How’s Blue Coat Doing?

Blue Coat Systems is a possible turnaround story, and many eyes are focused on the company as it attempts to extricate itself from a stock-option backdating controversy while trying to lift revenue on the strength of relatively new offerings in WAN optimization and content security and control.

The company’s board of directors has yet to complete its investigation into BlueCoat’s past stock-option granting practices. That means, even though Blue Coat’s latest quarter closed at the end of October, we should not expect anything more than revenue to be reported by the company about two weeks from now.

Still, revenue growth will provide at least some indication as to how well the market is receiving the company’s new offerings. It also could potentially give us some insight into the extent to which revenue growth attributable to the company’s flagship web-caching/proxy products is weakening.

Blue Coat sought to aggressively promote and sell its WAN-optimization products this past quarter. A consensus view is emerging that, while Blue Coat has begun to make headway into its installed base with those products, it probably did not close enough WAN-optimization business in the just-ended quarter to appreciably lift its top-line number. In addition to having to address its own issues with field execution and the sales cycle, Blue Coat also is facing daunting competition, including red-hot WAN-optimization leader Riverbed Technology and networking behemoth Cisco Systems.

For that reason, I’m thinking that Blue Coat’s revenue in the October quarter will be on the low end of estimates, which range from $37.57 million to $38.23 million. It might even be a bit lighter than the $37.57 estimate.

As for when the stock-option backdating quagmire will be resolved, your guess is as good as mine. For all involved, let’s hope it gets sorted out sooner rather than later.

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