hey gloff---i heard the bell right @ closing time got in
@ 18 1/4.i couldn't help myself.the numbers look to good,
the business is cold but i'm in for the long run.
F5 Networks (Nasdaq:FFIV)
This company is not only a fast-growing Net infrastructure company, it is
highly profitable. Yet the stock continues to languish near its lows--down
over 80% from its peak--resulting in an intriguing combination of growth and
value characteristics. F5 makes Internet traffic and content management
products that improve the performance and reliability of web-based businesses
and applications. This company is parked in front of a huge opportunity.
cheers and happy investing d.a :)
I am quite sure you know the whole story but there are times when its good to hear them again...so here's the rest
of the story.....
December 13, 2000 - F5 Networks (Nasdaq:FFIV) is not only a fast-growing Net infrastructure company, it is highly profitable. Yet the stock continues to languish near its lows--down over 80% from its peak--resulting in an intriguing combination of growth and value characteristics. F5 makes Internet traffic and content management products that improve the performance and reliability of web-based businesses and applications. This company is parked in front of a huge opportunity that is difficult to quantify, yet it's hard to understate the potential importance in the Internet economy going forward.
The broad imperative addressed by F5 is driven by two key issues. The first is the soaring amount of traffic on the Internet and corporate networks. The second is the fact that the Internet has matured beyond an entertaining novelty to become the medium for mission critical business functions and applications. This naturally includes the online media and e-commerce "dot-com" companies who want their sites accessible and responsive, but it also involves industries that now use intranets as well as the web for various enterprise applications like HR, supply chain management or collaboration on product design and manufacturing.
Traffic management solutions monitor and balance the load on servers and other devices by determining which server can best respond to a user request and direct it accordingly, ensuring optimum response time for users. These products also improve fault tolerance (if one server crashes, traffic is routed to the next best server) and allow geographically dispersed server architecture for better performance.
F5's also offers a product that helps network managers monitor and analyze their network traffic. Another F5 product controls file-based content and application management for publishing across dispersed server networks.
As the dot-com survivors "scale" to fulfill their promise and as traditional businesses increasingly rely on the Internet for mission-critical applications, the need for F5's products is clear. Customers include Exodus Communications (Nasdaq:EXDS), MCI WorldCom (Nasdaq:WCOM), InfoSpace (Nasdaq:INSP) and Intuit (Nasdaq:INTU).
Obviously such a huge market opportunity is going to attract competition. F5's competes with several companies in different ways, including Radware (Nasdaq:RDWR), Foundry Networks (Nasdaq:FDRY), and Alteon WebSystems (Nasdaq:ATON). Heavyweights like Cisco Systems (Nasdaq:CSCO) and Cabletron Systems (NYSE:CS) are also involved in this market. Unlike the others whose traffic management solutions reside inside network switches, F5 and Radware are in a separate appliance, making the purchase decision for customers independent of other hardware issues and in the case of F5, centralizing the administration of network management.
Estimates on market size are hard to produce because many companies incorporate traffic management into network switches, so it's not clear how to break it out. Nonetheless, the market is big enough that Cisco Systems spent $6 billion to acquire ArrowPoint earlier this year, a company expected to have just $60-$65 million in sales this year. Cisco said it sees this market growing to $2 billion by 2003 from $500 million in 2000.
F5 Networks is ramping up sales quickly with $108.6 million in the latest fiscal year which ended in September, up from $27.8 million a year ago. Fourth quarter sequential revenue growth was 25%. Earnings hit $0.69 per share for the fiscal year. Analysts estimate F5 will earn $0.88 in FY2001 and $1.65 in FY01, and growth is expected to average nearly 50% over the next five years.
Such amazing growth once commanded astronomical valuations. Now F5 isn't even trading at a premium to its growth rate. At $26 9/16 currently, F5 is trading at 30 times this year's earnings estimates, hardly a bargain by value investor standards but still easily below the projected growth rate in earnings.
Given the enormous market opportunity in Internet traffic and content management products it's surprising that this stock has not bounced back like some of the other top-tier Net infrastructure stocks in recent days. F5 is a fast-growing, profitable networking equipment play with a very volatile stock. For investors interested in owning that kind of company the question boils down to how confident they are in its growth outlook and how much to pay for a piece of the action.
--James Hale |
