Earnings Preview: Blue Coat Systems

Blue Coat Systems (BCSI) is expected to report Q4 earnings after the market close on Wednesday, May 27 with a conference call scheduled for 5:00 pm ET.

Guidance

The consensus estimate is 21c for EPS and $114.32M for revenue, according to First Call. On its last earnings call, management provided in-line guidance calling for $112.5M to $117.5M in revenue and 18c to 24c in EPS.

Analyst Views

BMO Capital expects Blue Coat to report revenue of $109M and EPs of 19c, below consensus and at the low-end of management guidance. The firm's recent reseller checks pointed to lackluster PacketShaper revenue execution and outlook. Blue Coat’s core business fared better in BMO's checks, with discounting very heavy in the quarter, underscoring their cautious stance. As BMO highlighted in their April 20 downgrade note, they think PacketShaper is in secular decline and the firm doesn’t share management’s or the Street’s view that revenues can be resuscitated. BMO thinks PacketShaper will continue to be a drag on Blue Coat’s growth rate and profit margins. Moreover, in the core business, BMO thinks the level of discounting was significant relative to the company’s typical practices and to its peers, which they fear may be an ominous sign with respect to Blue Coat’s outlook. BMO sees downside to Street estimates and to Blue Coat’s share price. Conversely, Needham raised their estimates and target recently on Blue Coat following what they saw as positive channel checks.