10 Updates

F5 Is Worth $108: Factors That Will Drive Growth

Apr 3 2014, 8:29am CDT | by

Weak macro conditions and the product portfolio transition impacted F5 Networks growth momentum last year. While economic uncertainty forced its customers to lower their spending, increasing...

Filed under: news

 
 
 

16 weeks ago

F5 Is Worth $108: Factors That Will Drive Growth

Apr 3 2014, 8:29am CDT | by

Weak macro conditions and the product portfolio transition impacted F5 Networks growth momentum last year. While economic uncertainty forced its customers to lower their spending, increasing competition led some to question the sustainability of F5′s growth rate and high margins over the long run – factors that negatively impacted its stock price. However, the strong demand for F5′s upgraded product portfolio, positive customer response to the recently introduced Synthesis architectural vision, and F5′s “Good, Better, Best” pricing model (introduced in November 2013) led to strong sales across all geographies in Q1 2014. (Read our earnings article) F5 Networks has seen its stock price increase by approximately 20% year to date as the strong results last quarter renewed investor confidence in the company.

Our price estimate of $108 for F5 Networks is now in line with its current market price. Though the weak macro environment might restrict F5′s short-term growth, we believe in the company’s long-term growth potential. Below are key factors that support our belief.

See our complete analysis for F5 Networks here

The ADC Market Remains Strong; F5 Is A Leader In Traditional ADCs

ADCs simplify the management of data centers, delivery of resources across diverse networks, and enable applications to perform faster. While the ADC market witnessed a double-digit growth in 2012, some research firms predicted the growth to slow down to as low as 2% in 2013. Though macro headwinds might restrict short-term growth, we think that the ADC market continues to have immense long term growth potential. The ADC market is estimated to grow at a CAGR of 7.07% through 2015.
/>

F5 is one of the leading technology providers that optimizes the delivery of network-based applications and a leader in the ADC market with a market share in excess of 50%. However, while F5 dominates the high-end market, it does not have a very large (less than 20%) market share in virtual ADCs. Though ADCs are still important in managing data network traffic, growth at the high-end of the market has stagnated and lower-end customers are turning to virtual ADCs.

F5′s partnership with VMware can help expand its presence in virtual ADCs. Also, although virtual ADCs are comparatively lower priced than traditional ADCs, the latter is better suited to manage large amounts of application connections and data. (Read: Physical or Virtual ADC: An Either/Or Choice?)

F5′s upgraded product portfolio has significantly expanded its addressable market and the company reports that it is witnessing record competitive win rates. At its investor meeting, F5 mentioned that its installed base of users has a relatively older suite of ADCs in place, ranging from three to six years of service, and even longer, in some cases. That means a refresh cycle has just begun gaining traction. A second wave of new software and hardware solutions, which offer new features across all product categories, will be released in the second half of 2014.

Enriched product capabilities should continue to drive growth and strengthen F5′s market position. F5 completed its acquisition of LineRate Systems in February this year, which it believes will broaden its application-focused ADC solutions and advance its leadership in ADCs. At present, over 70% of the Fortune 50o companies are F5′s customers.
/>

Continued Expansion In The Security Market

With the explosion of data and processing required online, security has become a major concern for most enterprises, and thus, this is one segment bound to witness tremendous growth in the coming years. IDC estimates that companies around the world will spend $491 billion in 2014 for fixes and recovery from data breaches and malware, $127 billion in dealing with security issues and $364 billion dealing with data breaches.
/>

With its BIG-IP 11.1 software passing the ISCA Labs test for network firewalls, F5 entered the Internet firewall market in February 2012 and since then has expanded its security solution portfolio with the addition of new products. Its security portfolio solution has increased dramatically in the last few quarters. It acquired Israel based Versafe Ltd., a provider of web anti-fraud, anti-phishing, and anti-malware solutions in September 2013. Offering advanced web and mobile protection solutions, Versafe provides a comprehensive real-time detection and protection for every user, device and browser. The acquisition will help make the company?s security, access, and mobile solutions (including its Application Delivery Firewall solution) stronger. F5 is building out two world-class security operations centers in Seattle and Tel Aviv to support the new online security service from its Versafe acquisition.

