Needham & Company Downgrades Blue Coat Systems (BCSI) to Hold; Concerns on Weak Outlook and CEO Departure

Needham & Company downgraded Blue Coat Systems (NASDAQ: BCSI) from Buy to Hold.

Needham analyst says, "The Blue Coat JulyQ results were moved up suddenly from Thursday to Tuesday, as CEO Mike Borman departed the company. The
departure of CEO Mike Borman (exactly 1 yr into his tenure) is most concerning to us, more than the weak guidance, because we view Borman as a CEO with extensive channel and partner relationships, as well as operational and sales expertise, from his 25+ years at IBM (NYSE: IBM) (Notrated).The fact that Borman could not stabilize BCSI in his 1yr tenure, combined with the seemingly disjointed new CEO arrangement (interim CEO + permanent CEO starting 4wks from now) signals to us that BCSI may not have been able to attract a more conventional CEO executive; this is an ominous signal for franchise attractiveness, in our view. Our BUY thesis has been largely based on a strategic M&A event; we are now changing our thesis." (Needham lowers FY12 EPS estimate from $0.87 to $0.65 and FY13 from $0.99 to $0.72)

For more ratings news on Blue Coat Systems click here and for the rating history of Blue Coat Systems click here.

Shares of Blue Coat Systems closed at $17.68 yesterday.

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