Seeking Alpha: The Frustrating Wait For Value Realization At PCTEL

It is not too hard to see how PCTEL (NASDAQ:PCTI) could parlay billions of dollars of end-market potential in markets like smart grids, process automation, enterprise WLAN, precision agriculture, train control, and fleet management into potentially hundreds of millions of dollars of revenue. "Potential" is always a tricky word when it comes to small cap companies, though, and PCTEL doesn't have the best track record when it comes to delivering on its potential at any given point in its past.

PCTEL doesn't trade at particularly ambitious multiples, but then why would it? The company has been free cash flow positive for some time, but doesn't have any real record of attractive margins or returns on capital. I do believe that investors need to focus on where a company is going more than where it has been ("skate to where the puck is going to be"), but I have questions about PCTEL's ability to truly differentiate itself as a component supplier. I ultimately come down favorably inclined toward PCTEL, but near-term headwinds in wireless infrastructure spending could stretch out what has already been an extended wait for market-beating performance.

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The Frustrating Wait For Value Realization At PCTEL

Seeking Alpha: Aruba Networks Still Searching For Margin Leverage

It's always something with Aruba Networks (ARUN) and its shares. If investors aren't worried about competitive share loss to Cisco (CSCO), there are worries about smaller rivals like Meru (MERU) or Aerohive (HIVE). If competition isn't a problem, then questions about the company's ability to generate attractive long-term operating leverage come back into play. I don't mean to suggest that these aren't all relevant and important questions. My point is rather to offer some reason as to why these shares are often so volatile around earnings reports.

As it looks today, I continue to believe that Aruba is undervalued, with fair value in the low-to-mid $20s. I really would like to see more evidence of sustained operating leverage before buying in myself, but by the time that's evident the shares are likely to have already had their run.

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Aruba Networks Still Searching For Margin Leverage

Seeking Alpha: Aruba Gaining Share And Broadening Its Base

Mobile enterprise specialist Aruba Networks (ARUN) hasn't completely filled the crater created in early 2013 when the company lost sales to weaker industry spending and competitive gains from Cisco (CSCO), but this quarter will bring it a lot closer. More importantly, the company appears to be gaining share from its largest rival and newer offerings like ClearPass and Instant seem to be hitting their stride.

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Aruba Gaining Share And Broadening Its Base

Investopedia: Aruba Networks Dig In For The Long War

When Cisco (Nasdaq:CSCO) decides that your particular market is an important one to its long-term goals, you're in for some challenging times (unless you're one of the companies that Cisco chooses to acquire). That's the reality that Aruba Networks (Nasdaq:ARUN) is facing right now, and it has consequences for the bottom line. While I continue to believe that Aruba has the technology and product quality to be a strong #2 in the growing WLAN market, the need to spend more on marketing and sacrifice margins to shore up growth adds another headwind for the stock.

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Investopedia: Frear Of Cisco Leads The Market To Abandon Aruba Networks

It was only nine days ago that investors were left speculating as to whether Aruba's (Nasdaq:ARUN) weak fiscal third quarter meant that the WLAN market was slowing or that rival Cisco (Nasdaq:CSCO) was gaining share. With Cisco's earnings in hand and Aruba management's own post-earnings comments, it's clear that Cisco now looms large as a major disruptive force.

A more aggressive (and successful) Cisco is a multi-faceted threat to Aruba, and investors aren't hanging around to see how this plays out – sending the shares down more than one-quarter Friday morning. Although I continue to believe that there's long-term value in Aruba Networks shares, investors approaching this stock today have to treat it like nitroglycerine – be gentle and have a backup plan if and when things go badly wrong.

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Investopedia: Cisco Comes Through, But Times Are Still Tough

With so many negative earnings reports for the first quarter, expectations for Cisco's (Nasdaq:CSCO) quarter were pretty modest. As a good company should, Cisco came through with a solid quarter and signs of share gain in multiple markets. That said, while I do believe Cisco is still undervalued, investors might want to exercise some caution before piling back into tech stocks.

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Investopedia: After The Hurricane, Is It Safe To Visit Aruba Networks?

There's a pretty good rule of thumb that applies to swimming and diving – if you can't see the bottom, don't dive in -- and think twice about swimming there. Likewise, jumping into a stock right after a significant revision to earnings expectation can be an invitation for successive disappointments, as companies don't often miss just one time.

With Aruba Networks (Nasdaq:ARUN), that leads to some tough choices for investors. While I definitely believe that the wireless networking (WLAN) is going to grow significantly, and that Aruba is well-positioned to take more share in the small/medium-sized business (SMB) space, I also acknowledge that WLAN spending is largely discretionary and this company could see further order/revenue disappointments if IT demand doesn't rebound during the summer.

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Investopedia: New Products Could Spark Aruba Networks In 2013

It's easy for value investors to have a love-hate relationship with a stock like Aruba Networks (Nasdaq:ARUN). The company has been delivering solid revenue growth and the company's WiFi and WLAN products are well regarded in the market. But the stock also trades at robust valuations, carries a significant short interest, and has the pleasure of competing against behemoths like Cisco (Nasdaq:CSCO). While I would caution investors to take note of the risks involved here, new products could yet lead Aruba to have a strong 2013.

