Needham & Company Downgrades Aruba Networks (ARUN) to Hold

May 17, 2013 8:17 AM EDT
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Price: $24.67 --0%

Rating Summary:
    14 Buy, 20 Hold, 2 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 23 | Down: 34 | New: 34
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Needham & Company downgraded Aruba Networks (NASDAQ: ARUN) from Buy to Hold following weak Q3 results and outlook.

Analyst Richard Valera said, "Following ARUN’s pre-announcement of an unprecedented ~10% miss of its 3Q results, we had held out hope that the miss would not have longer-term competitive implications. Unfortunately, the combination of Aruba’s commentary regarding the incremental competitive bundling it saw from Cisco during the quarter and the company’s very weak 4Q guidance suggest that ARUN is likely dealing with a multi-quarter, if not structural, change in its competitive landscape and growth rate. While management remains optimistic of an eventual reacceleration in growth to the 20% level as ClearPass revenue ramps and it adjusts to Cisco’s new bundling techniques, we don’t have the visibility/conviction to model this given the recent turn of events. As such, and with the shares trading at 17x our ex-cash F14 NG EPS in the after-market against our current model of a low double-digit top-line growth rate, we see the shares as fairly valued and downgrade the shares to Hold from Buy. We’d look for evidence of success in top line reacceleration to become more positive on the shares."

The firm cut FY 2013 EPS estimates from $0.69 to $0.63 and FY 2014 EPS from $0.89 to $0.68.

For an analyst ratings summary and ratings history on Aruba Networks click here. For more ratings news on Aruba Networks click here.

Shares of Aruba Networks closed at $17.61 yesterday.

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