Networking solutions provider
F5 Networks Inc.
) negatively preannounced its forthcoming second quarter 2013
results, scheduled to release on Apr 24. Post announcement, F5'
shares plunged $14.3 or 15.8% in the after-hours, reflecting
shattered investor sentiment.
F5 now expects revenues to be $350.2 million, significantly down
from previously expected range of $370.0-$380.0 million.
Management blamed slowing sales in North America and Europe,
Middle East and Africa for the dismal performance. From end
market viewpoint, soft Telco and U.S. Federal bookings hampered
Lower revenues have also pulled down earnings per share
expectations. F5 now expects GAAP earnings per share in the range
of 79-80 cents, down from previously expected range of 93-96
cents. Non-GAAP earnings are expected to be within $1.06 and
$1.07 per share, down from prior expectation range of
Though there were some negative factors noticed during the first
quarter 2013 results, such a massive downward revision is
surprising. In the last quarter, though total revenue grew 13.4%
year over year, Product revenues decreased. The deceleration in
Product revenues is being noticed since the past few quarters.
Also, bookings came below 1.
In its earnings call, F5 expressed its concern about the macro
uncertainties that could affect near-term fundamentals.
Management also remained concerned about an expected budget cut
from telecom customers.
But F5's view for fiscal 2013 seemed pretty good. For fiscal
2013, F5 aims to reaccelerate product revenue growth through
Big-IP appliance refresh and the introduction of new products
such as Application Delivery Firewall (layer 3-7), DPI, and the
next version of TMOS. Management expects to see sequential
revenue growth throughout the year.
F5 also expects Traffix (acquired on February 2012) to start
contributing materially toward revenues in 2014 as it sees good
traction from customers for its diameter routing technology.
The company is also making its existence felt in the
software-defined networking (SDN) market, through the acquisition
of a privately-held networking services provider, LineRate
Systems, last February.
Software-defined networking is an approach to networking in which
control moves from hardware to a software application called a
controller. A network administrator uses these controllers to
direct and regulate network traffic from a centralized hub. This
minimizes the use of different and expensive switches for
controlling web-trafficking and helps in uninterrupted traffic
flow. Another important factor for choosing SDN technology is
that it is applicable for both private and public cloud
The SDN approach to networking is gaining popularity among key
networking players such as
Cisco Systems Inc.
Juniper Networks Inc.
) and many more. With LineRate, F5 is now positioned to compete
in the SDN space.
BROCADE COMM SY (BRCD): Free Stock Analysis
CISCO SYSTEMS (CSCO): Free Stock Analysis
F5 NETWORKS INC (FFIV): Free Stock Analysis
JUNIPER NETWRKS (JNPR): Free Stock Analysis
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Despite attractive long-term growth prospects, near term concerns
keep us on the sidelines. Currently, F5 Networks has a Zacks Rank