{ "docId": "019dd923-622c-750b-8b9c-3ab27badb381", "docSlug": "cdaa07ebe8a9", "documentTitle": "Juniper Networks (JNPR)", "authorId": "02_Elliott_Management", "authorName": "Elliott Management", "documentKindSlug": "activist-deck", "documentKindLabel": "Activist deck", "sourceTypeSlug": "activist_investor", "sourceTypeLabel": "Activist investor", "presentationDate": "2014-01-13 00:00:00", "orientation": "portrait", "aspectRatio": 0.77272725, "pageNumber": 8, "pageCount": 28, "prevPage": 7, "nextPage": 9, "slideType": "cite_precedent", "function": "cite_precedent", "density": "overcrowded", "nDataPoints": 3, "notes": "The slide uses external validation (analyst quotes) to build credibility for the activist's proposed strategy.", "elementsJson": [ "headline_text", "bullet_list", "quote_block" ], "metadataConfidence": 1, "imagePath": null, "slideHref": "/slides/019dd923-622c-750b-8b9c-3ab27badb381/8", "deckHref": "/decks/019dd923-622c-750b-8b9c-3ab27badb381", "deckJsonHref": "/decks/019dd923-622c-750b-8b9c-3ab27badb381.json", "deckAnchorHref": "/decks/019dd923-622c-750b-8b9c-3ab27badb381#slide-8", "components": [ { "bbox": { "h": 0.03, "w": 0.25, "x": 0.109, "y": 0.355 }, "kind": "callout", "text": "1 Cost Realignment", "attrs": null, "subkind": "primary", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "7c78353d-e6c6-419e-a241-3c97a6e0760b", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "callout", "text": "Elliott is not alone in our recognition of Juniper's share price and operational underperformance", "attrs": null, "subkind": null, "toolName": "Visual emphasis", "toolSlug": "visual-emphasis", "confidence": null, "componentId": "019dd953-3f3d-76db-b332-4a19b4050cba", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.55, "w": 0.85, "x": 0.109, "y": 0.395 }, "kind": "list", "text": "\"Can we speak about the cost structure of Juniper and the scope for it to become more efficient? Because compared to many of the larger IT telecom equipment networking stocks, the operating expense to sales ratio ... [is] almost one of the highest of all the companies that we've looked at. ... Is it a case of direct cost-cutting?\" - Credit Suisse, CS Tech Conference (12/4/13)\n\"One of the frustrations I hear from investors is around OpEx and OpEx management. I think you have one of the highest percentages in sales of R&D spend. We've seen other companies in the sector that have throttled back on OpEx, returning cash in an aggressive way, and they're being rewarded for that\" - UBS, UBS Tech Conference (11/19/13)\n\"Cost cutting should be focal. Juniper's operating margin structure has been under pressure for several years .... Over the same period revenue has grown at a CAGR of 3.3% per year which raises questions about management's ability to control operating expenses. On an absolute dollar basis, operating expenses have risen by over $300 million from $1.8 billion in 2010 to $2.1 billion in 2012 which, as a percentage of sales, is the highest within our coverage universe\" - Credit Suisse (9/18/13)\n\"The retirement of CEO Kevin Johnson, while not expected this quarter, could provide an opportunity for a new strategic approach given the difficulties the company has faced. At the very least, it gives the stock a chance to benefit from the restructuring and realignment story that usually occurs after a CEO transition\" - Morgan Stanley (7/24/13)\n\"We view the increased opex as disappointing as leverage was one of the main reasons investors were attracted to Juniper's stock\" - Stifel Nicolaus (7/24/13)\n\"We continue to believe the company's R&D level is far too high and generates below average returns compared to rivals such as Cisco and F5 which have R&D in the 10-11% of revenue range\" - Wedbush Securities (6/13/12)\n\"The main issue that is impacting Juniper's opex structure is the number of new projects the company has undertaken ..., each of which required big new investments. ... In our view, the underwhelming initial reception for MobileNext and QFabric is evidence that the company should adopt a more prudent investment strategy going forward .... We also believe that Juniper should address its cost structure ... including exiting lagging businesses\" - Bank of America Merrill Lynch (5/23/12)", "attrs": null, "subkind": "bullet", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "88c33247-bdd7-45ae-9c83-64f84e226401", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.065, "w": 0.85, "x": 0.141, "y": 0.195 }, "kind": "list", "text": "The analyst community has repeatedly called for change - including the same simple fixes we are advocating today\nThis extensive analyst commentary clearly indicates that these initiatives should be very well-received by the investment community", "attrs": null, "subkind": "bullet", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "ffdf613a-4881-4afb-b9ee-d75fd2b6c40a", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.022, "w": 