Aruba Networks sees weak fourth quarter as Cisco competition intensifies

Thu May 16, 2013 6:53pm EDT

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(Reuters) - Network equipment maker Aruba Networks Inc (ARUN.O) forecast fourth-quarter results well below Wall Street expectations hurt by rising competition from Cisco Systems Inc (CSCO.O), sending its shares down 17 percent after the bell.

Aruba expects fourth-quarter adjusted profit of 10 cents to 12 cents per share, on revenue of $148 million to $150 million.

Analysts were looking for adjusted earnings of 17 cents per share, on revenue of $157.1 million.

"As the macro environment remains uncertain, we expect to see a heightened level of competition and bundling strategy from our largest competitor," Chief Executive Dominic Orr said on a post-earnings call with analysts.

He said the competition resulted in a lot of deals "slipping out" of April.

Aruba will find it difficult to compete with the much larger Cisco's bundling of its wireless offering with multiple other products such as routers and data centers, Mizuho Securities USA analyst Joanna Makris said.

"Cisco is getting more aggressive, and ... that's causing discounting pressure," Makris told Reuters.

The analyst said she believes this was not just a one-quarter problem, but a longer-term issue.

Cisco posted a higher-than-expected quarterly profit on Wednesday, and said current-quarter revenue could increase, giving some relief to investors who had worried it was being hurt by weak technology spending.

Aruba also reported a net loss of $20.2 million, or 18 cents per share, for its third quarter ended April 30, compared with a profit of $6 million, or 5 cents per share, a year earlier.

Excluding one-time items, the company earned 11 cents per share. Revenue rose about 12 pct to $147.1 million.

Analysts on average had expected adjusted earnings of 12 cents per share, on revenue of $145.4 million, according to Thomson Reuters I/B/E/S.

Aruba shares, which have fallen more than 20 percent over the last three months, were trading down 17 percent in after-hours trading. They closed at $17.61 on the Nasdaq.

(Reporting by Chandni Doulatramani in Bangalore; Editing by Anthony Kurian)

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