he would “align our cost structure around this new strategy.”
The job cuts will reduce Juniper’s internal bureaucracy, said Jason Noah Ader, an analyst at William Blair & Co. in Boston.
“It’s long overdue; this is a company that has been pretty badly mismanaged,” Ader, who has the equivalent of a buy rating on the stock, said in an interview. “It’s bloated and there are too many people reporting to too many other people and it needed to be streamlined and rationalized.”
Juniper needs to identify additional businesses to scale back on, Ader said. The application delivery controller technology that Juniper said it will discontinue -- which helps boosts website performance -- didn’t bring in any revenue, he said.
The job cuts will occur globally, said Michael Busselen, a spokesman for Juniper. He declined to provide further details. The restructuring represents about 570 jobs.
As a result of the restructuring plan, Juniper will incur severance charges of about $35 million, an impairment charge of $85 million and writedowns of about $10 million in the first quarter. Another $20 million in charges will be accrued later in fiscal 2014, the company said.
Juniper shares fell as much as 1.2 percent in extended trading following the filing. The stock fell less than 1 percent to $26.35 at yesterday’s close in New York, and is up 17 percent so far this year.
As part of the plan unveiled in February, Juniper is set to purchase more than $2 billion of shares through the first quarter of 2015 and will pay a dividend of 10 cents a share starting in the third quarter of this year.
Juniper, which is also eliminating about 12 percent of its global facilities, said it will discuss its restructuring plan in more detail when it reports quarterly earnings on April 22.