Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of wireless networking equipment company Aruba Networks (UNKNOWN:ARUN.DL) plunged 16% today after its quarterly results and outlook disappointed Wall Street.
So what: Aruba's Q3 EPS of $0.20 managed to meet estimates, but a disappointing gross margin -- 70.5% versus the consensus of about 72% -- is triggering plenty of concern on Wall Street over an intensifying competitive environment. Of course, revenue during the quarter surged an impressive 28% to $147.1 million, suggesting that Aruba's new products are at least gaining momentum, as well as some valuable market share.
Now what: Management reiterated its 71% to 73% gross margin target range amid new 802.11ac product releases and a more balanced product mix. "We believe our exceptional topline performance this quarter reflects the investment we made in extending our sales and channel capacity, coupled with the strength of our differentiated architecture and product portfolio," said CEO Dominic Orr. "The need for simple, smart, secure and stable Wi-Fi, particularly for cutting edge organizations moving toward all-wireless environments and 802.11ac, is driving interest for Aruba's broad product platform." Given Aruba's rock-solid balance sheet and suddenly weak stock price, the downside might even be limited enough to bet on that bullishness.