Starbucks' choice of Johnson underscores its tech evolution

[NEW YORK] Starbucks named former Juniper Network chief executive officer Kevin R Johnson as its next chief operating officer, underscoring the role technology now plays at the coffee chain and mobile-payment innovator.

Mr Johnson, 54, will take over on March 1 for Troy Alstead, who is leaving the company for an unpaid sabbatical announced earlier this month. Mr Johnson, who has been a Starbucks director since 2009, will remain on the board but cease membership on all committees, the Seattle-based company said on Thursday.

The move brings Starbucks a seasoned technology executive at a time when reaching customers through their mobile phones is an integral part of its strategy. Chief executive officer Howard Schultz said Thursday that about 16 per cent of Starbucks' US store transactions now come from mobile devices. The chain's app, which lets customers pay and earn rewards points by scanning their phones, has more than 13 million active users.

"The choice speaks to Schultz's conviction that mobile and digital platforms will drive the company's future growth," said Asit Sharma, an analyst at the Motley Fool in Raleigh, North Carolina. "Johnson brings deep technology and supply-chain expertise to Starbucks' C-level." Stock Climbs The shares gained 6.6 per cent to close at a US$88.22 in New York, lifted by strong quarterly results released on Thursday. Just before announcing the Johnson move, Starbucks posted an 82 per cent surge in profit in the first quarter after new food items and holiday-themed drinks fueled customer traffic.

Friday's stock gain was the biggest one-day jump since July 2013 and pushed Starbucks to the highest point since it started trading in 1992. The shares rose 4.7 per cent in 2014, the sixth straight year of gains.

Mr Johnson will be taking over for an executive who began managing day-to-day operations last year. Mr Alstead, a 23-year veteran of the coffee chain, had been widely cited as a potential CEO successor.

Mr Schultz said on a conference call on Thursday that he had been talking to Mr Johnson for some time, independent of Mr Alstead's decision to take a sabbatical. He also played down the idea that the move was part of a CEO succession plan.

"My personal commitment to Starbucks has never been greater, and I also want to make it clear that Kevin's addition is not part of some unannounced succession arrangement," said Mr Schultz, 61.

Mr Johnson will receive an annual base salary of US$1 million, Starbucks said. He's also been granted a new-hire equity award of US$7 million, along with a US$1 million cash award.

Mr Johnson led Juniper, a Sunnyvale, California-based maker of networking gear, from 2008 through 2013. He previously worked at Microsoft, which he joined in 1992. Mr Johnson rose to become president of its flagship Windows business as well as its struggling Online Services division. He also championed Microsoft's unsuccessful bid to buy Yahoo! in 2008, an attempt to create a strong No 2 in the search business to Google.

Mr Johnson left Microsoft after the Yahoo deal collapsed to become CEO of Juniper, the second-largest maker of routers used by phone companies. Known as a strong sales and marketing executive, he improved the company's execution but failed to make it a top provider of networking gear to corporate buyers. Juniper shares fell almost 20 per cent when he resigned in July 2013, five years after he took the job.

Starbucks, meanwhile, has become a leader in payment technology. The company introduced mobile ordering last month at cafes in Portland, Oregon, and plans to roll out the service nationwide this year. The company also expects to offer delivery in select markets in the second half of this year in a plan that Schultz has called "e-commerce on steroids." When Mr Alstead announced he was taking a leave of absence to spend more time with his family, it raised questions over whether he was still the top candidate to replace Mr Schultz. Some analysts speculated that he was still the leading successor, despite the sabbatical.

It's too soon to now call Mr Johnson an heir apparent for the CEO job at Starbucks, but the announcement Thursday shows the company isn't waiting for Mr Alstead's return, said Peter Saleh, an analyst at Telsey Advisory Group in New York.

"I'm reluctant to say Troy's not going to come back, but it doesn't look like they're leaving the seat open for him," he said.

BLOOMBERG