Elliott Management and Juniper Networks
Elliott lowered its position in Juniper Networks Inc (JNPR) during the third quarter that ended in September. The position accounts for 9.49% of the fund’s 3Q14 portfolio. At the end of 3Q14, the fund owned 37,674,200 shares in JNPR, down from 39,241,000 shares in the quarter ended in June. Juniper saw an activist push from Elliott, which disclosed a 6.2% stake in January.
On November 7, the hedge fund said in an amended 13D filing that it owns an 8.7% stake in the company. It said that it continues to be “engaged with the Board of Directors and management of Juniper regarding various strategic and financial value-generative steps to increase shareholder value.”
Overview of Juniper Networks
Juniper Networks sells high-performance network products and service offerings across routing, switching, and security to service provider and enterprise markets. The company does business in three geographic regions:
- The Americas
- Europe, Middle East, and Africa (or EMEA)
- Asia Pacific (or APAC)
Juniper saw activist push from Elliott, JANA in early 2014
Juniper saw Elliott urging for changes including cost realignment, capital return to shareholders, and the optimization of Juniper’s product portfolio. JANA Partners is another activist fund that exited its activist stake in 2Q14, also said it believes Juniper should trim ~$300 million in costs a year. In 1Q14, Juniper announced an integrated operating plan (or IOP).
Under the plan, Juniper expects annualized operating expense savings of at least $160 million by the end of 1Q15. It said it focused its strategy toward the market growth areas centered on cloud building and High-IQ networking. Juniper committed to return a minimum of $3 billion to shareholders over the next three years through a combination of share repurchases and dividends. The company also lowered its global workforce by 6%.
Elliott remains “constructive” on Juniper
Latest reports said the company is in talks with Elliott over adding a number of new directors to its board. In an investor letter, Elliott said it “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.”
CEO change in October
In October 2014, Juniper said Shaygan Kheradpir resigned as the company’s chief executive officer and director. He was replaced by Rami Rahim. Juniper said Kheradpir’s “resignation follows a review by the board of directors of his leadership and his conduct in connection with a particular negotiation with a customer.”
Posts decline in 3Q14 revenues, but increase in profits
Juniper’s net revenues for the third quarter of 2014 fell 5% year-over-year and decreased 8% sequentially to $1.126 billion. It posted a profit of $103.6 million, or $0.23 a share, up from $99.1 million, or $0.19 a share, a year earlier.
The management commented, “Despite a weaker spending environment impacting third quarter revenue growth, we have been able to manage costs effectively to deliver good margins.”
Elliott’s notable positions in 3Q14
The fund’s new holdings in the quarter include Family Dollar Stores (FDO), Time Warner Cable (TWC), VMware, Inc. (VMW). It raised its positions in EMC Corp (EMC), Interpublic Group of Companies (IPG), 21st Century Fox (FOX), and Brazilian telecom giant Oi (OIBR). Notable exits were Mallinckrodt Plc (MNK) and Allergan Inc (AGN), while a stake in Juniper Networks (JNPR) was lowered.