Juniper departures raise concerns

Executive departures announced by Juniper Networks this week have some analysts concerned about the company’s turnover.

Robert Dykes, Juniper’s chief financial officer, and Robert Sturgeon, executive vice president of the company’s Service Layer Technology group and general manager of its enterprise business, have both tendered their resignations, agreeing to stay for a few weeks to help the company transition. Stephen Elop, Juniper’s chief operating officer, will manage the enterprise business on an interim basis.

In research notes issued this morning, analysts said the news was all too familiar.

“Over the last few years, Juniper has continued to experience high management turnover, which we believe has led to some internal disruptions,” UBS Investment Research said. Last year the company bid adieu to six top executives, including Jim Dolce, executive VP of worldwide field operations; Krishna Kolluri, general manager of security products; Carol Mills, executive VP of the infrastructure group and George Riedel, who resigned as Juniper’s VP of corporate development to become Nortel Networks’ chief strategy officer.

“[The latest departures] highlight a lack of bench strength and a dearth of internally groomed succession candidates for key executive roles,” said Morgan Keegan analyst Simon Leopold. “We imagine that Juniper's key carrier customers likely feel the same way, as a lack of bench strength often precludes small vendors and privately held start-ups from winning [contracts], independent of whether they have the ‘best’ technology.”

However, the departures don’t have analysts questioning Juniper’s commitment to the Service Layer Technology group, which contributed about $480 million in product revenue last year, about a quarter of the company’s total product revenue. Made up largely of acquired businesses including that from Juniper’s Netscreen acquisition, the SLT group is not yet profitable, UBS said.

“The market is healthy, and Juniper’s market share seems to be stabilizing,” RBC Capital Markets said, but this week’s resignations could lead to execution risks. Juniper’s financial performance of late, like its track record for top management retention, is “mixed,” RBC said.