F5 Flexes Muscles in the Application Delivery Market, Stock Worth $127

January 30th, 2012 by Trefis Team
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FFIV: F5 logo
FFIV
F5

F5 Networks (NASDAQ:FFIV) announced results this past week.  F5 Networks, Inc. is the global leader in application delivery networking, providing technology that optimizes the security and performance of servers, data storage devices and other network resources. Better execution and a focus on enterprise and service providers has helped F5 Networks emerge as the leader in the application delivery controller (ADC) market, leaving networking giant Cisco Systems (NASDAQ:CSCO) behind. Other competitors in the information technology sector include: Blue Coat Systems (NASDAQ:BCSI), Radware (NASDAQ:RDWR), and Riverbed Technology (NASDAQ:RVBD).

We have a revised $127 price estimate for F5 Networks, which is around 5% ahead of its current market price as well as our previous estimate.

See our complete analysis of F5 Networks here

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Revenue and earnings beat estimates, gross margins up

For the quarter ended Dec 31st, F5 recorded product revenue of $196.6 million and service revenue of $125.9 million. Telco was the strongest vertical representing 23% of total sales, financials 21%, technology 17% and government 9% including U.S. Federal spending which accounted for 4% of the total.

Despite weak economic conditions, revenue from the Americas grew 20% from previous year and accounted for 59% of overall revenue. EMEA, which represented 21% of revenue grew 14%, APAC accounted for 14% of revenue and grew 28% year-over-year. Eurpoean sales were weak due to difficult economic conditions. Moreover, gross margins increased almost by a percent to 82.8%, driven by software sales.

Growth in traffic remains the key driver

Data is increasing within the service provider networks due to increased mobile internet usage. Moreover, this is going to rise exponentially as service providers roll out LTE network updates. As internet traffic increases, the potential for optimization increases dramatically. As data use rises and complexities increase. there’s a greater need to mass size that data, to monetize it, and that’s where F5’s products come into the picture.

F5 solutions are being used more and more in data centers throughout the world as strategic control points to secure and optimize mission critical applications. With F5 expanding its addressable market expanding to areas like security and service providers, we believe that is will easily deliver its target of 20% year on year growth.

We have revised our price estimate for F5 to $127, implying a premium of more than 5% to the current market price.

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