Stephen,
From the perspective of a FFIV shareholder, perhaps the most interesting excerpt from the Red Herring article is this:
Though Arrowpoint's products are hardware-based switches, Mr. Kennedy [Kevin Kennedy, senior vice president for Cisco's service-provider business] says that "90 percent of their development is in the software," meaning that it will become easier for Cisco to port the Arrowpoint software to its own platforms.
"The real value [of Arrowpoint's products] is in the software," said Mr. Kennedy, in a phone call Friday afternoon.
This would suggest that FFIV's software would perhaps also be of tremendous intrinsic value, assuming that it could be incorporated into the hardware of another gear maker. As I understand it, the FFIV/COMS deal is heading in precisely this direction: Phase 1 is for COMS to incorporate FFIV's appliances into its network architecture, but Phase 2 is to embed FFIV's technology into the chassis.
I personally am not going to fight the tape on this one -- meaning, I'm going to be very cautious about catching a falling knife -- but FFIV seems to offer a tremndous value proposition at this point. Its quarterly results were very strong (tremendous upside surprise on the top line; EPS 0.18 fully diluted, 0.20 excluding amortization). Its guidance going forward is strengthening. It's trading at a PEG of under 1 and a P/S of just over 6, based on projected 2000 results. If the CSCO/ARPT deal is any indication, its network-intelligence software would seem to have considerable intrinsic value.
The selling at this point is totally irrational . . . but negative sentiment and downward momentum are real forces that, unfortunately, trump value in certain short-term contexts--. I'm a big buyer of FFIV when the fear subsides and the value proposition comes back into view.
redherring.com |
