Juniper Networks is laying off approximately 500 employees as part of a corporate restructuring effort -- 4% to...
5% of the company's workforce.
Some industry insiders said the team responsible for Juniper's QFabric data center networking technology has been particularly targeted for staff reductions. The technology has received positive reviews, but uptake has been slow. Juniper recently added new components to QFabric to make it more affordable to midmarket enterprises. One insider at a competing vendor said senior members of the QFabric team are actively looking for work. [Editor's note: A Juniper spokesperson said on Oct. 1, 2012 that "speculation that our workforce reductions are primarily affecting the QFabric team is inaccurate" The company also issued an amended formal statement, which is included at the end of this story].
A Juniper spokesperson declined to give specific information about the divisions to be affected by the layoffs, or when they will happen. In an emailed statement, the spokesperson wrote: "As we disclosed on our second quarter 2012 earnings conference call, Juniper is working to align its resources to improve productivity and effectiveness, enabling us to deliver our roadmap for innovation and unprecedented value to customers and shareholders. As a result of this important initiative, we are reducing our workforce by approximately 500 people in functions across the company."
Juniper also declined to address the QFabric rumor directly. "Innovation is the lifeblood of Juniper," the Juniper spokesperson said. "We've consistently achieved the highest overall market growth in Ethernet switching, and customers continue to adopt QFabric. We are focused on delivering innovative solutions in the data center that drive revenue for customers."
The perception of slow uptake of QFabric is partially a consequence of Wall Street's impatience, according to Andre Kindness, senior analyst for Cambridge, Mass.-based Forrester Research Inc.
"Networking personnel are probably the most conservative group in infrastructure operations," he said. "Juniper came out with a new product that is so innovative in the industry." Kindness said the typical sales cycle for a networking product is six months. However, with something as novel as QFabric, which allows enterprises to build a large, flat network that operates a single virtual switch, the sales cycle is stretching out to two years. For a public company, a sales cycle of that length causes Wall Street hand-wringing, he added.
Juniper layoffs not drastic as long as they are targeted well
Given that Juniper hinted at restructuring during its last earnings call in July, and that the economy continues to be mixed at best, the Juniper layoffs aren't terribly surprising, according to Mike Spanbauer, service director for business technology and software at Sterling, Va.-based Current Analysis Inc.
"They had aggressive growth targets that they staffed for and macro conditions depressed that growth target," he said. "This isn't an indication of their failure to execute."
Indeed, many of Juniper's competitors, particularly Cisco, have also been hit by job losses. And service provider router sales have slumped for most vendors in Asia and Europe, which has hurt Juniper's bottom line. On the other hand, although Juniper has seen slow uptake of its QFabric product, it has seen growth in enterprise networking, Spanbauer said.
The number of Juniper layoffs seemed high to Zeus Kerravala, principal analyst at Westminster, Mass.-based ZK Research, but the company was probably overstaffed due to a series of acquisitions over the years, he said.
"I guess their success post-reduction [will be] based on how they've realigned the groups," he said. Juniper should focus on fixing its security business, protecting its share of the wire-line service provider market and finding a way to add LTE technology to its portfolio, he said.
"Palo Alto [Networks] and Fortinet have been definite [security market] share gainers. Juniper has been one of the share donors," Kerravala said. "[Juniper's security] products have fallen behind and they don't have an upgrade coming until next year. They have a huge security install base and I'd focus resources on protecting it."
[On October 1, 2012 a Juniper spokesperson issued the following clarifying statement: “Our actions to reduce operating expenses fall across our support functions, including supply chain, procurement, SG&A, as well as R&D. They are being carefully planned and managed to maximize efficiencies in our cost structure while preserving the investments in innovation in our core businesses of data center, routing, switching and security."]
Let us know what you think about the story; email: Shamus McGillicuddy, News Director.
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