Silicon Valley’s most generous employer has incurred the wrath of hedge-fund activists

January 13, 2014
January 13, 2014
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The highest paying employer in Silicon Valley isn’t Google, Twitter or Facebook. Surprisingly, it’s Juniper Networks, which is involved in the relatively mundane business of networking equipment (it competes with the likes of Cisco in the market for switches and routers).

But Juniper’s generosity has come back to bite it. This morning, activist hedge fund Elliot Management revealed it has built a 6.2% stake in the company and is now pressing for change to revive its flagging share price. Among Elliot’s biggest complaints is the company’s “excessive” spending on research and development. In a presentation to investors (p. 12), the fund cites Juniper’s generous salaries to support its claim that the company spends too much.

Elliot wants Juniper to cut costs by $200 million a year as well as streamlining its disparate portfolio of products, and returning up to $3.5 billion in cash to shareholders through buybacks and dividends. That might be good for the share price (Elliot thinks shares could be worth up to $40, compared to $25.50 currently) but not for its engineers’ wallets.

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