Shares of network traffic management software provider,
), plunged 32.4% on Wednesday's trade following its disappointing
second-quarter preliminary results.
Gigamon lowered its revenue estimate to $34.5 to $35.0 million
from its earlier projection of $38.0 to $42.0 million in the
recently released (Jul 8) preliminary result for the second
quarter. Management cited 'longer review and approval cycles' to be
responsible for a lower number of deals being closed during the
quarter that in turn impacted revenues. Incidentally, Gigamon's
second-quarter revised revenue projection is in line with the Zacks
Importantly, this is the second time in consecutive quarters
that management revised down its revenue outlook. Gigamon issued a
revised first-quarter revenue guidance of $31.0 to $31.5 million
versus $34 to $35 million expected earlier.
Moreover, the current revenue projection has prompted a number
of analysts to downgrade the stock citing lack of visibility and
competitive pressures from new as well as established
Despite the revenue disruption, management reiterated gross
margin and operating expense projections. It is worth noting that
Gigamon expects gross margin to range within 78.0-79.0% and
operating expenses in the range of $28.5 to $29.5 million.
Moreover, the company added 84 clients to its roster.
Notably, Gigamon will release its full set of second-quarter
numbers on Jul 24, 2014. The Zacks Consensus Estimate for the
second quarter for Gigamon is pegged at a loss of 11 cents. On a
cautionary note, Gigamon has a negative earnings surprise of
480.04% over the last four quarters.
Nonetheless, Gigamon's new and innovative product launches
remain its growth catalysts. Its GigaSMART platform witnessed
higher adoption. Moreover, the company is adding new clients, which
is a positive.
However, competition from the likes of
) remain the concerns. Moreover, the company's inability to close
the projected deals will dent investors' confidence.
Currently, Gigamon has a Zacks Rank #3 (Hold). Investors can
), which sports a Zacks Rank #1 (Strong Buy).
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