Two more high-level executives are leaving Juniper Networks after the company restated financials following an investigation into stock option granting practices, and as its enterprise business continues to struggle.
CFO Robert Dykes and Robert Sturgeon, executive vice president of the company’s Service Layer Technology group, tendered their resignations on March 12, according to a Juniper filing with the Securities and Exchange Commission (SEC). In that filing, Juniper stated that the resignations were “in connection with the ongoing review of the company’s growth plans and requirements to achieve desired scale.”
The filing, however, also states “neither resignation was the result of any disagreement with the company on any matters relating to the company’s operations, policies or practices.”
In a conference call to discuss the departures, Juniper CEO Scott Kriens said the resignations were "mutual decisions" between Juniper and the executives based on the company's plans to "aggressively scale" by doubling in size over the next couple of years.
The resignations come three days after Juniper filed its 10-Qs for the second and third quarters of 2006, and its 2006 10-K with the SEC after delaying these due to months of ongoing stock option granting investigations. Those investigations found that Juniper engaged in manipulation of option grant dating in order to enrich option recipients.
That practice and investigation forced Juniper to take a $900 million non-cash charge against earnings and restate earnings going back to Jan. 1, 2003.
Sturgeon will leave Juniper at the end of this month, while Dykes will leave at the end of April.
As head of the SLT group – which includes enterprise products such as NetScreen security platforms, WAN optimization and application acceleration products, and J-series branch office routers -- Sturgeon spearheaded the initial phase of Juniper’s enterprise strategy. He also helped build Juniper’s customer service organization after coming to the company from Lucent in 2001.
The SLT group, however, is unprofitable. The unit incurred a loss of $12.8 million in 2006 and Juniper’s intention to invest heavily in enterprise R&D is taking a toll on company profits overall.
“The SLT segment continues to be dilutive as Juniper management remains committed to the enterprise market,” states UBS Warburg analyst Nikos Theodosopoulos is a research report issued this week.
Stephen Elop, Juniper’s recently named COO, will take over the role of general manager of the SLT group.
Dykes joined Juniper in late 2004 after a seven-year stint as CFO of contract manufacturer Flextronics. Juniper is undertaking a search for his replacement.
Juniper has lost several high level executives in recent years since the company undertook an ambitious strategy to enter the enterprise market. The hallmark of that strategy was 2004’s $4 billion acquisition of security leader NetScreen.
Last year, the company lost Jim Dolce, former head of Worldwide Operations; Carol Mills, executive vice president and general manager of Juniper’s Infrastructure group; and George Riedel, vice president of Corporate Development, among others.
Observers note that in addition to financial, operational and execution challenges in developing an enterprise business, the effort may have also distracted Juniper from its core service provider router business.
“Over the last few years, Juniper has continued to experience high management turnover, which we believe has led to some internal disruptions,” UBS Warburg’s Theodosopoulos states. “We believe Juniper continues to maintain its strategy of investing and succeeding in the enterprise market while reviving its carrier business.”