Seeking Alpha: F5 Networks Executing Well And Building Out The TAM

A key item on F5's (NASDAQ:FFIV) management to-do list for 2014 was to make convincing progress with software and hardware offerings that continue to expand the company's total addressable market beyond its legacy application delivery controllers (or ADCs). So far, so good, as F5 has seen strong interest in its security offerings while continuing to build out a comprehensive array of offerings for the service provider market. I'm a little more cautious now given the valuation, but five straight beat-and-raise quarters shouldn't be overlooked and the valuation is not extreme or out of line relative to the opportunities.

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F5 Networks Executing Well And Building Out The TAM

Seeking Alpha: Riverbed Underrated, Or Perpetually Underperforming?

Management at Riverbed Technology (RVBD) has definitely put forth the effort to try to rally the troops and get the sell-side to take a more positive view of the company's growth potential. Given real issues in WAN optimization demand, not to mention a history of blaming "sales execution" for weak quarters and a disappointingly slow integration of Opnet, I can understand why the Street is responding with a "show me" valuation on these shares.

I have my doubts about both the quality of management at Riverbed and the company's overall business plan. While demand for performance optimization and management is not going away, I do have my doubts about how Riverbed will fare against the likes of Cisco (CSCO), F5 (FFIV), and Citrix (CTXS) as the market evolves. If you believe that Riverbed can do what it says it will and deliver high single-digit free cash flow growth, though, these shares do look undervalued enough today to be worth a close look.

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Riverbed Underrated, Or Perpetually Underperforming?

Investopedia: VMware Stumbles And The Street Spares No Mercy

This earnings cycle has been relatively better than feared for most tech stocks so far, but VMware Inc. (NYSE:VMW) is going to go down as a glaring exception. While fourth quarter results were generally solid relative to expectations, the Street absolutely hated what management had to say about lower overall growth in 2013 and sales growth more heavily weighted to the second half. The stock's nearly 20% drop as of this writing seems overdone, but VMware is going to have to rebuild its credibility before valuation matters again.

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Seeking Alpha: Frustrating F5 Networks Zigs And Zags Again

Value investors and tech stocks are typically an oil and water mix, but I've had enough success with a value approach (or at least a GARP approach) that I always keep an eye on interesting tech names. One of the most interesting, albeit frustrating, names has been F5 (FFIV).

While F5 has a legitimately impressive share of the ADC market and bold plans to expand into nearby markets like security and diameter signaling, sluggish product growth and an uncertain future for the ADC market make this a tricky stock. Though Thursday's post-earnings rally doesn't necessarily take it off the list as a potential buy, investor expectations for product revenue re-acceleration may be upping the risk.

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Frustrating F5 Networks Zigs And Zags Again

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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http://www.investopedia.com/stock-analysis/2012/Cisco-Pays-Dearly-For-Meraki-CSCO-ARUN-VMW-ORCL1120.aspx

Investopedia: Rumors Roil VMware

Virtualization leader VMware (NYSE:VMW) has been an exceptional stock for the past three years and the business has grown nicely on the back of server virtualization, system virtualization and management tools. Sometimes, though, I wonder if investors overlook a key part of the VMware story - namely, that EMC (NYSE:EMC) owns 80% or so of the business and can largely do as it pleases with it.

That is coming home to roost with a vengeance on Tuesday, as rumors have spread widely that EMC is replacing VMware's CEO. While these reports have not been confirmed as of this writing, such a change would be a considerable shake-up for investors and would certainly introduce new risk into the business.

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http://stocks.investopedia.com/stock-analysis/2012/Rumors-Roil-VMware-VMW-EMC-MSFT-CTXS0718.aspx

Investopedia: F5 Networks Becoming A Multi-Market Threat

As I have mentioned in prior write-ups on F5 Networks (Nasdaq:FFIV), I have a certain bias with regards to this company - namely, I hope it stumbles just enough that I can swoop in and buy up some shares. As this quarter shows, not only is F5 maintaining (if not extending) its lead in its core ADC market, but it's also seeing good initial results in incremental growth markets. While the valuation remains quite high, so too is the level of execution and the total addressable market at F5 Networks.

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http://stocks.investopedia.com/stock-analysis/2012/F5-Networks-Becoming-A-Multi-Market-Threat-FFIV-CTXS-CSCO-JNPR-CHKP0420.aspx

Investopedia: VMware Priced For Near-Perfection, But Results Not Perfect

Premium pricing has never been an obstacle to success in growth stock investing, but uncertainty about growth rates often is. To that end, while VMware (NYSE:VMW) is an operationally excellent software company, and the concerns about growth momentum do have a real bearing on its qualities as a growth stock. More to the point, this is a company that needs to see reported growth rates rebound if premium valuation is going to stay in place.

