Not since its seat-of-the-pants startup days has Juniper Networks been this much of a question mark. Granted, that's a relative statement; it isn't in trouble, at least in the Hewlett-Packard, RIM or Nokia sense of the word.
But the infrastructure company just closed one of the hardest calendar years in its 17-year history, beset by earnings shortfalls, challenges with some of its more ambitious products, a restructuring that's eliminated head count and the exits of several well-known vice president-level executives, along with continued questions about its mission and purview.
Now, heading into Juniper's 2013 Global Partner Conference, which kicks off in Las Vegas this week, solution providers, analysts and employees alike see the company at a crossroads, where it's no longer the hotshot networking kid taking on bigger vendor players and now is more of an awkward, scruffier tech industry adolescent, unsure of exactly what adulthood is going to look like.
"The strength of their balance sheet makes a recovery a distinct and likely possibility, but the timing and how that's going to manifest itself is still very uncertain," said Simon Leopold, managing director of communications equipment for Raymond James. "They're in their awkward teenage years now. They've been focused on new products, but have lost some of the attention on their existing businesses. The nature of getting into new businesses is that not all of them are home runs."
Industry opinion on Juniper is split. Some see Juniper about to right its ship following a long-overdue restructuring and solving problems that can be dismissed as traditional growing pains for a company of its $4.5 billion size. Others see a company that's fallen way behind in its traditional strongholds such as telecom and security while stumbling with ambitions around products such as its QFabric converged infrastructure system and trying to turn itself into a marketing powerhouse.
Juniper's leaders remain confident, but inside Juniper things have never been so disquieting.
"Juniper became so political," a longtime Juniper employee who left the company in 2012 told CRN. "Everything has become process, process, process. That's a growing pain with any small company that got to where Juniper is now, but in this case that's come with politics. To get something done, you have to be aligned with the right people in Juniper, and if you don't fit in, you're ignored. I didn't think I would see that at Juniper. Juniper is not the company it was five years ago."
Juniper began in 1996 as the company that was going to make the best and most exciting high-performance routers to help service providers embrace the burgeoning Internet, and challenge Cisco in that space. It accomplished that, having achieved about 32 percent of the core router market and 17 percent of the edge router market by 2012, according to Infonetics Research, compared with Cisco's respective 58 percent and 32 percent shares.
By early 2008, Juniper had entered the enterprise Ethernet switching with its EX product line, and after proving it could take on Cisco in service provider networking, was about to start eating into Cisco's share in enterprise networking, too. The mission had a nice ring to it: Juniper, a likeable gutsy competitor, was going to outmaneuver Cisco in Cisco's bread-and-butter markets and do so with engineering know-how and a channel ready to hand customers the more efficiently performing Cisco alternative they'd always sought. It would do all this on an operating system -- Junos --that would cut across Juniper's major product lines and be a unified platform in marked contrast to Cisco's galaxy of OSes.
Leading the charge was an influx of new talent, including Kevin Johnson, ex-Microsoft Platform and Services boss, who became Juniper's CEO in 2008.
Good early notices helped cement Juniper's market reputation, and along with Johnson came other major names, such as Lauren Flaherty, the hard-charging chief marketing officer and veteran of IBM and Nortel, and later, ex-Microsoft executives Gerri Elliott and Bob Muglia, who now run Juniper's sales and software, respectively. During this period also came some of the most important product launches in Juniper's history -- including QFabric in February 2011 -- and something that Juniper had never had previously: marketing muscle.
The success of Juniper's 2010 "New Network" campaign -- marked by splashy billboards that greeted travelers in airports worldwide -- made Juniper's 2011 Americas partner conference in Phoenix a high-excitement affair.
"There was the sense that Juniper really was making strides," recalled the chief executive of a Juniper Elite Portfolio partner and member of Juniper's advisory council, who requested anonymity. "They were this hotshot, and through '09 and '10, you had Cisco and HP duking it out and spitting at each other, and Juniper was like this calm away from that that customers were finally taking notice of, with damn good products to boot."
