Blue Coat Beats by a Whisker – Analyst Blog

Blue Coat Systems Inc. (BCSI) reported fiscal 2010 third-quarter results after the closing bell on Wednesday. The company posted GAAP earnings of $6.9 million, compared to $1.1 million in the year-ago quarter. Excluding special items, adjusted earnings per share came in at 27 cents, which squeezed past the Zacks Consensus Estimate by a penny.

 

Blue Coat offers an Application Delivery Network Infrastructure that provides the visibility, acceleration and security required to optimize and secure the flow of information to any user on any network anywhere. This application intelligence enables enterprises to tightly align network investments with business requirements, speed decision making and secure business applications for long-term competitive advantage.

 

The Sunnyvale, California-based company recorded a 16.0% growth in total net revenue to $127.1 million from $109.6 million in the year-ago quarter. The expansion was primarily driven by a 16.0% increase in product revenue to $84.1 million coupled with a 15.9% rise in service revenue to $43.0 million.

During the quarter, Blue Coat’s gross profit grew 20.1% to $95.0 million, while gross margin expanded 260 basis points (bps) year-over-year to 74.7%, mainly due to improved service margins. Total operating expenses, as a percentage of revenues, increased 20 bps to 68.6% primarily due to a 15.1% increase in research and development expense partially offset by a 1.6% decrease in sales and marketing expense.

 

However, a solid growth in revenue and gross margin more than offset the increase in operating expenses. Consequently, Blue Coat’s operating margin surged 87.9% to $7.9 million, while operating margin increased 240 bps to 6.2%.

 

 At the end of the quarter, Blue Coat had cash and cash equivalents of $187.3 million, compared to $110.9 million in the year-ago period. During the first nine months of the fiscal, the company generated $71.0 million of cash from operations and deployed $16.1 million towards capital expenditure.

 

Moving forward, Blue Coat expects revenues during the fourth quarter of fiscal 2010 to range between $129 million and $134 million, while adjusted earnings per share are expected between 36 cents and 41 cents. The guidance is well above the Zacks Consensus Estimate of 29 cents per share, which has remained constant over the past 3 months.

 

The Zacks Consensus Estimate for fiscal 2010, derived from 4 covering analysts, currently stands at 90 cents per share, which has remained unchanged as well over the past 3 months.