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Juniper Networks Cuts Deal With Elliott

Stocks in this article: JNPR

NEW YORK (The Deal) -- Juniper Networks (JNPR) announced Friday a restructuring and board overhaul along with plans to return at least $3 billion to shareholders, giving in to demands by activist Elliott Management.

Sunnyvale, Calif.-based Juniper said that it intends to repurchase more than $2 billion worth of shares by the end of the first quarter of 2015 and pay a dividend of 10 cents per share, starting in the third quarter. The company also said that former CEO Kevin Johnson will retire from its board by the end of February, with its board nominating Elliott recommendations Kevin DeNuccio and Gary Daichendt as new directors.

DeNuccio is the former CEO of Redback Networks Inc. Daichendt is a one-time Cisco Systems Inc. executive who also serves on the boards of NCR Corp., Emulex Corp. and ShoreTel Inc. DeNuccio was recently brought in to be CEO of Violin Memory Inc., a company under pressure from some investors to find a buyer.

The capital allocation plan will be funded by a combination of onshore cash and newly issued debt, with Juniper adding that it could return additional funds to shareholders over time, subject to its performance, its economic outlook and other factors.

Juniper will also push a restructuring plan spearheaded by new CEO Shaygan Kheradpir, who stepped into the position shortly before Elliott's January disclosure that it had amassed a 6.2% stake in the enterprise network service provider. Juniper said that it expects to cut annual operating expenses by $160 million in the coming years and achieve an operating margin of 25% by 2015.

Kheradpir in a statement said he wants to refocus Juniper "as a pure-play, high-performance networking company with engineering and organic innovations at its core." Though the company did not identify possible divestitures, Elliott had said it should sell its security division.

"Our new, sharpened focus will bring us closer to our customers as we innovate together to address the opportunities ahead, and will enable us to operate much more efficiently," Kheradpir said. "I joined this phenomenal company as an agent of change to enable Juniper to realize its potential through a more focused, agile, connected, and execution-oriented structure optimized to capture the significant and growing opportunity we see before us."

Juniper said that it developed the plan after engaging with Elliott and other shareholders. The company said it has an agreement with Elliott whereby the fund has pledged to support the company's changes and vote in favor of Juniper's board nominees.

Elliott portfolio manager Jesse Cohn in a statement called the announcement "an incredibly positive development for Juniper and its shareholders." Cohn said "Elliott is highly optimistic about the company's future and looks forward to supporting Juniper in its continued focus on creating shareholder value."

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