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Palo Alto Networks' Slide Should Fuel Merger Interest

Stocks in this article: PANW CSCO FTNT CHKP ARUN ORCL

It seems as if the Street would much prefer if Palo Alto suddenly switched from a top-line performer to posting bottom-line gains. But I think it's too soon. This is still a young company that is experiencing incredible growth. But Palo Alto is not immune to macro conditions.

Although Cisco spoke optimistically about a second-half rebound, it's anyone's guess when that's actually going happen. The recent 40% decline in the shares of Aruba Networks (ARUN) serves as a perfect example of what can happen when high expectations does not manifest itself into results.


After a 54% jump in revenue, could it be possible that Palo Alto management is being overly cautious? Perhaps. But it's certainly justified. But investors have to realize that this doesn't change the fact that the company has products and services that enterprise customers are willing to pay handsomely for.

With assets that helps corporate clients secure their network while safely enabling CIOs to manage the growing number of applications, I believe Cisco and possibly Oracle (ORCL) will eventually pony up the cash for Palo Alto. And I think it's just a matter of time, especially if the stock doesn't find a floor soon.

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Richard Saintvilus is a private investor with an information technology and engineering background and the founder and producer of the investor Web site Saint's Sense. He has been investing and trading for over 15 years. He employs conservative strategies in assessing equities and appraising value while minimizing downside risk. His decisions are based in part on management, growth prospects, return on equity and price-to-earnings as well as macroeconomic factors. He is an investor who seeks opportunities whether on the long or short side and believes in changing positions as information changes.
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