Reportedly, Juniper Networks (JNPR - Analyst Report) is contemplating the sale of its mobile security unit Junos Pulse. According to Reuters, the networking solutions provider has also hired an investment bank, UBS AG (UBS - Analyst Report), to look for prospective buyers.
Junos Pulse — part of Juniper’s Software Solutions Division (SSD) — offers a wide range of mobile security solutions and products to enterprises. It is noteworthy that dismal performance of the security segment (down 16% year over year) led to the overall decline in SSD sales (down 9% year over year) in fiscal 2013.
The current move appears to be in sync with Juniper’s efforts to realign its business plans due to pressure from Elliot Management Corp. and Jana Partners LLC to cut expenses and increase cash payouts to shareholders.
As part of the restructuring plan, the company recently announced the downsizing of its workforce by approximately 6% and increased focus on the high-margin routing, switching, security, control and network management businesses.
Though workforce reduction and possible sale of the Junos Pulse segment would impact the top line and put a burden on the operating results in the near term, these would help the company to focus on its core operations, in our view.
While the company’s new products, cost reduction initiatives and improving execution remain the growth catalysts, increasing competition from Cisco (CSCO - Analyst Report), AT&T (T - Analyst Report) and F5 Networks Inc. (FFIV - Snapshot Report), uncertain economic conditions and constricted federal spending are the possible headwinds.
Nonetheless, we believe that increased spending by service providers should support Juniper’s near-term fundamentals. The company’s expansion into the software defined network segment is expected to strengthen its position in the networking space.
Currently, Juniper has a Zacks Rank #1 (Strong Buy).
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