Network security specialist Sourcefire (Nasdaq: FIRE ) has seen its shares nearly triple over the last two years, amid near-constant buyout rumors and a long string of analyst-beating quarterly reports.
The fourth-quarter report hit the wires Thursday night, breaking tradition by merely meeting Street targets rather than crushing them -- non-GAAP earnings of $0.17 per share on $38 million in sales was right on the nose. Rubbing salt in the wounds, the outlook for next quarter came in slightly below analyst consensus. By all rights, that's the kind of event that takes market darlings like Sourcefire behind the woodshed for a quick thrashing.
Sure enough, the stock fell as much as 7% on the report -- but has already made all of that back, with a cherry on top.
I think this bizarre market reaction boils down to investors taking time to digest what the company really said. Business is at least as much about quality as it is about pure numbers, and management came across sounding really sharp in the earnings call.
The stated focus for 2010 was "the three I's:" innovation, indirect, and international. While innovation is a subjective target, the company brags about its perennial "leaders" position in Gartner's magic quadrant report for the network security industry. That distinction is made all the more impressive by the fact that Sourcefire is measured against much larger and better-heeled rivals, including Cisco Systems (Nasdaq: CSCO ) , Symantec (Nasdaq: SYMC ) , and CA Technologies (Nasdaq: CA ) .
The international push is clearly going well; total sales grew by just 8% year over year, but international sales jumped an impressive 50%.
Finally, indirect sales are gaining traction: channel sales represented 39% of sales in 2010, versus just 23% in 2009.
Sourcefire's management team is delivering on its promises, which should make any investor sleep better at night. For 2011, the focus shifts to the "the three Ss" of sales force, solutions, and story. The company is hiring salespeople in an effort to support sales growth, refocusing on next-generation security research, and working to educate analysts, investors, and customers on what sets Sourcefire apart.
You gotta have goals, and it's even better if you can deliver on them. The numbers tell only half the story.
Keep up with Sourcefire's ambitious goals by adding the stock to your watchlist.
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