Cloud Services

Arista's Strong Q4 Should Ease Investor Lawsuit Jitters – Analyst

Arista's strong fourth-quarter results should help calm investor nerves about its ongoing lawsuit with Cisco, an analyst report suggested Friday.

Arista Networks Inc. reported net income of $30.3 million Thursday evening. Earnings per share beat Wall Street expectations at $0.53 a share, excluding stock option expenses. Revenue for the final quarter of 2014 came in at $173.5 million, up 51% compared to the same period the year before.

For the first quarter of this year, the company is projecting revenue in a range of $164 million to $172 million.

MKM Partners lauded the strong results in a research note Friday. The analysts are raising their EPS guidance for the first quarter from $0.29 to $0.38:

    Arista turned in a strong revenue and gross margins beat-and-raise, and the underlying fundamentals of the business look very positive. The results should help to alleviate investor concerns that the Cisco lawsuit will have negative revenue and GMs [gross margins] repercussions. We are increasing our 2015 and 2016 revenue forecasts slightly and raising our non-GAAP estimates significantly as a result.

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This doesn't mean that the legal battle with Cisco, however, is just scotch mist. The networking giant launched a copyright and patent infringment suit against Arista in December. (See Cisco Slams Arista With Massive Patent & Copyright Suit and Arista Needs to Hang Tough as Stock Dives.)

Arista is projecting legal costs of $5 million to $7 million for the first quarter alone. It expects the lawsuit to be a multi-year process.

But continued strong quarters from Arista should help to fortify investors in this legal battle.

— Dan Jones, Mobile Editor, Light Reading

Mitch Wagner 2/24/2015 | 5:34:40 PM
Living well Cisco is unlikely to settle the lawsuit. It wants Arista dead and if it can't have that it will drag the process out, and spread FUD among customers, as long as possible.
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