Activist hedge fund group, Elliott Management, is turning up the pressure on Juniper Networks, Inc. (NYSE:JNPR). The hedge fund led by Paul Singer, began pressing Juniper earlier in the year, back in January, when it held 6.2% ownership in the company. In January, Elliot Management made the case that Juniper Networks is “undervalued” and certainly has been stuck in a sideways range for many years. Singer’s hedge fund saw opportunity to get the company back on track by refocusing on a core business of routers and switches for mobile network providers. In addition, Elliott suggested a $3.5 billion buyback plan and efforts to get Juniper to begin paying a dividend, something the 18 year old company has never done. Elliott analysts also found areas that could be cut to help earnings and refocus business operations, such as their suggestion to cut research and development, which would save an estimated $420 million a year.
Elliott Management increases stake in Juniper Networks
Two months later, in March 2014, Elliott’s plans were beginning to take action and the hedge fund increased its stake in Juniper Networks from its 6.2% to 7.4%, to take advantage of the undervalued state of Juniper shares and to certainly reap the benefits from the $3 billion in buybacks. Aside from increasing their stake, Elliott was able to successfully get its activist plans in motion, after the hedge fund acquired two seats on the Board of Directors, after threatening a proxy fight with Juniper.
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Moving on to today, December 15, 2014, Juniper Networks is once again facing pressure from Elliott and is attempting to find alternatives to a proxy fight and threats from the hedge fund. After former Juniper Networks, Inc. (NYSE:JNPR) CEO Shaygan Kheradpir stepped down from his post in November, another opportunity to shake up management is being eyed by Elliott, who now owns 9.1% of Juniper Networks. With more ownership and power, Elliott is demanding three to five new board members of the fund’s choosing.
The hedge fund has already sent over a list of acceptable directors that have experience in the networking and technology field, a trait that Elliott believes has been lacking in Juniper’s boardroom. In addition, Elliott wants the board to show more initiative in selling the company and further returning value to shareholders. Juniper still has two and a half months before the deadline for appointing new directors closes and you can certainly bet that Elliott will be stepping up the pressure and proxy threats as the deadline comes closer and closer.
In their Q3 letter to investors, Elliott Management stated:
Juniper traded down during the quarter as a result of a negative outlook on capital expenditures in the telecommunications sector, an area to which Juniper has significant exposure, as well as general skepticism regarding the company’s ability to execute on its cost reduction plan. Subsequent to the quarter, Juniper announced poor guidance related to the slowdown in service provider capital expenditures. Elliott remains constructive on the position and believes that Juniper will weather the temporary slowdown and emerge with a leaner cost structure and a much smaller share base as a result of aggressive buybacks. We think that Juniper is undervalued at current levels, and we have also been in dialogue with management and the board regarding actions that would further drive shareholder value.
Juniper Networks is still down -5.5% YTD
Despite Elliott Management’s efforts and plans to cut costs, return value to shareholders, etc, Juniper Networks, Inc. (NYSE:JNPR) is still down -5.5% year to date. Overall, the resistance to some of Elliott’s ideas has created a bit of a stalemate and certainly slowed the process down throughout the year, but in 2015, we could finally see Elliott’s plans in action and get a better determination if Juniper really could be a takeover target in the computer networking industry.