With growing awareness of its security solutions in the market, F5 believes that this segment offers huge growth opportunity and expects the strong sale momentum to continue in fiscal 2014.

Gross Margins To Remain High

At present, F5 enjoys a very high gross margin, which increased by over five percentage points from 2006 to 2013 (from 77.7% to 82.9% ). The company expects that the updated product portfolio will help re-accelerate its top line growth in fiscal 2014 and is confident of maintaining its product gross margin around the current level. However, it does expect a slight decline in service gross margins in the future. Service revenues were 46% of the total in fiscal 2013.

We expect F5′s gross margins to remain around the current level for the rest of our review period. Despite intensifying competition, F5′s recent product upgrade and its building sales momentum in new markets will help drive revenue growth. F5 drives technological differentiation through the software that is installed on the hardware that it sells. Given this differentiation, revenue growth should help offset the modest attrition in service margins.

Understand How a Company’s Products Impact its Stock Price at Trefis

Like our charts? Embed them in your own posts using the Trefis WordPress Plugin.

 
Update
10

7 weeks ago

RM47mil KWSG contributions still unclaimed

Jun 9 2014 7:54am CDT | Source: Business Times Malaysia

KUALA LUMPUR: About RM47 million of contributions in the Teachers Provident Fund (KWSG) still remain unclaimed, the Dewan Rakyat was told ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
9

7 weeks ago

Gold shop lost almost RM1mil

Jun 9 2014 3:50am CDT | Source: Business Times Malaysia

KANGAR: A gold shop owner lost almost RM1 million after after the safe on in his shop was broken int ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
8

7 weeks ago

Motion to debate MAS losses in Dewan Rakyat rejected

Jun 9 2014 3:39am CDT | Source: Business Times Malaysia

KUALA LUMPUR: AN emergency motion to debate the losses incurred by Malaysia Airlines last year, amounting to RM1.2 billion was reject ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
7

7 weeks ago

MH370 Tragedy: Hisham: RM27.6 mil spent on 1st phase of SAR

Jun 9 2014 2:11am CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia spent some RM27.6 million in its first phase of the search operations for missing Malaysia Airline flight MH370, said Acting Transport Minister, Datuk Seri Hishammuddin Hu ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
6

7 weeks ago

9.1m litres of diesel seized in a month

Jun 8 2014 1:11am CDT | Source: Business Times Malaysia

PUTRAJAYA: The Domestic Trade, Cooperatives, and Consumerism ministry has seized some 9.1 million litres of diesel and property worth RM58 million since mounting ‘Operasi Diesel Selatan’ in the souther ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
5

7 weeks ago

Girl, 9, awarded RM2.78m compensation for medical negligence

Jun 6 2014 4:56am CDT | Source: Business Times Malaysia

KUALA LUMPUR: A nine-year-old girl who suffered brain damage during her birth at a government hospital was awarded over RM2.78 million in c ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
4

7 weeks ago

Malaysia's total trade in April up 12pc

Jun 5 2014 11:52pm CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia's total trade in April 2014 rose by 12 per cent from a year ago to RM123.86 billion due to growing trading activities, International Trade and Industry Minister Datuk Seri Mustapa Mohamed sa ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
3

7 weeks ago

Works Ministry to spend RM20m for upgrading works at 50 accident black spots

Jun 4 2014 11:35pm CDT | Source: Business Times Malaysia

JOHOR BARU: The Works Ministry will implement upgrading works at 50 accident prone locations in the country that have been identified this year involvi ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
2

7 weeks ago

Najib launches loan scheme for Ramadan traders

Jun 4 2014 10:24pm CDT | Source: Business Times Malaysia

PUTRAJAYA: Prime Minister Datuk Seri Najib Razak today launches RM45 million Ramadan Bazaar S ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
1

8 weeks ago

Residents bring up objection against Kidex to Suhakam

Jun 4 2014 4:49am CDT | Source: Business Times Malaysia

PETALING JAYA: A group of 20 Petaling Jaya residents held a meeting with the Human Rights Commission of Malaysia (Suhakam) over their objection against the proposed RM2.2 billion Kinrara Damansara Skyway (Kidex) ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

OPEC daily basket price closes tad higher
Vienna, July 30 (IANS) The basket of 12 crude oils of the Organization of Petroleum Exporting Countries (OPEC) stood at $105.44 a barrel Tuesday, against $105.22 last Thursday, according to the OPEC Secretariat.
 
