Juniper CEO Johnson Out Amid Q2 Earnings

Juniper Networks Tuesday threw a curve ball to investors, announcing just prior to its second-quarter earnings call that CEO Kevin Johnson plans to retire, with the search for a new CEO already underway.

Johnson's departure was announced just minutes before the release of Juniper's second-quarter financial results, in which the company reported revenue of $1.15 billion, up 7 percent year-over-year.

Johnson, Juniper's CEO since 2008, will continue to serve in his "current capacities" while the search for a new CEO is carried out, Juniper said. The company's board of directors has created a formal search committee to seek a replacement and has also on-boarded executive recruiting firm Heidrick and Struggles to help with their efforts.

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Johnson's announced retirement comes on the heels of several other high-level executive departures at Juniper. Earlier this month, Juniper Chief Marketing Officer Lauren Flaherty jumped ship to CA Technologies, where she now acts as a senior vice president and CMO. In March, channel veteran and Juniper's senior vice president of Americas Partners Frank Vitagliano left the company to lead channels at Dell.

Jeff Matthews, general partner at Ram Partners LLC, a Naples, Fla.-based hedge fund, told CRN that the suddenness of Johnson's departure, and the fact that a successor has not been named, suggests his leaving Juniper was decidedly only recently.

"It's obviously something that happened quickly and hasn’t been in the works for a long time," Matthews told CRN. "[Usually] you have your successor in place and it's all very choreographed. This sounds very improvised."

One former Juniper executive, who worked under Johnson, agreed that Johnson's retirement seems unplanned and sudden.

"I'm very surprised that Kevin is leaving this early," said the former executive, who requested anonymity. "The [Juniper] stock price has not been stellar. The performance cannot be where anybody thought it was going to be. At the end of the day, I always thought very highly of Kevin and thought he was taking [Juniper] in the right direction, but we didn't see the results that that direction should have made."

Still, the former executive said, Johnson had a heavy hand in developing much of Juniper's software-defined networking (SDN) and fabric technologies, which will be crucial in its on-going rivalry with companies like Cisco, which are also investing heavily in SDN. "It's not a good thing for Juniper that he is leaving," the former executive said. "He was really a champion of some of their higher-end technology."

Johnson, for his part, said on the call with investors Tuesday that his decision to retire was simply personal.

"After 32 years in a line operating role, with the past five years here at Juniper, my family and I decided it was time to take a break," Johnson said on the call. "The company is healthy and growing, we have a strong management team, and world-class talent in the domain of networking. The board has formed a search committee and we are working closely together to ensure we manage the process in a thoughtful way."

NEXT: Juniper Q2 Earnings

Johnson's departure does fall at a time when Juniper seems to be regaining some ground financially. Juniper's second-quarter results beat analyst expectations, while results from Juniper's past two fiscal quarters also showed continued signs of stability.

In addition to revenue of $1.15 billion, Juniper in the second quarter saw a net income of $97.9 million, up from the $57.7 million it reported in the second quarter of 2012.

Revenue for Juniper's Platform Systems Division Segment, which houses its core switching and routing businesses, was also up year-over-year, pulling in $916 million compared to the $810.2 million in revenue it reported for the same period last year.

Juniper's Software Solutions Division, home to its SSD and security products, including its SRX line of services gateways, did, however, see a slip year-over-year. Revenue, Juniper said, was $243.7 million, down from $263.6 million last year.

Juniper's service provider business remained its sweet spot, accounting for $726 million of its total $1.15 billion in revenue. Second-quarter revenue for its enterprise business, Juniper said, was $424.7 million. Both service provider and enterprise were up compared to the second quarter of 2012, when they pulled in $681 million and $392.8 million in revenue, respectively.

Still, Juniper is catching its breath after a challenging couple of years. In October 2012, the company shed roughly 500 jobs as part of a broader restructuring initiative, adding to the several hundred jobs it already eliminated in 2011. Currently, the Sunnyvale-based company not only faces continued competition from Cisco, but from a growing sea of SDN-focused startups, including the likes of Big Switch Networks and Nicira, the SDN company VMware acquired for $1.2 billion last year.

During the earnings call, Johnson said Juniper saw "strong demand" for both its QFabric and EX9200 Ethernet Series switches. Looking ahead, Juniper said it expects its revenue next quarter to fall between $1.14 billion and $1.18 billion, driven by strong service provider demand and the continued stabilization of its security business.