Aruba Networks, Inc. F3Q10 (Qtr End 03/30/10) Earnings Call Transcript

Aruba Networks, Inc. F3Q10 (Qtr End 03/30/10) Earnings Call Transcript
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Aruba Networks, Inc. (ARUN)

F3Q10 Earnings Call

May 19, 2010 5:00 pm ET


Jill Isenstadt – The Blueshirt Group.

Dominic P. Orr – Chairman of the Board, President & Chief Executive Officer

Steffan Tomlinson – Chief Financial Officer

Keerti Melkote – Chief Technology Officer & Director

Hitesh Sheth – Chief Operating Officer


Min Park – Goldman Sachs

Ryan Hutchinson – Lazard Capital Markets

Tim Long – Bank of Montreal

Mark Sue – RBC Capital Markets

Sanjiv Wadhwani – Stifel Nicolaus & Company

Erik Suppiger – Signal Hill Group, LLC.

Greg Mesniaeff – Needham & Company

[Stephen Patel] – Broadpoint AmTech

Joanne Makris – Mazuho Securities

Rohit Chopra – Wedbush Morgan Securities, Inc.

Lynn Um – Barclays Capital

[Asway DeWong – Segalman Investments]



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Welcome to the Aruba Networks third quarter 2010 earnings call. During today’s presentation all parties will be in a listen only mode. Following the presentation the conference will be opened for questions. (Operator Instructions) This conference is being recorded today, Wednesday May 19, 2010. At this time I’d like to turn the conference over to Jill Isenstadt, investor relations.

Jill Isenstadt

Thank you for joining us on today’s conference call to discuss Aruba Networks fiscal third quarter 2010 results. This call is also being broadcast live over the web and can be accessed in the investor relations section of the Aruba Networks website at

. With me on today’s call are Dominic Orr, Aruba’s President and Chief Executive Officer; Steffan Tomlinson, Chief Financial Officer; Keerti Melkote, Aruba’s Co-Founder and Chief Technology Officer; and Hitesh Sheth, Aruba’s Chief Operating Officer.

After the market closed today, Aruba Networks issued a press release announcing results for its fiscal third quarter ended April 30, 2010. If you would like a copy of the release you can access it online at the company’s website or you can call the Blueshirt Group at 415-217-7722 and we will fax or email you a copy.

We’d like to remind you that during the course of this conference call Aruba Network’s management may make forward-looking statements including statements regarding our financial guidance for the fourth quarter of fiscal 2010, the company’s belief that it will continue to gain market share and derive significant traction from its 802.11n products including but not limited to its spectrum analysis module, the timing, expectations, financial plans, intentions, strategies related to our proposed acquisition of Azalea Networks, our expectations relating to our partnership with Alcatel-Lucent Shanghai Bell including our ability to further strengthen our position in the Chinese markets and statements as to the company’s future economic performance, pipelines, financial conditions or results of operations.

These forward-looking statements involve a number of risks and uncertainties, some of which are beyond our control that could cause actual results to differ materially from those anticipated by these statements. These forward-looking statements apply as of today and you should not rely on them as representing our views in the future and we undertake no obligation to update these statements after this call.

Also please note that Aruba’s application of US generally accepted accounting principles or US GAAP requires disclose that the availability of new products, planned features and upgrades discussed during this call are subject to change or cancellation. For a more detailed description of these risks and uncertainties that may affect our results please refer to the risks and uncertainties described under the caption risk factors and managements’ discussion of analysis of financial conditions and results of operations in our quarterly report on Form 10Q filed with the SEC on March 3, 2010 as well as our earnings release posted a few minutes ago on our website.

Copies of these documents may be obtained from the SEC or by visiting the investor relations section of our website. Also, please note that certain financial measures that we use on this call are expressed on a non-GAAP basis and have been adjusted to exclude certain charges including stock-based expenses and related payroll taxes, amortization of expense of acquired intangible assets, restructuring expenses and litigation settlement expense. We have provided reconciliation of these non-GAAP measures to GAAP financial measures in the investor relations section of our website located at

and in our earnings press release.

Now, I’d like to introduce Dominic Orr, President and Chief Executive Officer of Aruba Networks.

Dominic P. Orr

Thank you for taking the time to attend our fiscal third quarter 2010 conference call. I am pleased to announce another record quarter for Aruba with clear progress on a number of important fronts. Revenues are growing and our pipeline is robust, new initiatives are gaining traction and we continue to expand the market for our products. We’re benefitting from mobility becoming an increasingly critical driver for enterprise productivity and we are helping to shape this trend with innovative solutions that solve today’s IT problem and better utilize scarce IT budget dollars.

During the quarter revenues grew 51% year-over-year and 10% sequentially to a record $69 million. Based on our strong growth rate versus those of our competitors, we believe we are continuing to gain share in our market. Demand was strong across our core verticals and across all three of our major geographies. Additionally, we saw solid growth in enterprise. The rate of pilots at larger brand name customers has clearly increased over the last six months, a trend that is enhanced by our increasing ability to access high level decision makers at these global 2000 companies and organizations.

Contributing to our growing mind share is our right sizing initiative which continues to gain traction. We are seeing more cases where customers are shifting budgets away from wired LANs to fund wireless projects. In the past, this customer would have done a complete refresh of the wired networks but today they are instead using these dollars to accelerate the deployment of our wireless LAN solutions and as a result saving both op ex and cap ex dollars.

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