* Asks co to review security, switching businesses
* Says Juniper should buy back shares worth $3.5 bln
* Says Juniper should cut R&D costs by $420 mln a year
* Analysts say cost cuts feasible
* Juniper shares hit more than 2-year high
(Adds Juniper's response, updates shares with closing price)
By Neha Alawadhi and Lehar Maan
Jan 13 Hedge fund Elliott Management Corp urged
network equipment maker Juniper Networks Inc to buy back shares,
start paying a dividend and consider slimming down, less than a
week after it offered to buy Juniper's rival, Riverbed
Juniper shares rose as much as 10 percent to $25.95
on Monday, their highest in more than two years. The stock has
been stuck in the $20 range for two years, a far cry from the
high of $228.50 it hit during the dotcom boom.
The hedge fund, run by Paul Singer, said the "undervalued"
stock could be worth $35-$40 if Juniper implemented its
suggestions and focused on revamping its core business of making
routers and switches for mobile carriers such as Verizon
Communications Inc and AT&T Inc.
"We think Juniper is listless currently and a deep round of
cuts is justified," Needham & Co analyst Alex Henderson said.
Elliott said Juniper should start paying dividends and buy
back shares worth $3.5 billion, or nearly 30 percent of its
market value as of Friday's close. The 18-year-old company has
never paid a dividend.
The fund, which owns 6.2 percent of Juniper, also asked the
company to review its security and switching businesses, where
it was losing market share.
Juniper shares closed up 7.6 percent at $25.32 on the New
York Stock Exchange. Riverbed Technology Inc closed
down 0.7 percent at $19.79, while F5 Networks Inc
closed up 4 percent at $92.01 on the Nasdaq.
"Juniper's assets are valuable and strategic and that the
business possesses several fundamental upside drivers over the
medium-term but that its future will be increasingly difficult
if Juniper continues with its existing strategy," Elliott said
in a letter to the company. (link.reuters.com/puc95v)
"Elliott's presentation was received this morning and we
have not had any discussions with Elliott with respect to its
content," Juniper said in a statement adding that it intends to
review the offer "carefully."
Elliott said the company could save as much as $420 million
a year by cutting its research and development spend to match
those of its peers such as Riverbed and F5 Networks.
Analyst Henderson said Juniper's stock would rise
meaningfully if the company were to achieve even half of that
The hedge fund noted that Juniper paid its software
engineers more than Google Inc, Facebook Inc and
even Cisco Systems Inc, the world's largest network
Elliott said in November that Riverbed's stock was
significantly undervalued, and last week offered to buy the
company for about $3 billion in a move that analysts said was
likely to trigger higher bids.
Reuters reported in February last year that Juniper was
reviewing its enterprise-focused networking business after talks
fell through in 2012 to sell assets, including its security unit
Goldman, Sachs & Co is Juniper's financial adviser, while
Wilson Sonsini Goodrich & Rosati is its legal counsel.
(Additional reporting by Aurindom Mukherjee in Bangalore;
Editing by Saumyadeb Chakrabarty and Savio D'Souza)