Will Management Matter for Juniper?

As investors, we know that management matters. Ask anyone who owns shares of Apple today, or General Electric (NYSE: GE  ) during the Jack Welch era, or IBM (NYSE: IBM  ) during the Lou Gerstner years. (Big Blue under Gerstner was a multibagger of massive proportions.)

It's way too soon to know if Kevin Johnson can work similar magic as the new CEO of router maker Juniper (Nasdaq: JNPR  ) but, as the lead executive behind Microsoft's (Nasdaq: MSFT  ) failed bid for Yahoo! (Nasdaq: YHOO  ) , the little we do know about him is encouraging.

Think about it. Before the more recent shenanigans, Mr. Softy first sought to buy Yahoo! at a very reasonable price. When CEO Jerry Yang asked for the unreasonable, Microsoft did what any reasonable suitor would do: It walked away.

But now, with Johnson gone, Mr. Softy has become the creepy boyfriend who's so desperate that he'll do anything -- anything! -- to win his beloved's heart. Good for a Hollywood flick, bad for investors pining for outsized returns.

So, Microsoft lets Juniper -- in need of a successor to CEO Scott Kriens ever since chief operating officer Stephen Elop left in January for (where else?) Microsoft -- poach the cool-headed Johnson.

Juniper needs him, or so appears to be the judgment of those who follow the stock in Motley Fool CAPS:

Metric

Juniper

CAPS stars (5 max)

***

Total ratings

479

Bullish ratings

420

Percent Bulls

87.6%

Bearish ratings

59

Percent Bears

12.4%

Bullish pitches

48

Bearish pitches

15

Data current as of July 28, 2008.

I understand why: It's tough to let go of talent that's putting up good numbers against combative peers such as Cisco (Nasdaq: CSCO  ) and Brocade (Nasdaq: BRCD  ) . But that's what Juniper has done: Second-quarter revenue improved 32%, per-share net income rose approximately 40%, and gross margin expanded by 30 basis points.

We can't know if Johnson has the talent to extract similar (or better) numbers from his team. But it's a fair bet that he's unwilling to overpay for marginal assets -- and that should be more than enough to keep Juniper on the growth track. 

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Fool.com contributor Tim Beyers owned shares of IBM at the time of publication. He hunts for tech's best as a member of the Motley Fool Rule Breakers team. Get a daily dose of his Foolish musings via this feed for your RSS reader.The Motley Fool has a disclosure policy.


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