Again, White makes an accurate observation. But F5 has been telling investors this same information in its last three earnings reports. Investors ignored the signs and embraced excessive optimism.
What's more, management underestimated the direction of the ADC market and failed to diversify itself in the manner of Cisco, which has been on shopping spree -- spending $1.2 billion for Meraki and another $141 million in cash for Cariden. Most recently, the company acquired BroadHop, a provider of next-generation policy control and service management technology for carrier networks.
By contrast, F5 did not begin to realize its weaknesses until recently, when it felt it had to acquire LineRate. The company needed a way to offset the soft product business. But it should have realized this four quarters ago, given the declines in its hardware business.
For now, investors have to reconcile what is going on with F5. The Street also deserves some blame here for being too late to recognize the glaring weaknesses in this company that have been obvious for some time. The only question now is, when will the bleeding stop?At the time of publication, the author held no position in any of the stocks mentioned. Follow @rsaintvilus