Mysterious Customer Negotiation Leads To Sudden Ouster Of Juniper Networks CEO

A year ago, he was the outside executive with values "aligned very tightly" with the company appointing him as CEO. Just a week ago, he spoke to analysts at a meeting in New York City to discuss its upcoming plans.

But by Monday, Shaygan Kheradpir was out as CEO of Juniper Networks in a move that's surprised experts as sudden and one that appears laced with intrigue.

What Juniper, a provider of networking services for enterprises, will say isn't very much: after a "particular negotiation with a customer," the company's board of directors reviewed Kheradpir's "leadership" and "conduct" and found them unfit for him to continue as chief executive. The company felt it necessary to include a statement making clear that Kheradpir disagreed with that decision, which led to the appointment of longtime employee Rami Rahim to take over the role.

Rahim's a 17-year veteran of Juniper and board chairman Scott Kriens said in the company's official statement that it "couldn't be more excited" for Rami to be taking over. But that's after Kheradpir was thought to be the right executive as recently as January, when the company passed over Rami to bring in the outsider. No matter what spin is put on the appointment of Rami, his ascension here is directly tied to his former boss's fall.

In one of his final interviews as CEO last week, Kheradpir had told Forbes that Juniper stood out because of its belief in thorough partnerships and co-creation with its customers. "We are one of two companies on the frontier of web developer innovation and telecom carrier innovation and being at that intersection enables us to see where the market is going, which is great insight to co-create with customers," Kheradpir said then.

But Kheradpir appears to have been ousted specifically because he offended and potentially jeopardized a major account for Juniper. To warrant such a strong reaction, the customer was like a top 10% one for the company, says managing director Mark Sue of RBC Capital Markets. The move was a surprise, says analyst Alex Henderson at Needham Co., who calls the move one of the more unusual of his 25 years covering the networking space.

"The language around the departure is certainly more shall we say 'colorful' than almost any other similar departure," Henderson says.

In a call with analysts and press about Rami's appointment and Kheradpir's departure, the company said that the board reached the decision to make the switch on Sunday night. Under his contract agreement, Kheradpir's on the hook to pay back a pro rata $2.7 million or so of his $5 million signing bonus.

Kheradpir had joined Juniper from Barclays , where he'd served as chief operations and technology officer. Juniper was founded in 1996 and went public in 1999. Its stock is down about 4% for the year under Kheradpir's charge. The company has recently had investor turnover as Elliott Management has bought up shares this month, giving it a stake in the company of about 8.7%. Jana Partners, meanwhile, sold its stake earlier this year.

At the Forbes CIO Summit last week, Kheradpir said Juniper's customers cared about three things in particular: new sources of revenue, operational efficiency through automation, and how to "absorb the tsunami" of increased bandwidth.

In this curious events surrounding his own sudden departure, it appears customers cared about having someone else at the helm at Juniper, too. And Kheradpir himself was unable to weather that wave.

Says Sue at RBC Capital Markets: "It's the definition of dysfunction."

With additional reporting by Antoine Gara.