The magic wouldn't last, however. By the time 2012 arrived, Juniper was off to a rough start, telling Wall Street in early January that its quarterly profit and earnings would come in below expectations. It's spent much of the past 18 months, in fact, putting up mediocre earnings reports that to some analysts underscore that Juniper, for all its expansion efforts, was still far too exposed to the vagaries of service provider spending. Indeed, Juniper's revenue mix as of its fiscal third quarter of 2012 was 66 percent service provider and 34 percent enterprise.
"They really haven't done a good job shifting the revenue mix away from service provider and into enterprise," said Scott Dennehy, senior analyst and engagement manager with Technology Business Research. "When they came out with the EX switches and began to gain some momentum, it seemed like that mix was going to shift. But their mix now is really the same as it was years so, where they're so dependent on the service provider segment for a lot of their growth. When that stalls, they stall."
Juniper's financial challenges have cast a pall over its market momentum, and disappointments in major product lines such as QFabric and MobileNext have only further hampered its outlook. In an interview with CRN in October 2012, Cisco CEO John Chambers described Juniper as "questionable" -- which in Chambers-speak meant that a once-worthy opponent was considered all but vanquished.
"We told you we were going to beat Juniper," Chambers said. "Now they're on the defensive. They're really being challenged now."
Juniper, however, said it's unfazed by Cisco's criticism.
"I think John is going to regret that comment after he sees what we're doing," Juniper's Muglia told CRN in an interview before the partner conference.
Signs of deepening trouble at Juniper first popped up in October 2011, when the company quietly cut a few hundred employees. Nearly a year later, Juniper confirmed plans to lay off another 500, even though some insiders say it's been quietly laying off, consolidating and shuffling groups around throughout the past 12 to 18 months.
The stated goal, according to what Juniper told Wall Street analysts in July 2012, was to remove $150 million in operating expenses from Juniper's balance sheet by the end of its fiscal 2013. Robyn Denholm, Juniper's CFO, told attendees at the Raymond James IT Supply Chain Conference in New York in December that Juniper would finish its restructuring ahead of schedule. Juniper, she said, felt the need to accelerate its timetable because the restructuring -- and the attendant bad press -- was disrupting the company.
Denholm said that Juniper had gone after expenses with a "surgical focus," and that in addition to head count cuts that were completed in October, it had removed several layers of middle management. She also said at the time that Juniper would continue to return cash to shareholders as part of a successful buyback program, and continue to make both targeted "tuck-in" style acquisitions and investments in companies through its Junos Innovation Fund.
Juniper's upbeat tone with its restructuring has done little to distract industry watchers from an apparent executive exodus, however. Over the course of the last three months, Juniper has parted ways with some of its top sales, marketing and engineering talents, including four executive vice presidents.
The best-known and highest-ranking of them was Stefan Dyckerhoff, executive vice president of the Platform Systems division, who left in November to become a managing director at Sutter Hill Ventures. Dyckerhoff, who was Juniper's 33rd employee and returned to the company in 2010 following several years at Cisco, most recently headed Juniper's strategy and development for routing, switching, branch and wireless LAN products, as well as its silicon technology and the Junos OS.
"One of my big concerns, honestly, is something I can't build into a financial model: the departure of a guy like Stefan Dyckerhoff," Raymond James' Leopold said. "He knows more about Juniper than I ever will, so why did he leave? That's a big concern to me that he would pick now to exit the company."
Juniper's Muglia, however, said Juniper has stabilized and that the company's outlook is much improved.
"We very purposefully set expectations relatively low in terms of how quickly we would get through the restructuring," Muglia said. "We're now operating more of a business-as-usual kind of thing where we made the changes we needed to make and we have an important set of priorities as a company."
Beyond service provider networking, which remains Juniper's stronghold, its diversification effort has been spotty.
