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Why Aruba Networks (ARUN) Isn't Afraid of Cisco Systems

Why Aruba Networks (ARUN) Isn't Afraid of Cisco Systems

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Aruba shares on Friday jumped 22% following a strong earnings report
Aruba shares on Friday jumped 22% following a strong earnings report

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Published by: TechStockProspector.com on Feb 24, 2013
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02/24/2013

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Robert DeFrancesco’s

TechStockProspector.com
February 24, 2013

Why Aruba Networks (ARUN) Isn’t Afraid of Cisco
NOW AVAILABLE: The February 2013 issue of Tech-Stock Prospector for your Amazon Kindle or Kindle for iPad/iPhone reading app. Here are some of the topics covered in the February 2013 issue: *A subtle sentiment shift for Apple *Oracle to acquire Acme Packet *Two potential buyout targets in networking *Appreciating Google’s online video gem *Cloud-software updates: NetSuite, Ultimate & Concur *Fortinet experiences a growth uptick *A cloud name to watch: E2open *Symantec sets a new course *Customer concentration trips up Fusion-IO *LinkedIn builds engagements as user base grows *Why some big investors like ServiceNow *New growth drivers for Citrix Systems *Riverbed Technology looks to OPNET for growth *Aruba Networks benefiting from BYOD trend *Cornerstone OnDemand expands its customer base *Deal Report: IBM on the M&A hunt?

Order the February 2013 issue here: http://www.amzn.com/B004T6Z0ME
-----------------------------------------------------------------------------------------------------------On Friday, shares of Aruba Networks (ARUN, $25.40)—a provider of Wi-Fi solutions for enterprises and service providers—surged 22% on massive volume after the company reported strong quarterly earnings and issued upbeat guidance. The stock at one point traded to a new 52-week high of $26.78. Aruba shares have rebounded 42% from the November low of $17.84, which was hit after Cisco Systems (CSCO) announced the $1.2-billion purchase of privately held Meraki networks, a competitor in the enterprise wireless LAN market. Aruba shares were knocked down then on concerns about Cisco’s increased presence in the Wi-Fi market.

But we knew the Aruba sell-off was overdone. In the December issue of Tech-Stock Prospector (TSP #130), we wrote that the company’s Aruba Instant offering was seeing solid demand from mid-market customers, and that Cisco’s pricey purchase of Meraki looked like a defensive move. Aruba basically forced Cisco’s hand and the networking giant had to pay up for Meraki. On the fiscal Q2 (Jan.) earnings call last week, Aruba CEO Dominic Orr said Meraki isn’t even a noticeable competitor, as the new Cisco division is primarily focused at the low end of the SMB segment. As for Cisco in general, Orr said the networking giant has “lost interest” in competing with Aruba directly on WLAN technology, instead burying its wireless deals in datacenter upgrades or router refresh deals. For fiscal Q2, Aruba saw both top-line and product revenue growth accelerate from the previous quarter. The U.S. market, accounting for 61% of total revenue, also saw growth accelerate from fiscal Q1. EMEA revenue (18% of total revenue) advanced 16% and APAC/Japan revenue (18% of total) was up 32%. Gross margin of 73.4% rose 40 basis points sequentially, while operating margin advanced 130 basis points sequentially to 22.3%. Deferred revenue reached $118.1 million, up 30% from a year ago. *********************************************************************************** Read the latest issue of Tech-Stock Prospector on your Amazon Kindle or Kindle for iPad/iPhone reading app.

Here’s the Kindle link: http://www.amzn.com/B004T6Z0ME
-----------------------------------------------------------------------------------------------------Tech-Stock Prospector Managing Editor Rob DeFrancesco has more than 20 years of experience covering the tech sector. He is a former senior writer with Louis Rukeyser’s Wall Street. TechStockProspector.com, launched in 2003, is an investment-research service focused primarily on the networking, storage, security, wireless and software sectors. Annual subscription: $350. For more information or to place an order, call 800-392-0998.

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