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Blue Coat Systems (NASDAQ:BCSI) as I expected reported superior results. It truly is a damn shame what they have done to this stock on "fears"; first Riverbed Technology reported great earnings but was very highly valued so they destroyed that stock; next a company that "barely" competes with Blue Coat, F5 Networks (NASDAQ:FFIV) had a ho hum quarter and they chose to smash Blue Coat Systems further on that news, although there is almost no connection; finally on words that Cisco (NASDAQ:CSCO) is seeing some weakness from financial and automotive companies (duh! talk about 2 sectors you don't want to be in), Blue Coat was taken down yet again. Losing nearly 40% of its value, all the while itself doing nothing wrong.

While I had some massive booked gains in this name, since my strategy is to buy (and sell) in layers and I had sold a lot of my very large position in the upper $40s and lower $50s; my unrealized losses against my booked gains actually had me at a net loss on this name. Which is quite amazing since Blue Coat Systems 30 days ago was the largest winner in the fund.

With that said, I am glad to see this company continue to execute and hopefully this will put the fears aside. I am sure at some point naysayers will say 'the credit contagion will somehow hit Blue Coat, but much like Riverbed these 2 companies continue to execute - in Riverbed's situations it was simply a case of a stock too highly valued and full of momentum lemmings; nothing to do with bad earnings or guidance.

So here is a case of being 100% correct on the company, but the stock market missing the entire point - and you lose money in the process. Those are, frankly, the most frustrating times... there are many times you will be wrong on a stock, and you take your ball and go home on that name, but when you are right but still "lose" it is tougher to rationalize.

  • Internet monitoring equipment maker Blue Coat Systems Inc (BCSI) posted a quarterly profit that topped the Wall Street view, helped by a surge in revenue, and forecast third-quarter results above analysts' expectations, sending its shares up 18 percent in pre-market trade.
  • The Sunnyvale, California-based company posted second-quarter earnings of $7 million, or 17 cents a share, compared with a loss of $3.3 million, 12 cents a share, a year ago. Excluding items, the company earned 30 cents a share for the latest quarter.
  • Net revenue for the quarter rose 85 percent to $73.4 million.
  • Analysts had expected the company to earn 24 cents a share for the quarter, excluding items, on revenue of $69 million, according to Reuters Estimates.
  • The company said it expects third-quarter earnings of 31 cents to 35 cents a share, excluding items, on revenue of between $78 million to $81 million. Analysts were expecting earnings of 26 cents a share, excluding items, on revenue of $74.2 million.
I did sell down a bit of my Blue Coat Systems today to raise cash, on this 18% rise. (only 200 shares) - simply to raise cash. In a more stable market, with more cash in my fund, I'd probably actually be adding to the position.... Blue Coat Systems remains my favorite name in the space, but with the spectacular fall in Riverbed Technology I also believe it is now a good value as well, consistent with it's strong growth rates. The spike in the name has moved the stock back over its 50 day moving average which is a net positive. Let's see if it holds over the ensuing days.

Disclosure: Long both names in fund; just sold Blue Coat Systems in personal account