Aruba Networks (NASDAQ:ARUN) got its start in early 2002, a dire time for the mobile networking business. But management was convinced that mobile would be a big thing in corporate America. The past couple years have proved that good call. Now the company is growing at breakneck speed, and it's picked up a five-star rating from the Motley Fool CAPS community.
Aruba builds technologies that secure large wireless and wireleline networks. Its 2,400-plus customers include SAP (NYSE:SAP), Google (NASDAQ:GOOG), and the U.S. Air Force.
CAPS' take
CAPS member saanca500 is bullish on Aruba: "Cisco (NASDAQ:CSCO) can't do everything and there needs to be a strong number 2 in every industry. Question is, will Aruba be the one?"
Meanwhile, CAPS member billmenzies1958, reflecting the market's buyout chatter, is betting that Symantec (NASDAQ:SYMC) will make a play for Aruba.
But there are some dissenters. CAPS member danjez writes:
The company has a good product. But it's nowhere near profitable ... Even though the company is a possible acquisition candidate for Cisco's competitors, it's too expensive when valued at 13 times of expected FY2007 revenue.
My take
Aruba had a blowout fiscal Q3. Revenue surged 65% to $34.7 million, and Aruba's sequential growth rate was a sizzling 30%.
The company's systems are fairly easy to deploy within existing networks. That helps customers avoid huge up-front investments and disruptions to their work. Aruba's platform can support as many as 100,000 concurrent users -- more than enough for most firms.
True, Aruba continues to lose money. But the company needs to invest in its infrastructure to accommodate its growth. As long as its growth continues, the company should eventually realize operating leverage, and start producing profits. Based on the Q3 conference call, management appears confident that its market will remain strong for some time to come.
Aruba isn't a good fit for every investor. Despite the company's potential, it still carries plenty of risk. But for investors willing to take a chance on a hot sector, Aruba seems like an option worth investigating.
Link up with further Foolishness.
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Fool contributor Tom Taulli, author of The Complete M&A Handbook, does not own shares mentioned in this article. He is currently ranked 1,831 out of 30,414 in CAPS.
