We see in the news something I believe has been happening for many years, and continues ... under the surface, slowly but surely. I call it erosion because it is not obvious or a "big bang" emergency, but as we look around and ask where all the jobs went [Aug 14, 2009: No New Normal Say Some Economists, Prosperity Without Jobs?] while concurrently trying to create bubbles on 5 year cycles to create work, the truth can be seen in countless press releases.

Here is an example of some news with a technology company we have owned in the past - Blue Cost Systems (BCSI). As I wrote Thursday morning (and many times before) this increasingly flat world is great for capital, not so fun for labor. Especially labor in high cost countries...(we can argue its a net positive for labor in low cost countries). Speculators are correctly driving up the stock of Blue Coat (+14%) as "costs are lowered" - sort of ironic because what is good for this company, if extrapolated over countless examples the past 2 decades and many more in the future, is harmful to the domestic society as a whole.

F1Q10 Earnings Call

August 25, 2009 5:00 pm ET

It is very hard to find new opportunities on the long side, since most of the quality stocks are incredibly overextended... as are a lot of "not so quality" stocks. Thursday, Riverbed Technology's (RVBD) competitor Blue Coat Systems (BCSI) took a beating - I can find no discernible news, but the stock fell back to its 20 day moving average. Even finding interesting stocks in an uptrend anywhere near their 20 day moving average has become difficult ...


Since the overall market could obviously continue upward, I am continuing to hedge my bets and this gives us a better entry point in a name I am familiar with. If we are ever allowed an actual correction, we can jump ship from a much lower floor than those who bought the stock in the previous week. We last exited Blue Coat in February 2008 ($10 higher than it is priced today) after a very rough patch where the company was performing well but its competitors' ills were constantly causing investors to rush out.

The next step after you roll out full fledged intelligent branches is essentially a better allocation of WAN bandwidth, application traffic reduction, data center virtualization across enterprise, and branch office IT consolidation. Seamless application delivery to all enterprise users while being completely oblivious of their locations, technological moves towards cloud-computing architecture, WAN bandwidth reduction requirements and proper allocation of bandwidth among business needs created the market for WAN optimization products.

At the end of each trading week, Hillbent scans for the equity market for potential anomalies which exhibit extremely oversold and overbought conditions. Past observations have revealed that such candidates may experience reversal corrections to the upside or downside once the market reconfirms that their fundamentals remain solidly intact or relatively poor. From a contrarian perspective, these lists may also serve as a precursor to changes in institutional sentiment and underlying fundamentals.

(The purpose of this report is not to provide specific recommendations, but instead serve as a time-saving reference tool and starting point for investment ideas as the upcoming trading week unfolds. Of course, the results generated are not always perfect and users are strongly encouraged to perform their own due diligence on these names. Note that overbought and oversold conditions are based upon proprietary algorithms and quantitative models instead of conventional technical analysis indicators. As a supplement to this report, please refer to our Market Condition Summary to determine if market direction trends support a bullish or bearish investment bias over short-term, intermediate, and long-term timeframes.)

Everyone out there knows the company founded in 1989 that used to be named Network Associates that is now named McAfee Inc. (MFE) is a wonderful growth company. MFE is a Santa Clara, CA based company that provides security software to enterprises, governments, small and medium-sized businesses and individual consumers protecting them from known and unknown threats world-wide.

The company’s system security offerings include endpoint protection that encompasses security solutions for consumer and corporate computer systems, data protection solutions to safeguard vital info residing on various devices, and mobile security solutions to protect mobile operators and their users by safeguarding mobile terminals, applications, and content. The network security offerings are made up of firewalls, intrusion detection and prevention, web, email, and data loss protection security appliances.

F4Q09 Earnings Call

June 2, 2009 5:00 pm ET

Blue Coat Systems

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.

Bullish Calls:

Enterprise Products Partners (EPD): "I think that EPD at 8.6% yield is much better than yours (Williams Companies)."

Blue Coat Systems, Inc. (BCSI)

F3Q09 (Qtr End 1/31/2009) Earnings Call

Blue Coat Systems

Guidance

The consensus estimate is 16c for EPS and $108.82M for revenue, according to First Call.