In security, it's a strong alternative but not a galvanizing force, what with so many smaller, splashier contenders having beat it to the next-generation firewall punch. And in Ethernet switching, it became a contender but merely so. Most analyst estimates, from Infonetics to IDC, give it 3 percent to 5 percent of the global Layer 2/Layer 3 enterprise switch market as of the second quarter of 2012, behind HP's roughly 8 percent to 9 percent in the No. 2 spot. That's been enough for Juniper to keep pace with other switching vendors such as Huawei and Alcatel-Lucent, but limit its growth relative to the kingdom of Cisco, whose L2/L3 share in 2012 was still higher than 65 percent.
Critics point to Juniper's bumpy acquisition history as a prime reason it hasn't successfully diversified. Juniper succeeded with its Unisphere acquisition in 2002 but experienced integration issue with deals such as NetScreen in 2004 and never reaped much growth from a host of smaller acquisitions such as Peribit Networks and Redline Networks in 2005, analysts said.
"The NetScreen acquisition was a huge lesson for them about the challenges of integration. Most acquisitions they've made since then have been smaller technology deals -- they just didn't want to face the integration risks," Raymond James' Leopold said.
"Their acquisition record really is not good," said Technology Business Research's Dennehy. "NetScreen, Peribit, Ankeena -- these are companies where we really still haven't seen a lot of the fruits. The NetScreen acquisition made them wary of integration challenges with big acquisitions, so their strategy has been basically to stay away from blockbuster acquisitions and try to enhance what they already have. But I don't think that's moving the needle for them. The consolidation is happening in the overall network and data center. Cisco has continued to grow despite the downturn because it has such a broad portfolio. It can sell a lot of things to a lot of customers. Juniper can't."
Juniper has done much better with recent acquisitions, Muglia said. He cited Juniper's 2010 acquisition of Trapeze Networks, which gave it wireless LAN assets, and its 2012 acquisition of Mykonos for Web security, as areas where Juniper was investing heavily and had a lot of room to grow.
"Juniper has made a lot of acquisitions and some of them have not panned out," Muglia said. "But recently, we've been focusing very effectively with the acquisitions we've done."
What's unclear is whether Juniper can still hit home runs with new products considering its R&D spend. During her Raymond James talk, Denholm said sales of newer Juniper lines such as its PTX packet transport, T4000 core routers, QFabric data center system and ACX universal access routers would collectively account for about $150 million by the fourth quarter of Juniper's fiscal 2013, part of a stated plan by Juniper to turn new products into compelling run rates.
But the flash of new products is no guarantee of success, as Juniper has also repeatedly shown. MobileNext, Juniper's mobile packet core, which it launched at Mobile World Congress in 2011 as a platform for offering 2G/3G and LTE evolved packet core functions using gateways and policy managers implemented on Juniper products like the MX 3D universal edge router, has been one example of a widely acknowledged Juniper disappointment.
"MobileNext has been kind of a flop," Zeus Kerravala, founder and principal of ZK Research, said. "So what are they going to do to become a key part of the LTE ecosystem? The largest area of telecom spend over the next five years will be in those LTE build-outs. They needed a hit there."
"I think their problem is that they have a sales force that's gotten them to a certain level but no longer knows how to raise the game higher," said a top executive at another Juniper Elite Portfolio partner, who asked that his name not be used. "When we first starting doing business with them, that sales force was all guys they inherited from the companies they'd bought -- firewall guys from NetScreen, that kind of thing. It's always been kind of tough to get those guys to talk about switching, or the telecom guys to talk about enterprise, or any of them to get at the integrated play QFabric is supposed to be."
THE VIEW FROM INSIDE
If the view outside Juniper is one of uncertainty, the view from inside is one of angst. CRN interviewed more than a dozen current and former Juniper employees, including vice president- and director-level personnel in Juniper's sales, marketing, operations and engineering business units. All of them insisted on anonymity because they were either not authorized to speak publicly or did not want to compromise business relationships.
The sources were unanimous in expressing frustration, especially in Juniper's middle-management layers. It's added up to what one current Juniper executive calls "an atmosphere of pins and needles," in which many longtime Juniper diehards were convinced it was time to plan an exit.
