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F5 sees weak fourth quarter but says telcom to keep momentum
July 18, 2012 / 9:06 PM / 5 years ago

F5 sees weak fourth quarter but says telcom to keep momentum

(Reuters) - Telecommunication gear maker F5 Networks Inc (FFIV.O) forecast a weak fourth quarter as telecom customers curtailed spending, but it still expects demand for its products as wireless and data traffic grows.

Network gear makers have been hit as telecom service providers - their biggest customers - cut spending and delay or cancel orders on a faltering U.S. recovery and weakness in Europe.

On a post-earnings call with analysts, the company said that even though it continued to exercise caution in a weak spending environment, it still expects sequential revenue growth in the fourth quarter.

"Telco (for F5) is going to grow with wireless and data traffic growth and that's not going to slow and this is still a decent growth sector ...pretty resilient," Piper Jaffray analyst Troy Jensen said.

In the third quarter, the telecom vertical contributed 22 percent of total sales for the company.

"We said we expected telecom spend to be down last quarter, but telecom spend was still very solid for us. We did see some slight reduction ... it was 26 percent last quarter, but not that much (a fall)," Chief Executive, John McAdam, told Reuters.

Shares of the company, which posted third-quarter results in line with expectations, fell 7 percent to $91.90 in trading after the bell. The stock later pared some losses to trade down 1 percent.

"We would expect telecom (in Q4) to be reasonably similar to previous quarter," McAdam said.

F5, which supplies data traffic management equipment to major U.S. service providers such as AT&T (T.N) and Verizon (VZ.N), expects adjusted earnings of $1.16 to $1.19 per share, on revenue of $360 million to $370 million for the fourth quarter.

Third Quarter Treads in Line

Net income rose to $72.3 million or 91 cents per share, for the third quarter from $62.5 million, or 77 cents per share, a year earlier.

Excluding items, it earned $1.14 per share, in line with analysts' average estimates.

Revenue rose 21.3 percent to $352.6 million, marginally below analysts' expectations of $352.9 million.

Shares of the Seattle, Washington-based company closed at $98.59 on the Nasdaq.

Reporting by Siddharth Cavale and Supantha Mukherjee in Bangalore; Editing by Roshni Menon, Maju Samuel and Bernard Orr

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