World Economic Forum / Remy Steinegger / Creative Commons
Shares of networking equipment maker Juniper Networks got a jolt today on the disclosure by an activist investor firm that it had bought more than six percent of its shares.
Juniper shares rose by more than eight percent after Elliott Management, a hedge fund controlled by the billionaire activist investor Paul Singer (pictured), said it would use the influence derived from its ownership stake to seek a $200 million reduction in the company’s operating costs, a $3.5 billion share buyback and a streamlining of its product offerings. Juniper shares were selling at $25.60, up by more than $2, in afternoon trading.
“Juniper’s stock has severely and consistently underperformed the market and its peer group by any objective measure and over any relevant time period,” Elliott said in a slide presentation the company released on a website called new-juniper.com. It said the poor performance of the shares had been driven by a poor execution of mergers and acquisitions and lack of success in new markets, including security and enterprise switching.
Juniper shares have been volatile over the last two years. Before today’s news, the shares had risen about 12 percent over two years. The shares exited 2011 at $20.41 and by mid-2012 traded as low as $14.24. They rose as high as $22.57 in 2013, and declined to as low as $15.69.
Over three years starting in November of 2010, Elliott says, Juniper lagged the Nasdaq by 104 percent, falling by 45 percent during a period when the value of the Nasdaq rose by 59 percent.
Elliott said it had conducted an “exhaustive” analysis of Juniper’s business. “Our conclusion from this analysis is that Juniper’s assets are valuable and strategic and that the business possesses several fundamental upside drivers over the medium-term but that its future will be increasingly difficult if [it] continues with its existing strategy,” the firm said.
Cindy Ta, a spokeswoman for Juniper, had the following comment: “Juniper welcomes the opinions and insights of its shareholders and is always open to constructive input toward the goal of enhancing shareholder value.” The move comes only seven days after Shaygan Kheradpir took over as the new CEO at Juniper.
Analyst Brian Marshall of ISI threw his support behind Elliott’s proposals, saying “they should receive serious consideration.” Marshall has generally been positive on Juniper, arguing that the $2.8 billion it has spent over the last two years on research and development into new routing and switching products give it a fighting chance against its primary rival, Cisco Systems.
It has been a busy month for Elliott, which last week bid more than $3 billion in an attempt to buy out Riverbed Technology, another networking company. Riverbed said it would consider the offer; analysts expect a rival bid to emerge.
Elliott has previously targeted other tech companies like Brocade, BMC Software and Compuware with its activist moves. In 2010 it pushed networking concern Novell to sell itself, and ultimately prevailed in that effort when Novell was acquired by Attachmate, a privately held software company.