Shares of business services provider
) plunged 48.13% to $17.19 at the close of trading on Feb 11,
after it drastically lowered its fiscal 2014 outlook citing
weaker sales in January, fewer big-ticket deals and softer
federal business. As markets reacted in dismay to the downward
revision in the fiscal guidance, questions began to crop up
regarding some fundamental issues within the organization. The
lack of clarity without any follow-up call with investors has
further compounded the problem and has sent the shares on a free
fall. Let us summarize the turn of events owing to which the
stock took a heavy beating.
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In its preliminary second quarter fiscal 2014 results, Infoblox
acknowledged that net revenue would come in at approximately $60
million to $61 million, well below its prior expectation of $65
million to $66 million. The top-line miss was attributed to three
factors: lesser-than-expected January sales, fewer $1-million
plus deals in the quarter compared with the historic average and
weaker-than-expected revenues from Federal businesses due to a
soft macroeconomic environment.
Net loss for the quarter is expected in the 8 cents and 10 cents
band. The current Zacks Consensus Estimate is pegged at a loss of
4 cents. Consequently, this would come to a negative earnings
surprise of over 100% for the company, a clear indication of a
dearth of core growth drivers.
To make matters worse, Infoblox gave no explanation for the
downward revision of fiscal guidance. The company pulled down its
revenue expectation for fiscal 2014 from the prior range of $270
million to $276 million to $250 million to $254 million. The
non-GAAP earnings guidance per share was drastically reduced from
44 cents to 54 cents to 30 cents to 34 cents. Analysts, however,
had pegged the fiscal 2014 revenue at $274.6 million and non-GAAP
earnings at 51 cents per share.
Until the final second quarter fiscal 2014 earnings results and
the associated investor call details are out on Feb 26, any
satisfactory explanation is not likely to emerge. However, with
almost half of the market capitalization eroded and shareholder
wealth plummeting significantly, the credibility of the company
is seriously at stake. It would probably require some phenomenal
performances to turn the tables.
Headquartered in Santa Clara, Calif., Infoblox offers Automated
Network Control solutions that connect end users, devices and
networks. These solutions enable about 6,900 enterprises and
service providers to secure and scale complex networks, thereby
reducing costs and increasing security, accuracy and uptime.
Infoblox presently has a Zacks Rank #3 (Hold). Players in the
industry that are worth considering include
Bottomline Technologies (de), Inc.
Nuance Communications, Inc.
The Descartes Systems Group Inc
), each with a Zacks Rank #2 (Buy).