"Juniper's board should undertake a strategic review of the security business, which is underperforming and now lacks a leader after Bob Muglia's recent resignation," the Elliott presentation states.
Juniper's lack of overall execution outside of its core routing business is measured by its merger and acquisition activity over the past 15 years, according to Elliott. Juniper spent over $7 billion on acquisitions during this period while missing out on $40 billion in opportunity in four specific markets — security, WAN optimization, application delivery control and session border controllers — due to failure to execute, Elliott states.
NetScreen security is floundering, while Juniper discontinued products in WAN optimization, application delivery control and session border control, Elliott notes.
"Juniper has historically tried to buy into other attractive markets but consistently mis-executes post-acquisition, resulting in significant missed opportunities," the Elliott presentation states. "Pure-play vendors have succeeded in these 4 markets and have a combined value of over $40B today, illustrating that the opportunities for value creation were significant but Juniper simply failed to execute outside of routing."
These endeavors have also distracted Juniper from its bread-and-butter routing business, Elliott notes. Citing data from Infonetics Research, Elliott says Juniper has given up share in core and edge routing business from 2005 to 2012: Core dropped 12 percentage points, to 24% in 2012 from 36% in 2005; and edge gave up six percentage points, to 14% from 20% over that time.
Elliott recommends Juniper cease its acquisition activity until it can regain momentum in its existing business.
Juniper did not respond to a request for additional commentary specific to the Elliott points on product rationalization. Earlier, Juniper stated that it would review the Elliott presentation despite returning $1.7 billion to shareholders over the past three years.
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