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Foundry Takes Its Lumps

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Foundry Networks Inc. (Nasdaq: FDRY) reported higher revenues for its third quarter, but still missed analysts' expectations. The switch maker posted revenues of $102.5 million, up slightly from $101.7 million reported in the same period last year. But the company fell just short of the $103.17 million in revenues analysts were looking for.

It earned 11 cents a share, which is what analysts expected, and it showed sequential growth over the second quarter's $97.8 million.

Foundry CEO Bobby Johnson says the vendor dodged the "lumpiness" that characterized past quarters. Earlier this year, for the second successive quarter, Foundry missed analysts’ earnings estimates, thanks to some large orders arriving at the very end of the month (see Foundry Haunted by 'Lumpiness').

”We saw less of a back-end loaded quarter than the previous quarter,” Johnson says. But he added that Foundry’s largest deals with the federal government, which makes up 28 percent of its total revenues, came in the last two weeks of Q3.

The last few months have seen a number of changes at Foundry, with the departure of the company’s CTO and a major overhaul of the firm’s engineering, sales, and marketing operations (see Foundry Loses CTO to F5 and Foundry Completes Revamp).

Foundry’s headcount is now 640, up 52 employees year on year. But one analyst on today’s call asked Johnson about rumors of staff turnover, specifically the departure of sales people.

”There will be some people that feel comfortable with their new roles and there will be some people that feel less comfortable with their new roles,” Johnson says. Foundry has one of the lowest attrition rates in the networking and technology sector, according to Johnson.

Foundry is currently building a sales force specifically for its Layer 4 to Layer 7 products, separate from the company’s Layer 2 to Layer 3 sales team. The thinking behind this is to boost sales momentum on the company’s high-end application switches.

The CEO promises the launch of two new product lines this quarter, as well as several new Layer 2 to Layer 3 offerings next year. There will also be a concerted focus on security, according to Johnson. “The only piece that we are missing is a dedicated firewall/VPN device -- there will be more that we do in that space,” he says.

Foundry’s shares were up 3 percent in trading on Thursday and they climbed another 15 cents (1.39 percent) to $10.93 in after-hours trading.

— James Rogers, Site Editor, Next-gen Data Center Forum

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