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I recently joined a company as a network engineer. Almost all the people here are personally known to me.
One guy who works here, who used to be my good friend out of office, is not keeping up with the team properly.
The company wants to fire him and he is searching for another job. The people who want to get rid of him are also close friends of mine.

So because this guy has no "friends" in office he always hangs out with me. Probably other guys in the company don't like this. I don't find this person trustworthy, but used to be a casual "friend" out of office.

I'm not quite sure if I should avoid this person just like seniors do. Being neutral might be good. How to handle this scenario?

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    Your question is ambiguous. First you say that he is(was?) a good friend out of office, then you say he was a 'casual' friend and you don't trust him. – Jan Doggen Nov 20 '14 at 10:43
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  1. He is your friend, so don't treat him as a leper. He is getting fired, so whatever dissatisfaction they have with his performance has already been taken care of.

  2. You are a friend to your other friends, so let that be apparent, too. If they ask why you are with him, say that you understand the business reason why your friend is being fired but as the Russian proverb says: friendship is friendship and business is business.

  3. This is personal advice: try not to mix friendship and business. When you are doing business, you play one role. When you are a friend, play the role of a friend. Do not make business decisions based on friendship and do not make friends based on business considerations. It's perfectly OK to eventually become a friend to someone you are doing business with because you got exposed to their personal qualities and the fact that it's OK to form the friendship is in no way an exception to the rule of not mixing business and friendship.

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