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Investopedia: Riverbed Falls Out Of Bed

Outside of companies with big exposure to carrier spending, this has been a fairly upbeat quarter for tech hardware companies. Riverbed Technologies (Nasdaq:RVBD) wrecked that idyll to some extent on Thursday, warning investors that expectations for 2012 were too high. Although investors are booting this stock out of their portfolios on the day after earnings, a closer look at what's going on suggests a possible opportunity may be developing for patient investors.

Good Fourth Quarter Earnings, but... 
Riverbed posted pretty solid results for the fiscal fourth quarter. Revenue rose 23% from last year and 7% from the prior quarter, leading the company to beat the average estimate by a few million dollars. Product revenue was up 6% and ex-government revenue from enterprise customers was up strongly at 23%. Also encouraging, Riverbed's recovery in Europe continues, though the U.S. growth was not so impressive.

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http://stocks.investopedia.com/stock-analysis/2012/Riverbed-Falls-Out-Of-Bed-RVBD-CSCO-CTXS-FFIV0130.aspx

Investopedia: F5 Networks On The Run Again

For all of the pessimism that seemed to be building about the outlook for tech in 2011, January's earnings reporting season seems to be swinging the market back to some degree of optimism. With a decent quarter in the books and management seeming pretty confident about the pipeline of new business, F5 Networks (Nasdaq:FFIV) looks as though it will enjoy yet another post-earnings run.

A Decent Start to the Fiscal Year  
F5 Networks reported fiscal first quarter earnings after the close on Wednesday and the results (and more importantly, the guidance) pleased the Street. Revenue rose 2% on a sequential basis (and 20% on an annual comparison). Product revenue was a little soft (down 0.5% sequentially), while software revenue climbed 7% and deferred revenue rose about 11%.


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http://stocks.investopedia.com/stock-analysis/2012/F5-Networks-On-The-Run-Again-FFIV-RVBD-CTXS-CHKP0123.aspx

Investopedia: EMC A Name To Consider In A Tough Market

The chicken littles of the financial world are certainly getting their chance to spread their wings a bit. Nobody seems to be in any rush to predict great things for the global economy in 2012 and the best that can be said of the European situation is that it's getting worse at a slower pace. When Oracle (Nasdaq:ORCL) disappointed the Street with a soft earnings report a few days before Christmas, it was just like squirting lighter fluid on a campfire.

Investors cannot afford to be blithely confident about any assumptions in IT. However, it is hard to see how EMC (NYSE:EMC) isn't a bargain at today's prices. While the company is vulnerable to weakness at home and in Europe, and clearly needs customers to keep spending, data storage is a critical IT priority for many companies and should keep EMC in relatively better shape.

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Investopedia: TIBCO And The GARP Paradox

Value investors, and their quasi-traitor cousins GARP investors, often find little to buy in the software space. All too often, any software company priced like a bargain is likely to struggle to grow much (and will likely underperform the estimates that make it look cheap) or get much love from the typical tech investor crowd. That makes TIBCO (Nasdaq:TIBX) an intriguing but risky idea. While this company's valuation and their position as the last small independent integration vendor are appealing, any value investor is wise to be cautious about why this software stock seems appealing. (For related reading, see Stock-Picking Strategies: Value Investing.)  

A Fine End to the Year  
Despite the disappointing Oracle (Nasdaq:ORCL) reports that spooked investors, TIBCO reported a pretty good quarter. Revenue rose 20% for the quarter and slightly beat the average estimate. Growth was a little stronger in the slightly larger service/maintenance segment (up about 22%), while the licensing line showed around 17% growth and the company boasted of 28 deals over $1M for the quarter.

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Investopedia: Blue Coat Now Somebody Else's Problem

For better or worse, shareholders no longer have to worry about the repeated restructuring efforts at Blue Coat Systems (Nasdaq:BCSI), nor the competitive inroads being made by the likes of Riverbed (Nasdaq:RVBD), Cisco (Nasdaq:CSCO) or Fortinet (Nasdaq:FTNT). Private equity investors have stepped up and put an end to this story with an acquisition agreement. Though some shareholders may resent that management took a buyout price some 20% below the 52-week high, the reality is that this is a more-than-fair offer for a company that has been on skids for some time.

