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A10 Networks: A Cheap, Under-Followed Networking Software Company With Dynamic New Management - 70% Upside Potential

Jun. 15, 2020 8:00 AM ETA10 Networks, Inc. (ATEN)4 Comments
Cobiaman profile picture


  • Top technology combined with dynamic new management.
  • No analyst coverage of the name.
  • Accelerating revenue growth + declining costs = rapid EPS growth.

A10 Networks (NYSE:ATEN) is an under-the-radar player in the Application Delivery Controller (ADC), Distributed Denial of Service (DDoS), and Carrier Grade Networking (CGN) markets. The company has top notch products but had lacked a clear go to market strategy under the former CEO.

A new CEO, Dhrupad Trivedi, came in six months ago and is reinvigorating the company’s sales efforts to win market share. Dhrupad is well qualified (overqualified?) for the CEO position at A10 having been an Executive Vice President of Network Solutions at Belden, a $2 billion revenue signal transmission company, for many years, and a Vice President of corporate development at JDS Uniphase, a large-cap optical components and systems company, from 1998 to 2010. The former A10 CEO was the company’s founder, and while he was a terrific product innovator, he was not geared toward sales and operations. We think the management change can get the company moving in the right direction.

Dhrupad is focusing on making the company more efficient in two ways. First, he is cutting unnecessary costs to make the company leaner and to give it more operating leverage for its revenue acceleration stage. He is cutting $10 million out of operating expenses, primarily in the general and administrative (G&A) and sales and marketing (S&M) lines. The company recently switched auditors from Deloitte & Touche, a big 4 firm, to Armanino LLP, a regional firm. Armanino has a good reputation and is much cheaper than Deloitte & Touche. In sales and marketing, he flattened the organization, taking out a couple of layers of redundant management.

The results of the beginning of this cost cutting can be seen in the company’s Q1 2020 results, where it generated $4.1 million in non-GAAP operating income on $53.8 million in revenue versus a loss of $5.9 million in non-GAAP operating income on

This article was written by

Cobiaman profile picture
25 year veteran of the small-cap technology hedge fund sector.  Focused on smaller technology companies with new products and / or new management teams to drive accelerating revenue and operating profit growth.  Just opinions here, no investment advice.

Analyst’s Disclosure: I am/we are long ATEN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (4)

@Cobiaman Appreciate the coverage.
willpetty profile picture
even though everything else has gone up...this seems like a good call and find.
I agree with the Author. ATEN appears to be a gem that is not well covered by the Sell-Side.
New CEO is doing a great job and ATEN's technology is well accepted by major technology customers (major Telecoms, Microsoft, etc.). Second quarter results are very positive given the challenging Covid environment. Revenue up 5% YoY. Operating cash flow of $9 million.

Bottom line, their business seems to be holding up very well. Love the fact that they are cash flow positive in a tough environment and also sitting on $150 million of cash and no debt.
Cobiaman profile picture
This morning A10 announced a business update for Q2.  Revenue grew 5% year-over-year while profitability improved both year-over-year and quarter-over-quarter.  The company generated over $9 million in cash flow in the quarter.  Revenue was solid in the quarter considering the effects of Covid-19, and profitability showed the effects of management's recent cost-cutting actions.  I believe that revenue can accelerate in a more normalized environment and the business model's enhanced operating leverage due to the cost cutting will show through in better profitability.
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