RBC Capital Markets Managing Director - Mark Sue provides his take on the legal settlement between Aruba and Motorola, "Aruba Network's long standing legal battle with Motorola has come to a close through a joint settlement. The dispute which involved patents owned by both Aruba Networks and Motorola has come to a close with a payment from Aruba and also includes a cross licensing agreement. Accordingly, we expect ARUN's cash balance to reflect the payment in the October quarter.
"The $19.8M one-time expense to be paid by ARUN will impact its
upcoming October quarter results on a GAAP basis by approximately
$0.13/share. The settlement is important for Aruba since the legal costs associated with the suit impacted earnings by approximately $0.01 a quarter or $900K on the G&A line. For CY10 we currently remain at $0.24 in non-GAAP earnings, an estimate which we believe may prove conservative considering our view of enterprise wireless growth."
Sue continue, "For the October quarter we expect Aruba to post revenues ahead of our consensus-like estimate of $56M (+5% QoQ). Strength may be driven by healthcare, education and financial verticals with a strong showing by the federal segment. On the bottom line, Aruba may beat the consensus earnings of $0.03 by at least a penny from healthy gross margins as well as cost control."
Sue added, "Our CY10 revenue expectations of $243M (+16% YoY) may prove conservative considering the strong trends in notebook shipments, the narrowing of the cost differential between wireline and wireless networking and decreasing concerns of wireless mobile security. Aruba, with its technology lead in 802.11N, may grow faster than the market in our assessment."
Sue concluded, "Aruba's shares currently trade at 3.0x our CY10 revenue estimate net cash. Our price target of $12 represents 3.9x our CY10E revenues net cash. The peer group is currently trading at 1.9x EV/Sales. In our view, a premium is warranted by Aruba's faster relative organic top-line growth prospects."
But will it operate in dual-band? Let's not hurry 802.11a out the door before until we have a better protocol in the 'a' (5 GHz) band. Man, it's crowded in the 'b/g' (2.4 GHz) space!
The Leader in Network Knowledge
Aruba's legal battle with Motorola ends
"The $19.8M one-time expense to be paid by ARUN will impact its
upcoming October quarter results on a GAAP basis by approximately
$0.13/share. The settlement is important for Aruba since the legal costs associated with the suit impacted earnings by approximately $0.01 a quarter or $900K on the G&A line. For CY10 we currently remain at $0.24 in non-GAAP earnings, an estimate which we believe may prove conservative considering our view of enterprise wireless growth."
Sue continue, "For the October quarter we expect Aruba to post revenues ahead of our consensus-like estimate of $56M (+5% QoQ). Strength may be driven by healthcare, education and financial verticals with a strong showing by the federal segment. On the bottom line, Aruba may beat the consensus earnings of $0.03 by at least a penny from healthy gross margins as well as cost control."
Sue added, "Our CY10 revenue expectations of $243M (+16% YoY) may prove conservative considering the strong trends in notebook shipments, the narrowing of the cost differential between wireline and wireless networking and decreasing concerns of wireless mobile security. Aruba, with its technology lead in 802.11N, may grow faster than the market in our assessment."
Sue concluded, "Aruba's shares currently trade at 3.0x our CY10 revenue estimate net cash. Our price target of $12 represents 3.9x our CY10E revenues net cash. The peer group is currently trading at 1.9x EV/Sales. In our view, a premium is warranted by Aruba's faster relative organic top-line growth prospects."
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Sincerely,
Brad Reese on Cisco
Network World Cisco Subnet
BradReese.Com Cisco Refurbished
Enabling Affordable Networks
Atheros new 'n' chipset sending 802.11abg to the scrap heap?
But will it operate in dual-band? Let's not hurry 802.11a out the door before until we have a better protocol in the 'a' (5 GHz) band. Man, it's crowded in the 'b/g' (2.4 GHz) space!
Bruce in Kissimmee, FL
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