The Deal  
An investor group led by Thoma Bravo and including the Ontario Teachers' Pension Plan has offered to acquire Blue Coat Systems for $1.3 billion, or $25.81 per Blue Coat share, in cash. That price represents a premium of 48% to Thursday's close, but merely matches the price of this stock seven months ago.

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http://stocks.investopedia.com/stock-analysis/2011/Blue-Coat-Now-Somebody-Elses-Problem-BCSI-RVBD-CSCO-FTNT1213.aspx

Seeking Alpha: VMware Reports Earnings, So Cue The Next Fight

There are certain companies where the valuations and institutional investor love-fests seem to just drive some people to distraction. Salesforce.com (NYSE: CRM) is certainly one, and VMware (NYSE: VMW) is another. Whenever these companies report, bears bring out the long knives and do their level best to flense the company and the stock. While VMware's valuation is indeed rich by almost any measurement you name, the fact remains that VMware delivers oodles of growth and institutional tech investors lust for growth above all else. 

Third Quarter Results – Is Good Good Enough?
VMware reported 32% year-on-year growth and 2% sequential growth – excellent results when compared with software giants like IBM (NYSE: IBM) and Oracle (Nasdaq: ORCL) and quite strong relative to smaller growth stories like Red Hat (NYSE: RHT). Of course, this being VMware there has to be a “but” to it.

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VMware Reports Earnings, So Cue The Next Fight

Investopedia: Red Hat Plays A Familiar Tune

When analyzing the quarterly reports from virtualization and middleware provider Red Hat (NYSE:RHT), it is tempting to just refer back to older reports. For better and worse, not much has been changing for this software growth story. For those who liked Red Hat before, there are still ample reasons for optimism that this company has a defensible niche in a growth market (and/or could be an attractive buyout target). For those who didn't like Red Hat before, it's still a company with questionable operating leverage and rampant well-heeled competition.

Second Quarter Results - Like The Past, Only More So  
There was not much in the way of new trends or themes to come out of Red Hat's latest quarter. Revenue was up 28% from last year (and 6% from the first quarter), with subscription revenue up about 28% and billings up about 30%. Growth continues to be fueled by strong demand for products like RHEL and Jboss, and the company continues to do well in signing up large customers (30-million-dollar-plus deals this quarter) and keeping the ones they have.

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http://stocks.investopedia.com/stock-analysis/2011/Red-Hat-Plays-A-Familiar-Tune-RHT-VMW-CRM-ORCL-CSCO-IBM-GOOG0922.aspx

Investopedia: Blue Coat Looks Threadbare

Tech stocks have had a good run and when investors find tech stocks with what looks like a low valuation, they should be cautious. Blue Coat Systems (Nasdaq:BCSI) is a good example of why that is. While this security and WAN optimization company does indeed have multiples well below most tech companies (and the market in general), there is a good reason for that - Blue Coat is one of the least successful players in its markets today and the company is launching yet another organizational restructuring in the hopes of finding a new path to sustainable growth and better market share. 


Fourth Quarter as Bad as Expected
Blue Coat warned in early May that this fiscal fourth quarter would be bad, and the stock has been sliding ever since, losing about a fifth of its value. When Blue Coat actually announced those results on Thursday, performance was indeed ugly.

Revenue dropped 9% from the year-ago level and 2% sequentially, led by declines in product revenue of 5% and 21% respectively. Some products did show some growth (PacketShaper was up 7% sequentially, and MACH5 revenue rose 15%), but together those products were only about 30% of sales.


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http://stocks.investopedia.com/stock-analysis/2011/Blue-Coat-Looks-Threadbare-BCSI-RVBD-CSCO-INTC-FTNT-WBSN-CTXS0531.aspx

Investopedia: F5 - Is This The End Of The Beginning Or The Beginning Of The End?

If premarket indications are accurate, folks who bought shares of application delivery company F5 Networks (Nasdaq:FFIV) thinking that the mid-$90s would be a floor are going to see a decent return for stepping up to buy. That said, bears seem poised to portray this as more of a "less bad than feared" quarter, as opposed to real outperformance.


What's more, with weak sequential growth becoming more of a trend now, it is fair to wonder if the hot growth phase is over for F5. Clearly there is plenty of business yet to be won and the story is by no means over, but a shift to a less frenzied pace of growth will likely mean new multiples for this stock and perhaps a different shareholder base than before.

