FDRY Story:
biz.yahoo.com
"The market for Gigabit switches is expected to grow from an estimated $1.3 billion in 1999 to more than $7 billion in 2003, a growth rate in excess of 50% annually. The overall Ethernet market overall is projected to advance from $9 billion in 1999 to more than $117 billion in 2002. "
"Foundry Networks provides Internet routers, Gigabit Ethernet Layer 2 and Layer 3 switching routers, and other Internet traffic management systems for a variety of clients ranging from government agencies to Web hosting firms. "
"The trend towards sales of higher-margin products like Internet routers and Layer 4-7 switching products is accelerating, enabling Foundry to post gross margins of 65.7%, up from 56.7% in last year's quarter, and operating margins of 37.4%, up from 11%.
Even more significant: the higher margin Internet router products accounted for just 5% of revenue during the quarter and Layer 4-7 switches only contributed 15%. As a result, there is significant upside potential for earnings growth as these products comprise a higher percentage of the overall revenue mix, especially since the company expects Internet router sales to account for 15% of total revenue within twelve months and 30%-40% within two years.
Another plus is Foundry's products offer superior performance at attractive price points, according to testing conducted in April 1999 by Tolly Group, an independent equipment testing Group, and Network World, a networking publication, that showed that Foundry's BigIron 4000 and 8000 products offered the best cost per Gigabit of throughput for layer 3 Gigabit Ethernet switches. "
This is part of what caused the stock to sell off last Q. It appeared they were cutting costs and margin to get business. Competitors got more earnings growth on the same revenue growth Q-Q.
"Shares of Foundry currently trade at 13 times fiscal 2001 revenue estimates of $575 and are not cheap by traditional valuation methods. However, Juniper Networks (NASDAQ: JNPR - news) carries a forward price/revenue multiple of 66 and Extreme Networks (NASDAQ: EXTR - news) trades at 21 times estimated 2001 revenue." |
