Juniper Networks Announces Integrated Operating Plan
- Strategic focus on highest growth opportunities in networking as customers migrate to High-IQ Networks and best-in-class cloud environments - where Juniper excels
- An optimized One-Juniper structure - reinvigorating the heritage of a mission-driven culture
- Enhanced operational efficiency expected to result in a 25% operating margin for 2015 - an approximate 580 basis point improvement vs 2013
- Aggressive capital return plan, returning a minimum of $3 billion of capital to shareholders over the next three years, including more than $2.0 billion in share repurchases through Q1 2015
- Company to initiate $0.10 per share quarterly dividend to commence in Q3 2014, with the intention to grow it over time
- Two new highly qualified independent directors to be nominated to Juniper's board
The IOP includes four key elements
- A strategy that capitalizes upon Juniper's engineering expertise across routing, switching, security, control and network management - and that is most aligned to being a leading provider of secure High-IQ Networks and serving the needs of Cloud Builders. Juniper is a growth company with strong business momentum as demonstrated most recently in its Q4 2013 financial results where it reported record revenues and 11.6% year-over-year growth, representing its sixth consecutive quarter of year-over-year revenue growth. Kheradpir, who joined Juniper as CEO last month, has fully reviewed Juniper's businesses and intends to focus on the fastest growing networking segments - where Juniper excels - driven by service provider, enterprise and government customers who are increasingly investing in High-IQ Networks and best-in-class cloud environments. The Company believes focusing on these markets represents the greatest opportunities for sustainable top-line growth and operating margin expansion over the long term.
- An optimized One-Juniper structure: Juniper will create a more focused, connected, agile and execution-oriented company structure driven to deliver on its customers' imperatives for High-IQ Networks and cloud environments. Having engaged in a comprehensive evaluation of our product portfolio, the Company will coalesce its engineering talent, go-to-market teams and R&D around the above strategy. This will also result in streamlining its operations and business portfolio. The optimized One-Juniper structure will focus on quality, depth and what matters to customers; will augment its approach with an outside-in customer imperative fused with inside-out innovation; will reinvigorate its heritage of mission-driven culture igniting the energy and talent of its high performance teams working at scale; and will execute with the discipline of a results-driven organization.
- Enhanced efficiency and improved cost management: Juniper's refocused strategy and optimized One-Juniper company structure will result in a substantial structural reduction to the cost base and a significantly increased operating margin profile through highly detailed and executable actions with directed accountability. The Company expects to exit the first quarter of 2015 with annualized operating expense savings of $160 million from the Q4 2013 level and achieve an operating margin of 25% for 2015 - an approximate 580 basis point improvement from 2013 - with operating expenses of 39% of revenue.
To ensure that costs are removed in an accountable and efficient manner, Juniper established a Cost Control Committee led by Kheradpir and tasked with implementing efficiencies throughout the organization. Juniper has also retained McKinsey Technology Cost Structure Team, a nationally recognized cost consultant, who will work with the Cost Control Committee on the plan's effective implementation. Finally, to demonstrate the Company's accountability for achieving the IOP's cost reduction objectives and 2015 operating margin goal, Juniper will provide updates on the Company's progress on a quarterly basis.
- Aggressive new capital allocation plan: Juniper also today committed to return a minimum of $3 billion to shareholders over the next three years through a combination of share repurchases and dividends. As part of this plan, the board of directors has authorized $2 billion in share repurchases to be executed through the end of the first quarter of 2015, including $1.2 billion through an accelerated share repurchase program to be entered into shortly. Juniper will also initiate a quarterly cash dividend of $0.10 per share of common stock beginning in the third quarter of 2014, with the expectation to increase the dividend over time. The expanded capital allocation plan will be funded by a combination of onshore cash and newly issued debt to preserve Juniper's financial flexibility to invest in future growth opportunities and maintain the Company's current investment grade credit rating. The Company intends to continue to review this capital return policy for additional capital return over time, subject to company financial performance, economic outlook and any other relevant considerations.