After beating quarterly earnings but warning of a rough quarter ahead, John Chambers appeared a bit chastened and wary of the future. And he should be -- IT infrastructure builds will definitely suffer in the near term as the world rides out this rough recession / depression. one of the longest lived CEOs of any tech company, predicted his company would endure a 20% drop in sales for the third quarter of 2009. The Piqqem Sentiment on Cisco (CSCO) was moderately positive with sentiment estimates placing shares in the $17 to $18 range, slighly up from current levels. But Chambers, like Rahm Emanuel, is a CEO who never lets an economic crisis go to waste. So expect the giant networking firm to start an acquisition binge using its stock, which has weathered the market better than the shares of many of its potential targets. Cisco's $29.5 billion in cash and short term investments is another easy source of funding. Here's a few of the possibles.

• Riverbed Technologies (RVBD) - This provider of WAN optimization gear and other networking and security equipment is selling at nearly half-off its 52-week high of $23.25. It's current market capitalization of $800 million and change is barely a speed bump for Cisco. Riverbed has great technology and very strong presence in Europe. Company just beat earnings.
• BlueCoat Systems (BCSI) - The company builds security systems for businesses that filter traffic. It also builds WAN optimization gear. The products overlap in some places with Riverbed. At $10.92, BCSI is well off its 52-week high of $31.8. The company has struggled and lowered guidance in recent quarters but the vaunted Cisco sales force and VAR network could likely goose distribution nicely. Cisco is also very strong in security and this tuck in would only set chambers back roughly $500 million.
• Polycom (PLCM) - This is the leading player in the rapidly growing video conferencing market. Polycom sells systems across the spectrum, whereas Cisco is primarily selling expensive videoconferencing gear. There would be a lot of overlap between the two -- Polycom also sells IP handsets -- but Cisco has yet to make a big play in this segment for the SMB market, which could be the fastest growing. With shares at roughly half 52-week highs, Polycom just announced a beat-and-raise that has slighly boosted shares, making it a bit more of a mouthful but still digestible at a market capitalization of $1.24 billion.

Google (GOOG) has to be one of the most audacious companies in recent history. They took the advertising industry by storm, and as I wrote recently could even be accused of fomenting war with enterprise IT. Whether you like Google or not, you cannot help but be impressed with their audacious leap from search advertising and mysterious algorithms into the even more mysterious world of cloud computing.

Cloud computing has become the latest obsession in IT. And regardless of the paucity of revenues relative to headlines, it has stormed into the collective tech imagination like a Texas flood. As virtualization decouples applications from hardware, cloud computing promises to decouple IT services from hardware; and that threat alone is enough to send tech vendors scampering with slides, announcements and other forms of marketware.

Despite the gloom and doom in the news, no one seems to be predicting that the spread of TCP/IP will be slowed by a global recession. Most analysts are more concerned with how the network will be monetized and the role it will play in new virtualization and cloud computing initiatives.

That means that the networking industry needs to articulate its relevance to these initiatives more forcefully as IT automation initiatives continue to connect to the static TCP/IP network. A weak economy will also make the business case a more significant part of the sales process; which will increase the pressure on networking vendors to automate core network services, thereby setting the stage for dynamic network infrastructure capable of keeping up with new dynamic systems and endpoints.

Blue Coat is in the process of integrating its Packeteer acquisition. The ride hasn't exactly been smooth, but Blue Coat (BCSI) says it is aggressively looking to hire sales teams-- albeit not necessarily for the best reasons. The company is cutting back on most expenditures, but unlike most tech co.'s, it's not cutting back on hires. Blue Coat also hasn't increased discounting of fees. From Blue Coat Systems Inc. FQ209 conference call:

Ideally, I would have liked to have been in the 130 or 140 [sales] reps as opposed to the 121 that we ended the quarter. And you can see even now, from the end of the last quarter to today, which is roughly about three weeks, we have hired seven reps and a couple of more will start in the next week.

F2Q09 Earnings Call

November 25, 2008 5:00 pm ET

Blue Coat Systems

Guidance

The consensus estimate is 17c for EPS and $115.84M for revenue, according to First Call. Guidance for Q2 provided by management on the last earnings call was for EPS of 15c - 20c and sales of $116M - $120M. Since then concerns about the macro outlook for IT has increased.

F1Q09 (Qtr End 07/31/08) Earnings Call Transcript

August 21, 2008 5:00 pm ET

Blue Coat Systems

Guidance

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