Starbucks Picks Juniper’s Ex-CEO Johnson as Operating Chief

Starbucks Corp. named former Juniper Networks Inc. Chief Executive Officer Kevin R. Johnson as chief operating officer, filling the job of longtime executive Troy Alstead, who’s preparing to go on sabbatical.

Johnson, 54, will begin in the role on March 1, when Alstead begins his yearlong, unpaid break, the Seattle-based company said Thursday in a filing. Johnson has been a Starbucks director since 2009 and will remain on the board but cease membership on all committees.

The move gives Starbucks a seasoned technology executive to handle the operating chief job at a time when reaching customers through their mobile phones is becoming an integral part of its strategy. About 16 percent of Starbucks’ U.S. store transactions come from mobile devices, and the chain’s app, which lets customers pay and earn rewards points by scanning their phones, has more than 13 million active users, Chief Executive Officer Howard Schultz said today.

While it’s unclear if Johnson is being groomed for the CEO job, the company is putting more emphasis on its technology, said RJ Hottovy, an analyst for Morningstar Inc. in Chicago.

“I wouldn’t go as far as to say ‘heir apparent,’ but I do like his expertise given Starbucks is already successful with its mobile app,” he said. “That should dovetail nicely with their key growth initiatives.”

Juniper Career

Johnson led Sunnyvale, California-based Juniper, which sells networking gear, from 2008 through 2013. At Starbucks, he’ll be taking over for an executive who began managing day-to-day operations last year. Alstead, a 23-year veteran of the coffee chain, had been widely cited as a potential successor to Schultz as CEO.

While speaking on a conference call to discuss the company’s first-quarter earnings, Schultz said he had been talking to Johnson for some time and that the discussions were independent of Alstead’s decision to take a sabbatical. He also downplayed the idea that the move was part of a CEO succession plan.

“My personal commitment to Starbucks has never been greater, and I also want to make it clear that Kevin’s addition is not part of some unannounced succession arrangement,” Schultz said.

The shares rose 4.1 percent to $86.13 at 6:15 p.m. in late trading in New York, lifted by an 82 percent surge in profit in the first quarter. The stock increased 4.7 percent in 2014, the sixth straight year of gains.

Johnson’s Pay

Johnson will receive an annual base salary of $1 million, Starbucks said. He’s also been granted a new-hire equity award of $7 million, along with a $1 million cash award.

Johnson joined Microsoft Corp. in 1992 and rose to become president of its flagship Windows business as well as its struggling Online Services division. He championed Microsoft’s bid to buy Yahoo! Inc. in 2008, an attempt to create a strong No. 2 in the search business to Google Inc.

He left Microsoft after the Yahoo deal collapsed to become CEO of Juniper, the second-largest maker of routers used by phone companies. Known as a strong sales and marketing executive, he improved the company’s execution but failed to make it a leading provider of networking gear to corporate buyers. Juniper shares fell almost 20 percent when he resigned in July 2013, five years after he took the job.

Payment Innovator

Starbucks, meanwhile, has become a leader in payment technology. The company introduced mobile ordering last month at cafes in Portland, Oregon, and plans to roll the service out nationwide this year. The company also is aiming to offer delivery in select markets in the second half of this year in a plan that Schultz has called “e-commerce on steroids.”

The company said earlier today that first-quarter net income increased to $983.1 million, or $1.30 a share. Excluding some items, profit was 80 cents, matching the average estimate of 22 analysts surveyed by Bloomberg.

Revenue gained 13 percent to $4.8 billion, also in line with analysts’ estimates. Global same-store sales advanced 5 percent in the quarter, compared with a projection of 4.7 percent.

Breakfast-sandwich sales surged 29 percent in the U.S. for the quarter, while lunch-food sales were up 15 percent, Chief Financial Officer Scott Maw said in a phone interview.

“We want to make sure we have the right kind of food offerings for customers that want to attach something to their coffee,” Maw said. “It’s a pretty natural purchase.”

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