Is Blue Coat Systems (BCSI) the "Canary in a Coalmine" Related to a Slowing Euro-Zone?
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Blue Coat Systems Inc. (NASDAQ: BCSI), a small software maker that derives roughly 40% of its sales from Europe, warned yesterday's evening that sales in Europe are slowing and lowered its first quarter guidance. Shares are down 18% today.
But the bigger questions investors need to ask --- "Is Blue Coat Systems the Canary in a Coalmine?"
Since the European economic crisis hit, investors in the U.S. have been on edge and the recent sell-off in stocks is mostly attributed to the Euro-zone concerns. Now a company that is largely dependent on Europe is warning of slowing growth - uh oh!
Blue Coat Systems has an odd quarter-end of April 30, 2010, while most other companies end their quarters on March 31, 2010. With the crisis in Europe hitting in April and accelerating in May, this suggests that Blue Coat saw at least a month's impact in the reported quarter, while most others won't feel it until this quarter.
Blue Coat said EMEA revenue declined 5% sequentially and product revenue declined 9%, both lower than what they were expecting. The company blamed the softness on the recent uncertainty of the EU economic environment. The company saw sequential product revenue declines in a majority of the countries in Europe.
While Blue Coat blamed European weakness for its woes, no other April-quarter companies, including other techs HP (NYSE: HPQ) and NetApp (Nasdaq: NTAP), have cited any weakness in the region.
The company noted on the call that the average size of its customer in Europe is a bit smaller than it is in North America, but didn't know for sure if this was the driver. On Forex, the firm noted that they sell products in U.S. dollars, so the strengthening of the dollar versus the Euro makes their products more expensive in Europe.
While one small company doesn't make a trend, investors need to recognize that Euro-zone slowdown risk is real and any company will significant exposure could have top and bottom-line risk for the next few quarters.
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But the bigger questions investors need to ask --- "Is Blue Coat Systems the Canary in a Coalmine?"
Since the European economic crisis hit, investors in the U.S. have been on edge and the recent sell-off in stocks is mostly attributed to the Euro-zone concerns. Now a company that is largely dependent on Europe is warning of slowing growth - uh oh!
Blue Coat Systems has an odd quarter-end of April 30, 2010, while most other companies end their quarters on March 31, 2010. With the crisis in Europe hitting in April and accelerating in May, this suggests that Blue Coat saw at least a month's impact in the reported quarter, while most others won't feel it until this quarter.
Blue Coat said EMEA revenue declined 5% sequentially and product revenue declined 9%, both lower than what they were expecting. The company blamed the softness on the recent uncertainty of the EU economic environment. The company saw sequential product revenue declines in a majority of the countries in Europe.
While Blue Coat blamed European weakness for its woes, no other April-quarter companies, including other techs HP (NYSE: HPQ) and NetApp (Nasdaq: NTAP), have cited any weakness in the region.
The company noted on the call that the average size of its customer in Europe is a bit smaller than it is in North America, but didn't know for sure if this was the driver. On Forex, the firm noted that they sell products in U.S. dollars, so the strengthening of the dollar versus the Euro makes their products more expensive in Europe.
While one small company doesn't make a trend, investors need to recognize that Euro-zone slowdown risk is real and any company will significant exposure could have top and bottom-line risk for the next few quarters.
Market Moving News and Intelligence - Two Weeks Free
http://www.streetinsider.com/premium_content.php
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