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Investopedia: Cisco Pays Dearly For Meraki

Acquisitions often make investors nervous, as the temptation/risk to overpay is so high and there are reams of research indicating that most deals destroy shareholder value for the acquirer. By the same token, sometimes M&A is the only way to fill a product/technology gap and position the company for future growth. While Cisco (Nasdaq:CSCO) shareholders are certainly going to hope that the deal for Meraki advances Cisco's software-defined networking (SDN) strategy, the price tag is going to cause more than a little wincing.

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Investopedia: Is Aruba Back In A Growth Groove?

Although Aruba Networks' (Nasdaq:ARUN) fiscal third quarter report in May was disappointing (particularly from a guidance standpoint), I liked the stock on a GARP basis. Oddly enough, while this summer has not been a good one for tech companies, the stock has been quite strong over the past three months. While I continue to like the company, I do wonder if Aruba needs to start showing a little more competitive share growth for the stock to continue working well into the future.

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Investopedia: Will A New Philosophy Toward Capital Unlock Cisco's Value?

I've said it before, and I'll start off this article on Cisco (Nasdaq:CSCO) by saying it again - investors don't reward value-priced tech companies that are rich in cash flow generation but poor in revenue growth. It's still an open question as to just how much top-line growth potential Cisco still has, but management seems to have acknowledged that hoarding cash on the balance sheet isn't going to do shareholders much good. I'm still skeptical about how readily investors will embrace Cisco, but I do still see a lot of value in the shares.

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http://stocks.investopedia.com/stock-analysis/2012/Will-A-New-Philosophy-Toward-Capital-Unlike-Ciscos-Value-CSCO-FFIV-VMW-JNPR0816.aspx

Investopedia: Can BYOD Bring Aruba Networks Along For The Ride?

This is not a good time to be a tech stock with analyst numbers heading lower, and it's not altogether surprising that Aruba Networks's (Nasdaq:ARUN) stock is near its 52-week low. Although enterprise mobility is admittedly not the highest priority for most IT departments, and the company is seeing deceleration in Europe, this is still a small growing tech company with the number two share position in an emerging growth market.

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Investopedia: Brocade Has More To Prove

Brocade (Nasdaq:BRCD) is another one of those small tech stocks beset by worries that the market is changing out from underneath them, and that the Goliaths of the tech space ((Cisco (Nasdaq:CSCO), Hewlett-Packard (NYSE:HPQ), Juniper (NYSE:JNPR) and Dell (Nasdaq:DELL)) are going to chew away their business. Certainly the recent performance of the company and the valuation of the stock suggest little optimism, but this may yet be a name to consider for aggressive turnaround investors. Although this quarter's beat and raise proves nothing, at least there are some positive marks in the ledger for 2011.

An Encouraging End to the Year  
Brocade's results for the fourth quarter were not all that impressive at first look. Revenue was basically flat with last year and up 9% on a sequential basis. Storage area network (SAN) revenue was down about 4% from last year, with the smaller IP business offsetting that with 11% growth. Still, Brocade beat the consensus guess of year-on-year revenue decline, and surpassed the high end of the range as well.

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Investopedia: Aruba Still A Growth Story In A Growth Market

 Even if consumer demand for smartphones and tablets has started to disappoint lately, there is little question that it is still a major emergent trend in enterprise IT. As Aruba Networks (Nasdaq:ARUN) is built upon facilitating wireless access to network resources, it is a good pure play on this secular growth. While worries about enterprise IT spending and reinvigorated competition are relevant in the context of a robust valuation, this is still an interesting tech growth story.



A Solid Start to the Fiscal Year
Aruba is getting its fiscal year off to a solid start. Revenue rose 44% in the quarter and 5% on a sequential basis. Profitability is also fairly good. Gross margin did worsen from last year ((whether generally accepted accounting principles (GAAP) or non-GAAP)), but improved decently on a sequential basis. Operating income was more uniformly positive - the year-on-year GAAP increase being so large as to almost be irrelevant, while the company added almost a point and a half to non-GAAP operating margin on a sequential basis. (To know more about income statement, read: Understanding The Income Statement.)


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Investopedia: Aruba Still Wired On Growth

How much more needs to be said about the state of enterprise IT spending? Companies like Cisco (Nasdaq:CSCO), Riverbed (Nasdaq:RVBD), F5 (Nasdaq:FFIV) and Juniper (Nasdaq:JNPR) have all had their challenges and setbacks, leading many investors to reevaluate the health of the tech sector and reset valuations much lower. What seems to be evident in Aruba Networks' (Nasdaq:ARUN) earnings, though, is that there is still money out there for IT - perhaps not as much as a year ago, but enough that companies will still spend on the products they see as important to their operations.

A Solid Close to the Fiscal Year  
Aruba announced that fiscal fourth quarter revenue rose 47% compared to last year and almost 8% compared to the fiscal third quarter. Management did not give a lot of specificity regarding where revenue came from, other than to say that U.S. results were stronger than in Europe (not a surprise) and that the strongest markets were "general enterprise" and education (a minor surprise). In response to a question on the conference call, management indicated no particular weakness in the financial sector - a surprise perhaps given NetApp's (Nasdaq:NTAP) recent comments.


