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A10 Latest Victim of Carrier Spend Slowdown

Mitch Wagner
10/30/2014

The slowdown in carrier spending claimed another victim Thursday, as A10 reported disappointing quarterly earnings. The company saw a net loss of $12.3 million compared with $2.7 million in the third quarter of 2013. Total quarterly revenue was $43.4 million, compared with $39.8 million in the year-ago quarter.

"We are very disappointed with our third quarter financial results and we are committed to improving our execution," Lee Chen, A10 Networks Inc. president and CEO, said in a prepared statement.

A10 blamed lower revenue from North American service providers, longer-than-expected close times for deals and a lengthening sales cycles for some enterprise deals. Outside North America, most regions delivered revenue consistent with or above expectations, A10 said.

The $43.4 million quarterly revenue was below initial guidance of $48 million to $50 million.

Chen was humble and contrite on the earnings call. "Our current level of growth and execution is not at the level we intend to exhibit," he said, reading from a prepared statement. "We understand that the investment community expects more out of A10, as do we, and we are committed to improving our execution and rebuilding your trust in A10."


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The North American service provider spending slowdown was particularly painful because four of A10's year-to-date customers are North American service providers, Chen said. That revenue will continue to fluctuate quarter to quarter in the near term, but A10 believes its "value proposition remains strong as our ACOS platform addresses a critical part of their data center infrastructure and consolidation strategies," Chen said, adding, "for longer-term opportunities, we are working with many of our large service provider customers to design products to meet the needs of their next generation network deployments."

"As you know, service providers tend to move in a herd mentality," Ray Smets, A10's VP of worldwide sales, said. A10 saw a slowdown in Japanese spending, which could be attributed to overall economic problems in that country. In North America, carriers may be looking to preserve cash in anticipation of new wireless spectrum licensing next year.

Slow carrier spending is racking up injuries among networking hardware vendors. Juniper Networks Inc. (NYSE: JNPR), Spirent Communications plc , EZchip Technologies Ltd. (Nasdaq: EZCH) and Adtran Inc. (Nasdaq: ADTN) are sporting bruises. Juniper, for one, said it plans another round of job cuts. On the other hand, Infinera Corp. (Nasdaq: INFN) saw growth, as did Ericsson AB (Nasdaq: ERIC), which offset North American slow sales with global growth. (See Global Reach Helps Ericsson Grow in Q3, Juniper Plans More Cuts and Juniper Pummeled by Weak Carrier Demand.)

A10 reported results after close of trading Thursday, and traded at $4.35, up 3.08%, after hours.

— Mitch Wagner, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profileFollow me on Facebook, West Coast Bureau Chief, Light Reading. Got a tip about SDN or NFV? Send it to [email protected]

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mendyk
mendyk
11/3/2014 | 7:51:58 AM
Re: Best/Worst of times
We assume that investment markets behave logically, but that's case only some of the time.
kq4ym
kq4ym
11/2/2014 | 3:06:57 PM
Re: Best/Worst of times
Interesting how the stock goes up while profits dwindle, at least for the quarter. With a net loss of $12.3 million compared with $2.7 million last year that's quite a hit. How to scramble to make up that will be quite a challenge it seems for A10 next time around.
mendyk
mendyk
10/31/2014 | 11:04:09 AM
Best/Worst of times
Things are a bit ... divergent right now. In some areas, operator spending appears to be more than healthy. In others, things are tough. If there is a clear dividing line, it's that spending on new technologies is up, while legacy spending is down. That may sound too simplistic or too logical or too obvious, but it seems to be the case. And don't forget -- the drones are coming! The drones are coming!
MikeP688
MikeP688
10/31/2014 | 3:42:11 AM
Re: the big slow down
What is unfortunate is that this kind of spending diverts from what is necessary for the long-term development.   
thebulk
thebulk
10/31/2014 | 3:13:21 AM
Re: the big slow down
Nothing wrong with pondering out loud ;-)
MikeP688
MikeP688
10/31/2014 | 12:40:53 AM
Re: the big slow down
Not per se for these guys--but others have and when you see leading lights on the S&P 500 spending 290 Billion+ on stock buybacks (based on a report I saw earlier yesterday), I can't help but wonder. 
thebulk
thebulk
10/31/2014 | 12:33:28 AM
Re: the big slow down
So you think this is just a dog and pony show for the sake of stock prices, nothing more?
MikeP688
MikeP688
10/31/2014 | 12:17:13 AM
Re: the big slow down
First and foremost, let me begin by wishing all A Happy and Safe Halloween :-)  Let me humbly add on to the thoughts shared with this thought: Has their time past as we see the trend toward open network standards which is prompting the slowdown?   I wonder if these guys have the same "tricks" up their sleeve to spruce up their stock price just like the big players due (including IBM..who has tried to stay releveant with the Financial Tools at its' disposal? :-)
thebulk
thebulk
10/30/2014 | 11:05:38 PM
the big slow down
Working with service providers really can be feast of famion, even for larger players. everyting works in cycles and, the piece is right, they are like a big herd and all follow the biggest buffalo in the pack. 
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