Today: Elliot Management announces a large investment in Juniper Networks and agitates for immediate change, even as it seeks to acquire fellow networking company Riverbed Technology. Also: Google (GOOG) buys Nest, Facebook buys Branch.
The Lead: Juniper Networks stock jumps after Elliot Management invests
One gamble in the Silicon Valley networking space apparently is not enough for New York hedge fund Elliot Management: Billionaire Paul Singer's outfit announced Monday that it had amassed an investment of more than 6 percent in Juniper Networks and began demanding a larger return to investors, even as it stokes a bidding war for Riverbed Technology.
Juniper stock jumped to a 52-week high of $25.96 Monday before closing with a 7.6 percent gain at $25.32 after Elliott publicly released its demands, which include cost cuts, a higher dividend and stock repurchases. The move comes at a delicate time for the Sunnyvale company, which is less than a month into the reign of new CEO Shaygan Kheradpir after previous CEO Kevin Johnson mysteriously retired at age 52 while the company is being investigated by the SEC and Department of Justice on suspicion of corrupt foreign practices.
"Juniper's new CEO along with its existing management team and board have a unique opportunity to immediately unlock significant value at the company," Elliott portfolio manager Jesse Cohn wrote in Monday's announcement.
In addition to the release, Elliott released a 28-page presentation detailing what it sees as the failures of Juniper's management and the possibility for heightened investor return, making it publicly available at a website creatively titled new-juniper.com. The presentation suggests Juniper slash its spending on research and development by nearly half a billion dollars a year and criticizes the company for paying software engineers more than its rivals.
Juniper responded with a simple statement from spokeswoman Cindy Ta, which read, "Juniper welcomes the opinions and insights of its shareholders and is always open to constructive input toward the goal of enhancing shareholder value."
Elliot targeted Juniper less than a week after offering to purchase fellow Silicon Valley networking company Riverbed for $19 a share, immediately sending shares higher than that mark on the open market in a gambit seen as a spark for a bidding war for the company, with Juniper even mentioned as a possible acquirer. Riverbed dropped 0.7 percent Monday to close at $19.79.
Elliott Management is known for purchasing debt from distressed companies and forcing payments. Since 2012, Singer's hedge fund has been focusing on heavy investments in technology companies that are lagging their peers on Wall Street, then publicly agitating for larger investment returns and seeing stock prices rise no matter the end result.
SV150 market report: Google and Facebook make fresh acquisitions
Monday was one of the worst days of the young year on Wall Street, with all three major stock indexes declining more than 1 percent. Silicon Valley tech stocks had a smaller drop of 0.8 percent, helped by Juniper, before Google announced one of the largest acquisitions in its history after the bell.
Google announced Monday afternoon that it had agreed to pay $3.2 billion in cash for Palo Alto-based Nest, a company founded by former Apple (AAPL) employees to redesign common home appliances. Nest has introduced a thermostat and smoke detector since it was founded in 2010 while building "a tremendous team," Google CEO and co-founder Larry Page said in Monday's announcement. In a blog post, co-founder and Nest CEO Tony Fadell called Google "a rocket ship" that will help Nest's growth, while co-founder Matt Rogers said "I'm betting that there's a lot of cool stuff we could do together" in his own blog post. The acquisition is the second largest in Google history without adjusting for inflation, behind only the Mountain View search giant's purchase of another hardware maker, Motorola Mobility. Google stock dropped 0.6 percent to $1,122.98 Monday, but shares gained slightly in after-hours trades following the announcement, topping $1,130.
Twitter, which suffered last week after a big run-up at the end of 2013, gained Monday after Goldman Sachs analyst Heath Terry gave a serious boost to his price target for the San Francisco company's stock. Terry reiterated his "Buy" rating on the stock and raised his price target to $64, noting the many changes Twitter has made to its offering and writing that they will "improve the ubiquity of the Twitter platform, as it becomes relevant for any user who wants an aggregated source of news and current events." Twitter gained 1.4 percent to $57.82 on the day, then announced yet another change after the bell, with its web interface being redesigned to more closely resemble its mobile app. Rival Facebook declined after confirming its own acquisition, the purchase of Branch, a company led by a founder who had previously denigrated the Menlo Park social network. Facebook stock declined 3.5 percent to $55.91 after the deal was reported, with The Verge quoting a $15 million purchase price.
Apple advanced 0.5 percent to $535.73 despite losing its attempt to jettison a court-appointed antitrust monitor in a fight that angered the Department of Justice. Netflix (NFLX) gained 1.4 percent to $336.81 after renewing its first original drama, "Lilyhammer", for a third season, and Electronic Arts (ERTS) fell 2.7 percent to $22.38 after making a change to its latest "Sims" game. eBay (EBAY) gained 0.7 percent to $52.54 after the e-commerce company announced a new, streamlined approach to paying with PayPal on third-party sites. Zynga dropped 2 percent to $4.03 after closing down one of its oldest games still going and renting out part of its large San Francisco headquarters building.
Up: Juniper, Hewlett-Pacakrd, Twitter Netflix, eBay, Apple
The SV150 index of Silicon Valley's largest tech companies: Down 11.84, or 0.79 percent, to 1,485.23
The tech-heavy Nasdaq composite index: Down 61.36, or 1.47 percent, to 4,113.3
The blue chip Dow Jones industrial average: Down 179.11, or 1.09 percent, to 16,257.94
And the widely watched Standard & Poor's 500 index: Down 23.17, or 1.26 percent, to 1,819.2
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/jowens510.