Earnings Preview: Blue Coat Systems

Blue Coat Systems (BCSI) is expected to report Q1 earnings after market close Thursday, Aug. 21,  with a conference call scheduled for 5:00 pm ET.

Guidance

The consensus estimate is 16c for EPS and $102.23M for revenue, according to First Call.

Analyst Views

ThinkPanmure expects Blue Coat to report Q1 results of 19c on $101.4M in revenue, which includes $12.4M in sales from Packeteer. With sentiment so low, the firm believes that in-line results, reiteration of the 17% to 18% operating margin target exiting FY09, and building Packeteer and MACH 5 momentum should be positive catalysts for the shares. Last month, on July 21, ThinkPanmure upgraded Blue Coat to a Buy rating, based on the company's growth prospects following positive channel checks. Their target is $20. ThinkPanmure's channel checks indicated that WAN optimization trends over the past quarter were healthy in the U.S., and that Blue Coat, with its security-based differentiation, continued to benefit. Blue Coat, ThinkPanmure was told, with its unique security plus acceleration differentiation, continues to receive mindshare in a market which stayed healthy despite the macro weakness.

With this backdrop, ThinkPanmure believes that the flat U.S. growth guidance for FY09 may prove to be too conservative. ThinkPanmure said the channel believes that the integrated Packeteer Blue Coat product cycles could be exciting when the products are released, expected in early 2009. Positive earnings announcements from Riverbed (RVBD) and Cisco (CSCO) in the past month reinforced ThinkPanmure's thinking that U.S. WAN optimization trends are healthy and that Blue Coat will beat its flat growth guidance.