"We have the partner conference coming up, followed by the Juniper sales conference, then [industry] shows like Mobile World Congress and RSA that are hugely important to [Juniper's] presence," said one current executive, who requested anonymity. "[There is] concern we won't have the same pop we usually do at those things."
Several employees told CRN that groups within Juniper's sales, marketing and engineering teams have been left adrift by all the executive exits and the constant shifting of resources. They also described a culture of "silos," in which currying favor from executives said to have the ear of either Johnson or Flaherty is of the utmost importance for getting projects or spending approved.
"My team has lost people and been reorganized several times in the past two years," said another current Juniper employee. "We are still searching for purpose and also to get management buy-in, which is the only way you get actual movement around here. There's not a lot of leadership. There is a lot of posturing and dead air."
"If you question Kevin or Lauren, you are shown the door," said a former Juniper employee. "But a lot of what they're putting out [for marketing] is infographics and empty messaging. The problem with Juniper's marketing is that they're not backing anything up with any real technical proof points and our team was never able to spend enough time doing testing for customers to show how [products] work. Cisco's approach to all this can be convoluted, but Cisco does extensive validation testing and actually publishes the architectures. I don't think Juniper did a good job arming its people to tell stories around QFabric and that stuff."
Several former and current Juniper employees mentioned the stepped-up pressure on Johnson, who joined Juniper during an upswing but quickly had the global economic downturn to deal with and is now seeing the first major setbacks of his stewardship.
Juniper employees say that while Johnson is generally well-liked as a chief executive, he's also perceived as far less approachable now than he was when he joined the company. An ongoing series of quarterly town-hall-style meetings dubbed "Kevin Johnson Unplugged" -- the most recent of which was held on Dec. 12 in Juniper's Junos Cafe -- are aimed specifically at deflecting employee criticism that Johnson had insulated himself within Juniper's upper management ranks, said a current employee.
"The biggest change in Kevin since 2009 and 2010 is that back then he seemed to want Juniper to be much more collaborative," said the employee. "There was this big feeling of growth and expectation. These days, he only really seems to talk to [CTO and Co-founder] Pradeep [Sindhu] or Lauren. The perception from two or more levels below him is that decisions are made top-down and people don't know what to expect."
TRYING TO GET BACK ON TRACK
Juniper, for its part, is focusing on positives. It's also making what some analysts see as long-overdue moves, such as abandoning or de-emphasizing markets where it lags stronger competitors.
Juniper in July 2012, for example, unveiled a deal with Riverbed Technology through which Juniper would license Riverbed's application delivery controller technology for about $75 million and partner on WAN optimization -- essentially an admission by Juniper that it was better off yielding to WAN optimization king Riverbed than competing in markets where its share had faltered.
Later in 2012, it moved into a consolidated Sunnyvale, Calif., corporate campus and ended a relationship with components partner Plexus to deal with fewer suppliers.
There are other encouraging signs. Denholm said in December that Juniper expects to keep up its sizable annual investment in R&D, which in the past two years has been about $1 billion, or roughly 22 percent of its 2011 revenue of $4.49 billion. (Juniper is scheduled to report fourth quarter and full-year 2012 results on Jan. 24.)
Juniper also made modest gains in its third fiscal quarter, which it reported Oct. 23. The company's service provider revenue inched up 3 percent year over year and enterprise revenue showed growth in EMEA and APAC but was soft in the Americas. Total revenue for the quarter was up 1 percent year over year.
Overall, however, Juniper's rebuilding tone isn't comforting to many past and present Juniper employees who see a fundamentally different company than the one that was holding its own against Cisco even a few years ago.
"The atmosphere there is just so uncertain right now," said one of the former Juniper employees interviewed by CRN, who left the company in 2012. "They've made a lot of investments, such as in the new campus they built. But over a five-year period they went from being about a 6,000-person company to north of 10,000, I think. It just got too big, too fast and the direction got lost."
TOMORROW: HOW DOES JUNIPER'S CHANNEL FEEL?
PUBLISHED JAN. 14, 2013