This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Aruba Networks Seems Cheap But Is There Value?

Management guided fourth-quarter EPS to come in at 11 cents on revenue of $149 million -- both below expectations. Analysts were looking for 17 cents per share (excluding items) on revenue of $157.1 million. There are a couple of ways to play this guidance, though.

Essentially management is calling for 38% year-over-year drop in earnings per share after the company earned 18 cents per share in the year-ago quarter. Likewise, revenue is expected to grow at only 7%, which would represent decelerated year-over-year growth of 15% and 5% sequentially. These numbers presume (relatively) no growth for the coming quarter.

It's entirely possible that management has created a worst case scenario and tossed everything out, including the kitchen sink, which can be brilliant, by the way. For example this is precisely what Apple (AAPL - Get Report) has done with its third-quarter guidance. For Aruba, though, I don't believe that the WLAN situation is this dire.

While I won't begrudge investors for having bailed on the stock, whether to lock gains or to cut their losses, this may prove later to have been an erratic move. For new investors, though, that are looking to "test Aruba's waters," the question to ask is, how much of Aruba's struggles has more to do with poor sales execution vs. the idea Aruba might be losing both market share and its "best of class" status.

In that regard, there are two major factors that investors have to consider. First, it's still unclear when enterprise IT spending will fully rebound. Although analysts are projecting a possible recovery in the second half of the year, recent earnings and/or a combination of earnings and guidance from enterprise players like IBM (IBM - Get Report) and Oracle (ORCL - Get Report) suggests that corporate leaders aren't feeling as optimistic.

The other issue is, even if the optimism were there and enterprise IT spending does rebound faster-than-expected, will WLAN be an important IT priority to the extent that interest in the bring-your-own-device (BYOD) market comprises of a meaningful enough portion of the expense budgets to matter to Aruba? The good news is that Cisco seems to thinks Cisco's efforts to build its WiFi capabilities.
2 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
ARUN $0.00 0.00%
AAPL $118.30 0.42%
CSCO $27.25 -0.26%
IBM $139.42 0.69%
ORCL $38.97 -0.54%


Chart of I:DJI
DOW 17,719.92 -78.57 -0.44%
S&P 500 2,080.41 -9.70 -0.46%
NASDAQ 5,108.6660 -18.8590 -0.37%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs