In theory, Blue Coat Systems
Also, there is no difference between theory and practice. In theory, that is.
In reality, none of these three companies have any acquisition offers on the table, and Blue Coat isn't eating caviar and sipping champagne. Third-quarter earnings and sales may have satisfied CEO Mike Borman but fell short of Street targets, and guidance for the fourth quarter also failed to impress. The stock cratered as deeply as 8% on Friday, following the news.
Borman, who has been on the job for a mere five months, said that this was a "planning and execution" quarter and that the sales and product initiatives he started haven't had a chance to affect real-world sales yet. Some of this is because new stuff like Blue Coat's cloud products are subscription services, which means less lump-sum activity up front but stable sales over a long period.
But mostly, Blue Coat's customers are of the large-scale enterprise variety and shackled by corporate budget schedules, which means it takes a long time to move from introducing a new Blue Coat product, then testing it, and finally getting budget approval for the project.
Most of Blue Coat's profit growth is coming from cost efficiencies right now -- sales growth is decelerating, but margins are expanding across the board. If the company can leverage recently started reseller partnerships with Hewlett-Packard
All told, I think Mr. Market overreacted to short-term concerns and that long-term investors would be smart to give Blue Coat a second look after its sell-off continued into today.
Fool contributor Anders Bylund holds no position in any of the companies discussed here. The Fool owns shares of Oracle. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.