F5 Delivers Strong Quarter, with Another on the Way

Despite difficult economic headwinds, F5 Networks sails ahead smoothly.

The application-delivery network specialist — whose competitors include Cisco Systems, Citrix Systems, and Juniper Networks — announced fourth-quarter financial results last night that surpassed market expectations. It also gave strong first-quarter guidance that ran ahead of analyst projections.

Fourth-quarter net income increased to $28.4 million, or 36 cents per share, from $19.7 million, or 24 cents per share, a year earlier. Revenue grew about 2 percent to $175.1 million, up from $171.3 million in the same quarter last year

The impressive results buoyed F5’s share price in after-hours trading last night, and the company’s share price has more than doubled during the past year.

F5 wrote the book on how to beat Cisco at its own game. The two companies originally fought it out in the load-balancing market, which then morphed into the application-traffic management space. F5 now calls what it does “application-delivery networking,” which is all about ensuring the secure, reliable, and fast delivery of applications.

Like any good technology company, F5 never stops innovating. It keeps adding software-based functionality to its product portfolio, looking to deliver more value to existing and prospective customers. The modular architecture of its flagship BIG-IP product family allows it to offer extensible solutions that can accommodate evolving requirements. The company is well placed, for example, to benefit from increased data-center virtualization and cloud computing.

File virtualization is a relatively new area for the company. The F5 Data Manager is in a nascent market, not contributing much to F5’s current revenue or profitability; but it’s a good example of how the company tries to anticipate where its customers might want to go next.

F5 also has a strong executive team, and a well-developed channel strategy worldwide. It wasn’t always that way, as the company’s veterans will tell you, but F5 reached a point where it understood that channel quality counts for more than channel quantity. Channel partners that are committed to F5 receive a commensurate and reciprocal level of support from the company.

It seems F5 always is the subject of acquisition rumors. That’s certainly been the case recently, with many observers speculating that the company might be acquired in an impending wave of data-center consolidation. It’s possible, but bear in mind that this company has resisted acquisition on at least a few occasions.

I have no doubt that F5 would be an attractive target for one or two prospective buyers, but I wonder whether the ardor would be requited.

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