Juniper Networks, Inc. (NYSE:JNPR) was blindsided recently after Chief Executive Office Shaygan Kheradpir unexpectedly left the company after taking the Chief Executive position less than a year ago. The exact details and reasoning surrounding the departure is still hazy and unclear, but it is said that Kheradpir had a conduct issue while dealing with a customer, and other executives questioned his leadership ability. The Board of Directors has decided to nominate Rami Rahim, 17 year executive vice president and general manager of development and innovation. Analysts appear to be positive on Rahim, but took the opportunity to grill Juniper Network’s board on appointing Kheradpir to the CEO position in the first place. To make matters even worse for Juniper Networks is the fact that activist investors are circling the company and they are currently being investigated for wrongdoing by the Securities and Exchange Commission.
Elliott Management and Jana Partners’ stakes in Juniper Networks
Elliott Management and Jana Partners have been picking up stakes in the company with the intent on getting the company out of its slump and back to industry leadership. Elliott Management has the largest outside investment in the company, at 8.7%. However, both activist funds have been pushing for the company to cut costs and launch buyback program.
The SEC began their investigation into Juniper Networks back in August 2013, under suspicion that executives at Juniper Networks, Inc. (NYSE:JNPR) may have bribed foreign officials to get some contracts awarded. So far, there is no ruling yet, but being investigated is not good for your public image and Rahim will likely look to get this squared away as soon as possible.
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Juniper Networks’ stock downtrending
Juniper Networks has had a difficult year. The stock has been in a downtrending channel since the start of February and continues to struggle with getting back on track. Sales, quarter over quarter, fell -5%, but earnings per share rose 21.10% during the same period. The stock is up 12% in past year, but down -4.32%. While being down -4% may not seem bad, keep in mind the stock has significantly underperformed the broader market.
Overall, Juniper Networks has a solid security and networking businesses that will likely lead to the company’s recovery. Continued cost reduction, debt pay downs, dividends and buybacks will help win investors over back to your side. However, abrupt CEO departures are usually a red flag and there is certainly still a lot of mystery surrounding the events that led to such an immediate firing of Kheradpir. Juniper Networks, Inc. (NYSE:JNPR) is a solid company, but they have to get this investigation settled, cut costs and revamp its image and direction to investors.