Juniper Takes Security Business Charge, Posts $769.6 Million Q4 Loss

Juniper Networks wrote down the value of its security business by $850 million, leading to a loss of $769.6 million for its fourth quarter ended Dec. 31.

The company took the "noncash goodwill impairment charge" in the wake of a complete review of the security business by new CEO Rami Rahim, the former Juniper executive vice president of development and innovation who took the helm in November. In an 8K filing with the Securities and Exchange Commission, Juniper attributed the impairment charge to poor performance of its security business as well as a change in the company's security strategy and product road map.

Juniper security sales in the quarter plummeted 38 percent to $96.5 million compared with $157 million in the year-ago period.

[Related: Juniper Revamps Partner Program, Teases New Product Lineup]

The company's overall sales for the quarter dropped 14 percent to $1.1 billion compared with $1.27 billion in the year-ago period.

’The overarching message that I want to get across is that I’m not pleased or satisfied with the performance of security business," said Rahim in a conference call with analysts. "I think we can and will do better. You’re going to see some enhancements coming out later this year.’

Rahim, an 18-year Juniper veteran who took the CEO job after the board of directors called into question the conduct of former CEO Shaygan Kheradpir, said Juniper is "pivoting away" from point security products toward "integrated solutions across switching, routing and security."

’This is a back-to-basics approach where I can leverage some of the silicon enhancements that I’ve already funded and already invested in to improve my routing and switching that can be used very effectively in security, and that’s what we will do," said Rahim.

Mark Robinson, president of CentraComm, a Findlay, Ohio-based solution provider, praised Rahim's steps to integrate security directly into the core of the company's routing and switching products.

’Rahim is the right guy to integrate the execution with the technological vision as they’ve always had, that they maybe just didn’t execute on as well as they did in the past," said Robinson. "He can probably make much bigger moves quicker than others might be able to do, or might have done in the past.’

Robinson said Juniper is making an all-out drive to improve network security.

’I believe in the vision in terms of the integration of the security. When they say that they're committed to narrowing the focus on security and fixing it, I believe it,’ said Robinson. ’It looks like they’re really trying to further integrate security into more routing-switching type of standalone products.’

Andy Malivuk, vice president of Vology, a Juniper partner based in Oldsmar, Fla., said he is optimistic about 2015 after the Juniper restructuring.

"As long as these products they are planning on releasing are truly competitive and they keep a consistent structure and attention to the channel, I think they’re going to have a good year," he said.

As for the security product shift, Malivuk said even if Juniper comes with a superior product, solution providers will face challenges.

"They have a hole that they have to dig out of," he said. "It’s going to take some pretty creative partner enablement as well as marketing for them to really leverage a superior product. They cannot afford to come out with anything less than the best because of the hit they’ve taken. So we've got a lot riding on this. [Juniper] has lost so much credibility that partners just can’t just go to their customers and look them in the face and say, 'We recommend the security product line from Juniper.' "

The security shift comes six months after Juniper entered into an agreement to sell its Junos Pulse portfolio, the networking company's mobile security suite, to Siris Capital for $250 million.

Juniper's telecom business, meanwhile, was down 10 percent in the quarter to $744.4 million compared with $827 million in the year-ago period.

Juniper's enterprise business in the quarter was down 20 percent to $357.2 million compared with $446.6 million in the year-ago quarter.

Dan Ferguson, CEO and president of AdvanTel, a San Jose, Calif.-based solution provider and Juniper partner, said in an email to CRN that when former CEO Kheradpir took over he ’clearly’ shifted the company’s focus to telecom service providers and away from enterprise business.

’That shift took resources away from channel partners who drove sales volume in the enterprise market,’ said Ferguson.

PUBLISHED JAN. 27, 2015