 
Moscow calls US sanctions 'illegitimate'
Moscow, July 30 (IANS) The economic sanctions imposed by the United States are a revenge on Russia, the country's foreign ministry said Wednesday.
 
 
EU boosts funding to fight Ebola epidemic
Brussels, July 30 (IANS) The European Union Wednesday allocated an additional 2 million euros ($2.68 million) in aid to tackle the Ebola epidemic in West Africa.
 
 
Top doctor in Sierra Leone dies of Ebola
Nairobi, July 30 (IANS/EFE) Sierra Leone's top Ebola virus doctor, Sheikh Umar Khan, died a few days after contracting the lethal disease which has claimed the lives of 672 people in Western Africa, health authorities in Sierra Leone announced Wednesday.
 
 
 

Latest from the Network

Doutzen Kroes welcomes second child
Doutzen Kroes has given birth to her second child. The Victoria's Secret model and her DJ husband, Sunnery James, welcomed daughter Myllena Mae into the world in her native the Netherlands this morning (07.30.14). The...
Read more on Celebrity Balla
 
Ian Ziering says being away from his kids is 'torture'
Ian Ziering finds it ''torture'' being away from his children. The 'Sharknado 2' star - who plays Fin Shepherd in the upcoming TV movie - admits he hates leaving his two daughters, Mia, three, and Penna, 14 months, whom...
Read more on Celebrity Balla
 
India struggling at 112/4 in second innings
Southampton, July 30 (IANS) India were left struggling at 112 for four in the second innings, while chasing a target of 445, at stumps on the fourth day of the third cricket Test against England at The Rose Bowl here...
Read more on Sport Balla
 
17 Palestinians killed in Israeli strikes on Gaza market
Gaza, July 30 (IANS) At least 17 Palestinians were killed in Israeli strikes at an overcrowded market in Gaza Wednesday after Hamas rejected an Israeli four-hour truce offer, a media report said. As many as 160 people...
Read more on Politics Balla
 
Five killed in Nigeria suicide attack
Abuja, July 30 (IANS) Five people were killed when a woman suicide bomber blew herself up in a college in Nigeria Wednesday, a media report said. The suicide attack took place in a technical college in northwestern...
Read more on Politics Balla
 
India women's hockey team out of medal contention
Glasgow, July 30 (IANS) The Indian women's hockey team lost their last crucial Pool A tie 2-3 to South Africa at the Glasgow National Hockey Centre here Wednesday to go out of medal contention at the Commonwealth Games...
Read more on Sport Balla
 
Gold eludes Indian wrestlers, get 4 silvers, 1 bronze (Roundup)
Glasgow, July 31 (IANS) After a day of highs, there was disappointment in store for Indian wrestlers as they only garnered four silver medals and a bronze in the 2014 Commonwealth Games at the SECC Hall here Wednesday...
Read more on Sport Balla
 
Scoreboard: India vs England, day 4, third Test
Southampton, July 31 (IANS) The following is the scoreboard at stumps on day four of the third cricket Test between India and England at The Rose Bowl here Wednesday: England first innings 569/7 declared India (first...
Read more on Sport Balla
 
Pinki, Sarita, Devendro reach CWG boxing semis
Glasgow, July 31 (IANS) Indian boxers Pinki Jangra, L. Sarita Devi and Devendro Singh made the semi-finals of the Commonwealth Games in their respective categories at the SECC Hall here Wednesday. However, Amritpreet...
Read more on Sport Balla
 
Indian doubles squash players earn group wins
Glasgow, July 31 (IANS) India's doubles squash players earned wins in their respective categories at the Commonwealth Games here Wednesday. Men's doubles pair Saurav Ghosal and Harinder Pal Sandhu won 11-7, 11-3 over...
Read more on Sport Balla