COO departure a short-term blip for Juniper

The resignation of Chief Operating Officer Stephen Elop is a short-term negative event for Juniper Networks, but some analysts say it will not dampen the company’s momentum for the quarter or fiscal year.

Elop resigned this week to become president of Microsoft’s business division, replacing the retiring Jeff Raikes. Elop had only been at Juniper a year, having been recruited from Adobe Systems.

In his short tenure at Juniper, Elop was credited with instilling operational efficiency at a company struggling to enter the enterprise market and keep top talent. His departure is yet another indication that Juniper continues to have trouble retaining senior executives beneath CEO Scott Kriens.

Wall Street analysts were generally surprised by the move and some reacted negatively. Two firms – JP Morgan and JMP Securities – downgraded Juniper stock, saying the company will have trouble hitting operating margin targets this year and next.

Juniper stock dropped 15% on Friday, Jan. 11.

But UBS Warburg and Standard & Poor’s upgraded Juniper, citing continued momentum in carrier routing and longer-term demand to increase bandwidth to support video.

“We continue to believe Juniper will report a solid quarter and that the departure of Elop is not reflective of a weakening business outlook,” UBS analyst Nikos Theodosopoulos stated in a report.

Juniper reports fourth-quarter 2007 results Jan. 24. It is also expected to launch a major enterprise initiative Jan. 29 that is expected to include its entrée into LAN switching.

Nonetheless, Theodosopoulos says Juniper needs to stabilize its top management.

“While we believe the company needs strong operational leadership, we believe Juniper may need to provide a path to CEO for the new COO in order to get a high-caliber candidate like Elop,” Theodosopoulos states in his report.

A Juniper spokesman said Kriens will assume COO responsibilities on an interim basis while the company searches for Elop's replacement. 

The company said in an 8K filing with the Securities and Exchange Commission this week that Elop's decision to resign was “due to his acceptance of an executive officer position with Microsoft and not to any disagreement with the company” on any matters of operation, policy or practice.

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