F5 Networks May Catch Activist Investor Attention Amid Sector Consolidation

In the backdrop of industry consolidation and potential growth concerns, networking company F5 Networks ( (FFIV) ) could catch the attention of activist investors, according to company followers.

While Seattle-based F5 boasts of being a high quality business with a well-established, installed customer base, the asset is also undervalued because its growth profile is slowing, said Sanford C. Bernstein  analyst Pierre Ferragu, adding that growth is also slowing in a natural way for a cash-generative business that has nicely penetrated the market.

At the same time, F5 Networks is among the few firms left to be picked up in the IT security management sector that has consolidated partly amid activist pressure. 

Last month, Infoblox ( (BLOX) ) agreed to be acquired by Vista Equity Partners for $1.6 billion following pressure from Jeffrey Smith's Starboard Value. The sale of Infoblox came after Riverbed Technology was taken private for $3.5 billion by a consortium led by Thoma Bravo in 2015 after Elliott Management's campaign. Citrix Systems ( (CTXS) ) was also a target of pressure from Elliott Management and opted to merge its GoTo business with LogMeIn ( (LOGM) ).

Paul Singer's Elliott Management has carved out a niche by focusing on technology companies and built a strong track record pushing for M&A at large-cap tech firms. It has successfully pushed for sales of Qlik Technologies and Informatica, among others. The fund is currently agitating for change at Imperva ( (IMPV) ) and Mentor Graphics ( (MENT) ).

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