Why is Wall Street shocked????

On Feb 22 the Wall Street Journal printed an article about Juniper Network’s choice to invest heavily in R&D during these trying times. CEO Kevin Johnson has bucked the trend of rival firms to hold or cut R&D budgets, and instead has increased it by 15% and has cut other expenses, including salaries.

Additionally, Juniper was expected to announce the creation of a new business unit dedicated to developing and deploying a new generation of networking equipment. …so the investment is in R&D as well as in a commercialization engine.

CEO Johnson, upon taking the helm at Juniper in September 2008, reviewed the inventory of R&D projects and decided they’d have to go ‘on the offensive.’ He adopted this strategy by studying companies that survived the Great Depression of the 1930’s and then thrived. The pattern was clear: companies that invested heavily in R&D benefited when the depression ended. Others did not fare as well.

The size of Juniper’s R&D increase has ‘shocked the market,’ the article quotes an analyst at Goldman Sachs as saying, and Juniper’s share price fell by 15%. Many of the investments will take years to pay off.

But the senior leadership team is backing the CEO. It turns out the company made the same decision during the dot com bust and survived. Their annual R&D budget has not dropped since the company went public. Persistence and consistency in innovation are key, whether or not Wall Street believes it (yet).