Fiscal Second Quarter Brings Growth and Relief  
F5's growth in its fiscal second quarter was either great or just okay, on the basis of which numbers an investor uses. Compared to last year, revenue jumped almost 35%. Sequential growth, though, was more on the order of 3% - suggesting that F5 has basically caught up with the IT capital equipment under-spend of the recession. Within the total revenue figure, product growth was 34% on an annual basis, while just a bit over 1% on a sequential comparison.

You can find the full piece at Investopedia:
http://stocks.investopedia.com/stock-analysis/2011/F5---Is-This-The-End-Of-The-Beginning-Or-The-Beginning-Of-The-End-FFIV-CSCO-RVBD-CTXS-BRCD0425.aspx

Investopedia: VMware Singes The Shorts ... Again

Like it or not, "early" and "wrong" can mean the same thing in investing. It is hard to argue that VMware's (NYSE:VMW) valuation makes much sense or will be sustainable, but shorting this name has been a tricky proposition over the past couple of years. So even if the skeptics are right that VMware is apt to hit a wall in terms of growth and market penetration, this could still be a case where Wall Street's ability to remain irrational outlasts an individual investor's ability to stay short and remain solvent. 


Another Strong Quarter
Beating estimates is nothing new here, and VMware once again outpaced even the high end of its revenue estimate range. Reported revenue jumped 33% this quarter, with license revenue growing 34% (to roughly half the total). Billings were also quite strong (up 44%), and the company has roughly $2 billion in deferred revenue on the books. Of the company's bookings, 22% were enterprise license agreements (ELAs) and that percentage continues to improve.

There was also strong momentum on the profitability side of the business. Operating income (on a non-GAAP basis) jumped 44% and operating margin rose more than two full points. What's important here is that VMware is not delivering this growth by stinting on its future - R&D spending rose 23% this quarter (again on an adjusted basis), while general and administrative expenses have stayed under control. 



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Investopedia: Oracle Has It All Together

Normally, there is a trade-off in technology stocks - the bigger the company, the less impressive the growth. In those cases, investors tend to look to the larger companies as more secure and more conservative plays on basic tech spending trends, while the smaller, riskier names post the exciting growth. 

Somebody forgot to send that memo to Oracle (Nasdaq:ORCL). Oracle often gets criticism for being too aggressive with deals (and paying too much), and not sharing enough cash with shareholders, but the Oracle formula seems to be working quite well right now. 

A Very Good Fiscal Third Quarter
It is hard to find much to fault in Oracle's third quarter. Revenue jumped 36% from the year ago level and ticked up 1% on a sequential basis. Growth was led by a very strong result in license revenue, up 29% (11% sequentially) on strong growth in both apps and database. Hardware and services were not so impressive, though, and both declined. 


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http://stocks.investopedia.com/stock-analysis/2011/Oracle-Has-It-All-Together-ORCL-CRM-RHT-IBM-SAP0328.aspx

Investopedia: What's Beneath The Red Hat?

Open source is still popular, and Red Hat (NYSE:RHT) is riding the wave. What remains to be seen, though, is whether Red Hat can prove that there is further leverage in its business model and/or when investors will start to care about this detail. Although Red Hat has as good a shot as any of being a force in server and desktop virtualization for years to come, ultimately there has to be a resolution to the tension between market share and margin. 

A Great Quarter ... Or Is It?  

On first blush, it looks like Red Hat is primed destroy the bears. After all, the company did post an impressive 25% revenue growth number for its fiscal fourth quarter well ahead of even the high end of the analyst range (which, with 22 analysts, was surprisingly tight). Other numbers looked quite good as well. Subscriptions were up 24% from last year, and 5% from the last quarter. Billings were up 31%, and deferred revenue jumped almost 20%.  

And now for the "yeah, but ..." Operating income (presented on an adjusted basis) grew 31% and the operating margin jumped about a full point from the year-ago level. The thing is, analysts were expecting better margins. Red Hat got a sizable boost from lower taxes and an R&D credit, and the company basically met its expectations without those factors. 

 

So where is the operating leverage? Should it not stand to reason that a solid beat on the top line would translate into a solid beat on the bottom if there was good operating leverage within the model? Sure, some will say that "any beat is a good beat," but those stories do not tend to work over the long haul.

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http://stocks.investopedia.com/stock-analysis/2011/Whats-Beneath-The-Red-Hat-RHT-VMW-CRM-CTXS-CNQR-ORCL0325.aspx