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Juniper CEO shuffle creates uncertainty, excitement

Leadership problems and troubled negotiations with an unnamed customer spurred the resignation of Juniper CEO Shaygan Kheradpir.

Juniper Networks ousted CEO Shaygan Kheradpir under mysterious circumstances and appointed a veteran of its telecom business to take over.

Juniper announced the resignation of Kheradpir in a press release, explaining, "His resignation follows a review by the board of directors of his leadership and his conduct in connection with a particular negotiation with a customer. The board and Kheradpir have different perspectives regarding these matters."

Rami Rahim, Juniper's vice president and general manager of development and innovation, was appointed as the new Juniper CEO. The 17-year company veteran was one of the engineers who developed Juniper's first product, the M40 core router. He also helped design the MX router, Juniper's popular, carrier-class router line.

A culture clash for ousted Juniper CEO?

Juniper's board of directors appointed Kheradpir as CEO in January 2014, under pressure from activist investor firms Elliott Management Corp. and Jana Partners LLC, which demanded leadership changes, cost-cutting and strategic adjustments at Juniper to maximize shareholder value. Shortly after Kheradpir took over the company, Juniper announced an Integrated Operating Plan aimed at addressing the investors' demands, which included changes in product focus and job cuts.

Kheradpir was hired away from Barclays PLC, where he had served as chief operating officer. He was brought in from the outside to institute change, said Zeus Kerravala, principal analyst at ZK Research. In particular, Kheradpir was expected to reinvigorate Juniper's enterprise business.

"It looks like there was a cultural difference between the board and Shaygan," Kerravala said. "I put this at the feet of the board. They're the ones who hired him. They could have hired somebody internally and kept the culture the same."

Juniper's vague statement about Kheradpir's conduct in "a particular customer negotiation" will leave many people scratching their heads in confusion, Kerravala said. "I don't know who the customer was," he said. "The one that comes to mind is Verizon, because he worked there [before Barclays]. I don't know what it would take at a customer site -- other than something that was improper -- that would lead to his dismissal."

In a conference call with Wall Street analysts that Juniper held shortly after announcing the leadership change, Scott Kriens, chairman of Juniper's board of directors, did little to clarify matters.

"In simplest terms, after the board's review on two fronts, one being [Kheradpir's] leadership and other being a customer interaction, it was time for a change," Kriens said during the investor conference call.

According to a Juniper employee who spoke on condition of anonymity, Kriens told employees today that the board "put the wrong guy in the chair."

Kheradpir "never worked in [Silicon] Valley," and he did "not understand the product," the Juniper employee said. "Rami is a sharp product guy who knows the customers, but I just wonder how Juniper can respond to the changes in the industry and the constant missteps."

New Juniper CEO: A return to company's roots?

If Kheradpir wasn't a cultural fit for Juniper, Rahim certainly should be, Kerravala said. As employee No. 32 at the company, Rahim is part of the company's old guard. But he's also considered a rising star, Kerravala said.

Before becoming Juniper CEO, Rahim was running the research and development organization. The question that arises is what has changed over the last 12 months to make Rahim the right man for the job? When pressed on this issue by Wall Street analysts during Juniper's conference call, Board Chairman Kriens said, "Shaygan was the person we felt best capable at the time. Rami was a very busy guy a year ago, consolidating the development organization, the security and switching businesses and so forth. There is a year behind us now, and we have an opportunity to take [Rahim's] strengths and his contribution and spread it around the entire company, which is the source of our excitement." 

Rahim knows the networking business much better than Kheradpir, said Andre Kindness, principal analyst at Forrester Research. That should help the company, especially given all the industry turmoil caused by software-defined networking and white box switching. Companies with leadership that best understands networking are best positioned to adapt to change in the industry, he said.

Kheradpir presented Juniper's overall strategy to Wall Street about 10 days ago, and many of those analysts asked Kriens and Rahim about the state of that strategy during yesterday's conference call. Rahim helped craft that strategy, and the board of directors approved it, they said, so they remain committed.

Kindness disagreed. He described Rahim's appointment as a "reset" for Juniper.

"Like it or not, new CEOs bring in new strategies," Kindness added. "Even if you carry out 1% of a strategy, you could still say you are carrying it out, and then you might go 99% in a different direction."

Juniper could scare off a lot of potential customers with this move, Kindness said. "I would tell my customers to hold off [spending with Juniper] for 18 months. [Research and development] money is going to be shifted. Marketing money is going to be shifted. Is MetaFabric still going to exist?"

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Kindness said "I would tell my customers to hold off [spending with Juniper] for 18 months. [Research and development] money is going to be shifted. Marketing money is going to be shifted."

If I stopped buying product for 18 months every time there was a CEO change, HP, Dell, Cisco, EMC, well, everyone, would be on a black list.
3rd CEO inside 12 months is a slightly different situation. And when you consider the Jana/Elliott pressure to cut costs, it creates uncertainty. If the hedge funds don't like how Juniper executes over the next 12 months, they might start pressuring Juniper to find a buyer.
@KNetMan: Cisco would be on your black list? It's 18 months, not 18 years...