Half of F5's 8% ADC market share gain came from Cisco

BradReese.Com Blog by Brad Reese
Archive

Aironet

Power Supplies

VoIP Gateways

Competitive Lab Tests

Subscribe to the BradReese.Com Blog

Half of F5's 8% ADC market share gain came from Cisco
Wed, 10/27/10 - 11:12am View comments

At the 27 minute time mark in yesterday's F5 4Q10 earnings conference call recording, F5 revealed that half of its 8% application delivery controller (ADC) market share gain came from Cisco.

RBC Capital Markets Managing Director - Mark Sue, provides further analysis on F5's 4Q10 financial results:

"A substantive revenue beat and a strengthening pipeline means F5's OMs may stay at new found levels of 37.8% and with broad trends in data center consolidation and mobile data traffic to continue, the street's CY11 EPS of $3.26 may move closer to our recently increased $3.38. We are introducing CY12 estimates of $1,452M (+19% YoY) and EPS of $4.20. Blending CY11 and CY12 and applying 32X gets us to a new target of $125. Rapid market growth and share gains may warrant the high stock multiple.

"F5 more than delivered with revenues of $254M (+10% QoQ) vs. the street's $249M and RBC's high-end of $253M. Non-GAAP EPS of $0.79 beat the Consensus of $0.72. With deferred revenues increasing to $259M (+8% QoQ) and book-to-bill greater than 1.0 F5 is endorsing revenues of $265M to $270M vs. the prior Consensus of $260M."

Sue continued, "Data center consolidation, virtualization and cloud computing trends are still in the early stages and F5's R&D investment is paying off as evidenced by the company's market share gains. More new products are in the works which may enable the company to maintain its leadership position. Key products remain the Viprion and the 8900 with mobile applications a strong driver."

F5 vs. Cisco stock price chart

Source: Yahoo! Finance

Sue added, "GMs strengthened from the prior quarter's 81.4% to 82.4% due to product mix and OMs increased from 33.6% to 37.8%. F5 added 110 heads bringing total headcount to over 2000, adding behind revenue growth. F5 generated $86M in cash from operations and ended the quarter with cash of $862M ($10.61/share).

"Core application delivery networking revenues increased +11% QoQ to $241.8M, ARX revenues were $7.3M (+18%) and FirePass revenues were $5.2M (-9%). The decline in FirePass revenues had to do with products in the ADN segment which have similar offerings to FirePass. Telco (25%) increased +20% QoQ, Government (11%) increased +21%, US Federal (7%) growing 54%, Financial Services (20%) decreased -8%, and Technology (19%) increased +5%."

Sue concluded, "North America revenues (60%) increased +12% QoQ to $153M due to strong US federal sales and large application delivery control project wins. Europe (22%) increased +10% to $56M, Asia (12%) increased +10% to $31M, and Japan (6%) decreased -5% to $15M."

What's your take, why do you think half of F5's 8% ADC market share gain came from Cisco?