A10 Latest Victim of Carrier Spend Slowdown
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."
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.