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http://stocks.investopedia.com/stock-analysis/2011/Aruba-Still-Wired-On-Growth-ARUN-CSCO-JNPR-HPQ-MSI-MERU-MSFT0829.aspx

Investopedia: Guidance Sours High-Flying Aruba

Even though the actual numbers do not support it, it feels like the markets have been down at least 1% every day for weeks. Whether this is just another example of enough people buying into "Sell in May and go away" that it becomes self-fulfilling or not, the reality is that the market is in a shoot-first mood. 

When Aruba Networks (Nasdaq:ARUN) gave cautious guidance with its fiscal third-quarter report, it was tantamount to painting a bullseye on the derrière of shareholders and the market punished the stock in due course. With the dust starting to settle a bit, though, it is time to ask whether the long-term growth potential of this name merits the attention of risk-tolerant growth investors.


On its Own, Not a Bad Fiscal Third Quarter
In a vacuum with respect to guidance and expectations, Aruba's third quarter was pretty strong in many respects. Revenue rose 53% and surpassed estimates by more than the usual degree. Growth was again led by product revenue (up 58%), though 3% sequential growth in the U.S. is a bit of a concern - particularly in light of that softer guidance.


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Investopedia: Brocade Moves Two Steps Forward, One And A Half Back

Brocade (Nasdaq:BRCD) is not a turnaround situation from a financial standpoint, but the stock has not managed to break out above $10 (and hold it) in almost a decade. Investors once loved the stock, but worries about the company's ability to match yesterday's growth in storage networking and find an interesting path in Ethernet has capped their enthusiasm of late. Now, with fiscal second quarter earnings in hand, the picture is still murky as the company cannot seem to make progress in both businesses at the same time. 


Some Good, Some Not So Good in Fiscal Q2
Brocade made some progress in the second quarter, but not as much as investors might have hoped. Revenue rose 10% overall from last year, but was up less than 1% on a sequential basis. Growth was led by the SAN business, which grew 17% from last year, but contracted a bit on a sequential basis. Ethernet was up a bit sequentially, but basically flat on an annual basis.

While the SAN business was helped by good performance in backbones, switches and adapters, the Ethernet business was smacked by a big year-on-year decline in revenue from federal customers, as several deals got pushed out. That federal detail is curious, as the state of the public sector market really seems to be a company-by-company phenomenon; Cisco (Nasdaq:CSCO) is not doing well here either, but Aruba Networks (Nasdaq:ARUN) (not a competitor to Brocade) and Juniper (Nasdaq:JNPR) don't seem to be having the same sort of problems.



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Still Good Weather In Aruba

With the normal fall chill in the air in most parts of the country, Aruba seems like an increasingly pleasant destination. Tech investors seem to share that feeling, as Aruba Networks (Nasdaq:ARUN) has been an incredible performer over the past year. With this WLAN supplier having nearly tripled from its lows, it is fair to wonder how much gas is left in the tank. 

No Real Slowdown ... Yet
Aruba posted strong results for the fiscal first quarter, but analysts had been calling for precisely that. Revenue rose 44% on a year-over-year comparison and 8% sequentially. That is a little less growth momentum than in the prior quarter (where the top line grew 45% annually and 12% sequentially) but not significantly less. 

Below the top line, performance was once again good but not all that much better than expected. Gross profit rose 49% and gross margin did expand to 72%. That is above the company's target range and a function of new products as well as a higher mix of software. At the bottom line, on a non-GAAP basis, earnings more than tripled from the year-ago level.

The Road AheadAs Aruba is the No.2 player in WLAN (wireless networking for companies and large organizations), the spread of smartphones and tablets has to be a positive sign. When Research In Motion's (Nasdaq:RIMM) Blackberries started getting traction, there was a need for corporations to adjust their network and security needs to facilitate the technology. Now whether the device comes from Apple (Nasdaq:AAPL), Samsung, or Motorola (NYSE:MOT) and whether or not it runs Google's (Nasdaq:GOOG) operating system, there is the opportunity (and need) to access much more of the company network in an effective and secure way.

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Cisco's Head Cold Isn't A Tech Plague

Not all bellweathers are created equal. True, Cisco (Nasdaq:CSCO) is an incredibly significant player in networking equipment and software, but the product and customer overlaps are never perfect across any sector. What that means for investors is that Cisco's near-term business issues may not be a sign of doom for the sector, and nimble investors may want to keep an eye out for stocks that get cut down unnecessarily. 

Cisco's Bad News
Cisco reported decent fiscal first quarter results (sales up more than 19%; operating income up 14%) but guidance was very problematic. It looks like Cisco is seeing low-to-mid single-digit growth in its second quarter (the calendar fourth quarter) and may post less than double-digit growth for the full fiscal year. Perhaps not too surprising, the biggest sources of weakness for Cisco are public (government) customers and European customers - two market segments where debt burdens and weak spending budgets are major issues. In fact, state governments' orders plunged 48% on a quarter-over-quarter basis.

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