F5 Networks reported another quarter of strong sales in Q3 2014 driven by rising customer adoption of its new product portfolio, the ‘Good, Better, Best’ pricing model, and the growing sales momentum of F5′s security and service provider business.
The solid revenue growth and profitability in Q3 2014 was driven by strong uptake of F5′s expanding array of systems and application services.
The company claims to have experienced a very strong increase in its business pipeline in Q3 which it believes will translate into growth in the current quarter as well as fiscal 2015.
Though Lazard is staying upbeat, four firms have downgraded F5 (FFIV -17.9%) following its FQ3 warning. William Blair, which has cut shares to Market Perform, argues a saturating ADC market and competition is taking a toll, and Mizuho believes price pressure is growing. Nomura, reiterating a Neutral, thinks execution and product transition issues are to blame, but not competition. The firm notes recently-announced ADCs sport telco-specific features - F5 mentioned telco demand was especially weak. Analyst commentary was much more upbeat not too long ago.
Lazard cuts its price target on F5 (FFIV) to $100 from $115 following yesterday's AH Q2 warning. The related commentary was somewhat upbeat however as analyst Ryan Hutchison says the profit warning wasn't "company-specific" and notes F5 should benefit from "several meaningful tailwinds" including a "major product refresh and Cisco's (CSCO) exit from the market." Nonetheless, shares are -17% premarket.
F5 (FFIV) resumes trading and is currently at $75.85, down 16.1% AH in response to its FQ2 warning, which (in the wake of Oracle's results) is bound to heighten concerns about U.S./European enterprise IT demand. Rivals and peers are off in sympathy: CSCO -2.3%. RVBD -3.7% CTXS -3.7%. JNPR -5.1%. VMW -2.2%. EMC -0.9%. RHT -1.7%.
F5 (FFIV) warns it expects to report FQ2 (March quarter) revenue of $350.2M and EPS of $1.06-$1.07, below a consensus of $375.8M and $1.23. The company blames "a slowdown in North American and to a lesser extent EMEA sales." Telco bookings fell sharply both Q/Q and Y/Y, and U.S. federal bookings were "down significantly" Y/Y. Shares are halted. F5 had received a lot of favorable sell-side commentary in recent weeks. (PR)
The sell-side continues to turn more positive on F5 (FFIV +2.2%): Craig-Hallum has launched coverage with a Buy and $110 PT today, helping shares rally above $90 in the process. Baird upgraded F5 yesterday, and McAdams Wright a week ago.
Baird upgrades F5 (FFIV +2%) to Outperform, citing optimism about both the company's core business (application delivery controllers) and its efforts to expand into security hardware. McAdams Wright made similar arguments while upgrading F5 last week. Shares are still -8% YTD.
F5's (FFIV +1.3%) expansion into new security and telecom markets will quadruple its addressable market from 2012-2016, argues McAdams Wright in upgrading shares to Buy (ed: F5's share in many of the newer markets will inevitably be lower). The firm also thinks Cisco's exit from F5's core ADC market is a $200M/year opportunity, and believes F5 will produce ~$6.30/share in free cash in FY13 (above EPS of $4.93). Software-defined networking, and particularly the adoption of software-based ADCs running on commodity hardware, is named as a risk, but McAdams sees little near-term impact. (Deutsche on F5)
Fortinet (FTNT) is encroaching on F5's (FFIV) turf by acquiring Coyote Point Systems, a maker of application delivery controllers (ADCs) for SMBs. Fortinet claims Coyote Point's products, which (like F5's) rely on a proprietary OS, complement its core FortiGate unified threat management security hardware, as well as its firewall and denial-of-service appliances. The purchase comes as F5, which sells to enterprises and carriers in addition to SMBs, launches firewall hardware, as well as security modules for its ADCs.
Telecom equipment/optical component names underperform following FBR's Cisco/Juniper downgrades, as investors mull the impact of lower demand for switches/routers among service providers and enterprises on demand for complementary hardware and the parts that go into it. Given software-defined networking (the main reason for FBR's downgrade) will have a limited impact on hardware use on many carrier networks, is the Street overreacting? JDSU -4.2%. FNSR -3.3%. CIEN -3.8%. ADTN -3.1%. ALU -2.7%. ADTN -3.1%. SONS -4.7%. INFN -2.6%. FFIV -2.3%.
Boutique research firm Off Wall Street has launched coverage on F5 (FFIV -4%) with a Sell and $70 PT, and has sent shares tumbling in the process. The report comes as F5 furthers its security ambitions by forming a partnership with Websense (WBSN). The companies have developed an enterprise security architecture that relies on F5's mainstay BIG-IP application delivery controllers and Websense's X10G and V-Series Web security/content inspection appliances.
F5 (FFIV) is burnishing its mobile credentials ahead of next week's Mobile World Congress. This week, the company has announced: 1) Mobile App Manager, a cloud-based solution for managing access to corporate apps/data on iOS/Android devices. The solution, which competes with offerings from many other IT software firms, addresses security issues related to the BYOD trend. 2) The latest version of its traffic signaling software for 4G networks. The software, stems from F5's purchase of Traffix Systems, and addresses a booming market.
F5 (FFIV -0.6%) follows up on yesterday's acquisition of LineRate Systems by announcing a policy enforcement module for its high-end VIPRION application delivery controllers (ADCs). The module, aimed at service providers looking to analyze and set rules for network traffic, puts F5 into competition with Allot (ALLT) and Procera (PKT). F5 has already introduced firewall and WAN optimization ADC modules, among others. (PR)
F5 (FFIV -1.1%) wants in on the networking industry's favorite buzzword(s): it's acquiring software-defined networking (SDN) play LineRate Systems for an undisclosed sum. LineRate's software, thus far aimed at service providers, extends SDN to networking gear analyzing traffic at the application level - the specialty of F5's application delivery controllers. As is the case for Cisco and Juniper, SDN is both an opportunity for F5 (can increase sales of high-margin software) and a threat (could reduce/eliminate the need for its proprietary, ASIC-based hardware). (PR)
F5 Networks Inc provides Application Delivery Networking (ADN) technology that secures and optimizes the delivery of network-based applications and the security, performance and availability of servers, and other network resources.