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Aruba Networks Q1'FY11 sales expected to increase +47% Y/Y
Tue, 11/16/10 - 11:41pm    View comments

Aruba NetworksMark SueTomorrow, Wednesday, November 17 at 5:00PM EST, Aruba Networks will announce its Q1'FY11 financial results.

However earlier today, RBC Capital Markets Managing Director - Mark Sue in his note to yours truly, predicted Aruba will achieve Q1'FY11 sales of $85 million. That's a whopping +47% increase year-over-year (see page 4). Meanwhile as reported last week, Cisco's Q1'FY11 wireless sales increased a mere +9% year-over-year.

Sue continued further with what to expect, "Aruba is likely to report a strong beat while also boosting its outlook for the current quarter. Strong uptake by enterprises around the world for 802.11N solutions and a product portfolio enhanced for mobility may mean that Aruba is growing faster than the market.

"In terms of competition, it's predominantly Cisco in most deals. Enterprise verticals such as healthcare, education and retail are deploying wireless and Aruba has the benefit of no legacy switch ports in its product portfolio. Aruba is benefiting from broader wireless uptakes with financial verticals."

Aruba Networks (ARUN) vs. Cisco (CSCO) stock price chart

Aruba Networks (ARUN) vs. Cisco (CSCO) stock price chart
Source: Yahoo! Finance

Sue concluded, "In our best-case analysis for Aruba, in which the company grows +35% in CY11 and in CY12, has steady GMs of 70% and OMs of 25%, we estimate potential earnings in CY12 of $0.90. So, while the current multiple of 37x consensus CY11E EPS of $0.58 seems high, we believe there is quite a bit of room in a growing market for Aruba to see strong earnings. We have increased our price target to $24 from $19."

What's your take, why do you think Aruba's sales are increasing a whopping +47% while Cisco's wireless sales are only increasing a mere +9%?

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