The networking-hardware sector continues to grapple with a post-Covid hangover, and the issue is weighing heavily on the stocks in the group.
This week brings alarming earnings news from two players in the group. As reported earlier,
Extreme Networks
shares are getting pummeled after the company provided financial guidance for the March and June quarters that was well below Wall Street’s expectations.
For the March quarter, Extreme is projecting revenue of between $200 million and $210 million, a miss of more than $100 million. For the June quarter, guidance is for $265 million to $275 million, below the consensus call for $355 million.
Extreme blamed the shortfall on high customer inventories, which have resulted from a surge in shipments that followed the normalization of component availability in recent quarters after the parts shortage that cropped up during the Covid-19 pandemic.
This is a familiar story. Cisco cited the same issue in reporting its financial results last November.
“
Cisco
saw a slowdown of new product orders in the first quarter of fiscal 2024 and believes the primary reason is that customers are currently focused on installing and implementing products in their environments following exceptionally strong product delivery over the past three quarters,” the company said in announcing its October quarter results. “Cisco estimates there are one to two quarters of shipped product orders still waiting to be implemented by its customers.”
Meanwhile,
Juniper Networks,
which recently agreed to be acquired by
Hewlett Packard Enterprise
for $14 billion in cash, late Tuesday reported December quarter results that missed the company’s financial targets on almost every line.
Juniper posted revenue of $1.36 billion, down 6% from a year earlier, off 2% sequentially, and below guidance for $1.4 billion. That includes a 13% drop in product revenue, offset by 10% growth in services.
Non-GAAP operating margin was 18.3%, below the company’s 18.6% target . Adjusted profits of 61 cents a share missed the company’s target of 63 cents. And product orders were down by single digits on year-over-year basis.
Juniper, which didn’t conduct a post-earnings conference call, said that the revenue miss reflected “the timing of orders and our ability to deliver those orders within the period.” Piper Sandler analyst James Fish said in a research note that were it not for the deal, Juniper shares would almost certainly be selling off.
“We expect HPE investors to be concerned with this type of print,” he wrote.
Given the pending acquisition, Juniper shares were little changed, but HP Enterprise stock was down 3.6%, to $15.32. Other key players in the group declined as well: Cisco was down 3% to $50.69, and
Arista Networks
fell 4.9% to $258.74.
Write to Eric J. Savitz at [email protected]
Read the full article here