0.785, "x": 0.109, "y": 0.165 }, "kind": "paragraph", "text": "Elliott is not alone in our recognition of Juniper's share price and operational underperformance", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "6adf066e-9dd6-459a-b261-2c9f748d1518", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.055, "w": 0.85, "x": 0.109, "y": 0.275 }, "kind": "quote", "text": "\"We believe the exit of CEO Kevin Johnson raises some concerns around execution, which has been largely uneven of late. That said, his eventual successor could be more opportunistic around costs and buybacks, while simplifying the product line. Time will tell\" - Barclays (7/24/13)", "attrs": null, "subkind": "pull-quote", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "49509c2e-98bf-48e8-8b33-7e14ec540ee1", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "quote", "text": "\"We believe the exit of CEO Kevin Johnson raises some concerns around execution, which has been largely uneven of late. That said, his eventual successor could be more opportunistic around costs and buybacks, while simplifying the product line. Time will tell\" — Barclays (7/24/13); \"Can we speak about the cost structure of Juniper and the scope for it to become more efficient? Because compared to many of the larger IT telecom equipment networking stocks, the operating expense to sales ratio ... [is] almost one of the highest of all the companies that we've looked at. ... Is it a case of direct cost-cutting?\" — Credit Suisse, CS Tech Conference (12/4/13); \"One of the frustrations I hear from investors is around OpEx and OpEx management. I think you have one of the highest percentages in terms of sales of R&D spend. We've seen other companies in the sector that have throttled back on OpEx, returning cash in an aggressive way, and they're being rewarded for that\" — UBS, UBS Tech Conference (11/19/13); \"Cost cutting should be focal. Juniper's operating margin structure has been under pressure for several years ... Over the same period revenue has grown at a CAGR of 3.3% per year which raises questions about management's ability to control operating expenses. On an absolute dollar basis, operating expenses have risen by over $300 million from $1.8 billion in 2010 to $2.1 billion in 2012 which, as a percentage of sales, is the highest within our coverage universe\" — Credit Suisse (9/18/13); \"The retirement of CEO Kevin Johnson, while not expected this quarter, could provide an opportunity for a new strategic approach given the difficulties the company has faced. At the very least, it gives the stock a chance to benefit from the restructuring and realignment story that usually occurs after a CEO transition\" — Morgan Stanley (7/24/13); \"We view the increased opex as disappointing as leverage was one of the main reasons investors were attracted to Juniper's stock\" — Stifel Nicolaus (7/24/13); \"We continue to believe the company's R&D level is far too high and generates below average returns compared to rivals such as Cisco and F5 which have R&D in the 10-11% of revenue range\" — Wedbush Securities (6/13/12); \"The main issue that is impacting Juniper's opex structure is the number of new projects the company has undertaken ..., each of which required big new investments. ... In our view, the underwhelming initial reception for MobileNext and QFabric is evidence that the company should adopt a more prudent investment strategy going forward .... We also believe that Juniper should address its cost structure ... including exiting lagging businesses\" — Bank of America Merrill Lynch (5/23/12)", "attrs": null, "subkind": null, "toolName": "Authority citation", "toolSlug": "authority-citation", "confidence": null, "componentId": "019dd953-3f3d-76db-b332-4f1489af00d3", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.032, "w": 0.595, "x": 0.109, "y": 0.115 }, "kind": "title", "text": "Broad Calls for Change: Our Views Are Widely Held", "attrs": null, "subkind": "headline", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "1b767014-cab8-4eab-8cde-66e2cc242f4f", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [], "frameworks": [ { "name": "authority-citation", "slug": null, "matchId": "fc63bed6-7efe-4d55-9e53-b0db55ea92d6", "evidence": "Uses analyst quotes to validate the activist's thesis.", "confidence": 0.9 } ], "arcBeats": [ { "to": 10, "from": 7, "beatId": "18361a43-eb8e-441c-8b93-88d1ec4d517f", "arcName": "Problem-Agitate-Solution", "arcSlug": "problem-agitate-solution", "beatName": "Agitate", "beatSlug": "problem-agitate-solution-agitate-make-it-worse", "evidence": "Agitates the problem by highlighting significant loss of shareholder value.", "position": 1, "confidence": 0.8, "parentBeatName": "Development", "parentBeatSlug": "development" } ], "loops": [], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }