Juniper CEO Kheradpir resigns over conduct related to customer negotiation

Shaygan Kheradpir has resigned from his post as CEO of Juniper Networks following a review the company's board of directors made of his conduct related to a negotiation with one of their customers.

Juniper's board did not provide details about Kheradpir's conduct or what customer was involved in the negotiations other than to say that they and "Kheradpir have different perspectives regarding these matters."

Scott Kriens, Juniper's chairman and former CEO, said in a Wall Street Journal article that Kheradpir's leadership style also influenced the board's decision to change CEOs.

"In the board's judgment, the conduct was inconsistent with our expectations," Kriens said Monday on a conference call with analysts. "But it's really about our definition of leadership at Juniper."

Kheradpir has been replaced with 17-year company veteran Rami Rahim, who most recently was executive vice president and general manager, Juniper Development and Innovation.

After beginning his career at Juniper as employee number 32, Rahim worked as an engineer on Juniper's first product, the M40 core router and was one of the original architects of the MX routing platform. More recently, Rahim was a key driver behind Juniper's ongoing movement into software defined networking (SDN) and network functions virtualization (NFV) with the launch of its vMX Series 3D Universal Edge Routing platform, which provides virtualized routing for service providers.

Financial analysts applauded Juniper's move to replace Kheradpir with Rahim, citing his long tenure and experience in driving new product innovations at Juniper.

"We believe that the chances of Juniper generating revenue growth are materially improved by the appointment of Mr. Rahim to the CEO role," wrote Stuart Jeffrey, a research analyst for Nomura, in a research report. "The last two CEO appointments came from outside the company and outside the industry. In contrast, Mr. Rahim has been at Juniper Networks for the past 17 years; has demonstrated strong domain expertise in numerous investor presentations; extended his role at Juniper meaningfully over the past year; and been a key driver of product rationalization and development."

Rahim said that Juniper remains on track with its financial projections it laid out during its Oct. 30 Investor Day, including the near- and long-term outlook the company disclosed in its third-quarter 2014 earnings.

Kheradpir came to Juniper in January from Barclays PLC. He had to deal with pressure from activist shareholder Elliot Management in January, who said Juniper needs to reduce costs and return more money to shareholders. As part of that cost reduction process, the vendor announced in April that it would lay off 6 percent of its employee base.

Juniper's struggles continued into the third quarter of 2014, announcing that it will have to make additional cost reductions after reporting that third-quarter 2014 revenues fell 5 percent year-over-year and 8 percent sequentially to $1.13 billion amidst falling U.S. service provider sales.

Jeffrey said that while the vendor has some near-term revenue challenges due to delayed spending from its large carrier customers, Juniper's plans to refresh its product set could provide some long-term positive effects.

"Should these impress, then the combination of new leadership and improved products could trigger an improved outlook for earnings, and a rerating in the stock. Despite the near-term challenges, we believe that the outlook for Juniper is now much improved, the risks are relatively limited and the upside potentially increasingly compelling," Jeffrey wrote. "Despite the near-term challenges, we believe that the outlook for Juniper is now much improved, the risks are relatively limited and the upside potentially increasingly compelling."

For more:
- see the release
- WSJ has this article

Related articles:
Juniper lowers Q3 2014 revenue guidance on slower U.S. carrier sales
Juniper to lay off 6 percent of workforce
Juniper Networks' shareholder wants to retool company strategy

This article was updated on Nov. 11 with perspective from Nomura.