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Earnings Are Good Enough


Here are three companies to watch after average earnings reports...


With earnings season well underway, here are three companies whose reports I'm watching and whose action I'm watching even closer.

F5 Dodges a Bullet

The bottom line for F5 Networks (FFIV) is that the quarter was not nearly as bad as people feared. The company acknowledged the issues in the macro environment, particularly given its high exposure to financial services clients. The quarter was a touch light, as was the guidance, but with the stock hammered to the tune of 60% since mid-October, it just does not matter. Revenues from newly acquired Acopia were ahead of original guidance, but, for what it's worth, I still think F5 should have let that one alone.

This is a 30%+ grower for the next two years, with just under $6-ish in net cash, and trading at 14x this year's estimates. It was up $4 after-hours and it will probably hang in the mid-high $20's thereafter. A $200 mln buyback plan should backstop any selling for the near future.

Is Trimble Nimble?

Trimble Navigation (TRMB), mentioned here yesterday, pre-announced to the upside, and by a pretty sizeable amount. The company reports on Jan. 29 and it will be very curious to see where the strength came from. This one was also up $4 in after-market trading, and it would not surprise me if the report pushes it back into the mid-30's in short order. It too announced a $250 mln buyback plan effective Feb. 1.

Ciena Goes World Wide

Finally a quick comment on Ciena's (CIEN) trashing after announcing the acquisition of World Wide Packets.

Yes the company did pay through the nose, and the sell-siders got very agitated about that, but – unlike FFIV's Acopia deal – to me this one makes strategic sense. Like FFIV, CIEN looks like a 35%+ grower for the next two years, trades at a 15 PE, and will have north of $1 billion of cash on hand after paying down debt and the cash portion of the WWP deal. It does have $800 mln of debt, but it's basically a zero coupon that does not come due until 2013 and 2017.

Had I ridden the 60% stock dive since October without the benefit of put options I'd be... not very happy; but I did have the puts. That will no longer be the case come tomorrow, when I will close all of them out and let the stock trade on its own. Why now? On an Enterprise Value to Sales, the stock has not been this cheap since the April and July quarters of 2002: now those were the dark days of telco tech.


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Positions in TRMB, FFIV, CIEN
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