Temp. Home of Cooperative Group-Trading Message Board

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Temp. Home of Cooperative Group-Trading

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next

To: HandsOn who wrote (653)	5/7/2000 11:44:00 AM
From: Rajiv	Read Replies (1) of 790

FFIV might very well bounce a few pts on Monday. However, this is one stock that I wouldn't be comfortable holding for the intermediate term. FFIV has stopped being an earnings growth story. In q2, it did not show any seq earnings growth. And there won't be any improvements for a few qtrs. The management has commented on the growth in revenues. Be sure to read the part about earnings. FFIV has used up its carried forward losses (only 1.4 MM is left) and will start being taxed at 35+% rate from later this year. This would mean that profits (on a pre-tax) basis must increase substantially for it to post greater EPS (post-tax). IMO this is unlikely - you only have to look at last qtr earnings to realize that. FFIV has added significantly to the sales and marketing teams in the last and current qtrs which will prevent this. IMO, the earnings growth curve will (at best) be flat for the next 3 quarters. CSCO's takeover of ARPT is a big negative. ARPT signed a non-exclusive reseller agreement with EXDS in late March. EXDS was/is FFIV's single largest source of revenue. I wasn't convinced by the FFIV's management's arguments that there is little overlap. I have confidence that CSCO's M&A team did not pay 6 billion for a firm with quarterly revenues of 9.5 million and which won't turn profitable till the 2nd qtr of calendar 2001. They have paid for technologies/products which are under development or in the pipeline. As for the CFO's comments about guiding revenues numbers higher, are you aware that analysts routinely have estimates for the next qtr and current fiscal year only? They fill up the blanks (rest of the quarters) in the fiscal year using a generic % number. In this case it was 10%. Surely they did not expect us to believe that they were previously expecting 10% seq revenue growth (especially when they were pumping the stock at much higher levels). My own estimates for the last quarter were revenues > 25 MM and an EPS of 24c. FFIV failed to meet both. With a flat earnings growth curve (for a min of 3 quarters), FFIV has stopped being an earnings growth story. Since it is profitable and has been around for sometime, it is easier to build a valuation model for it than other companies (with -ve earnings). In FFIV's case, being profitable is (unfortunately for the stock) turning out to be a -ve. FFIV is overvalued to be considered by people who routinely look for value (it sells at a premium to the S&P). Stocks like FFIV (no longer a growth story) will IMO not do well in uncertain overall market environment. I have no position in FFIV (long or short). Regards, Rajiv

Report TOU Violation

Share This Post

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next