Foundry Stock Slides on Q1 Results

Despite its flurry of recent activity in the Layer 4-7 space, Foundry Networks Inc. (Nasdaq: FDRY)dipped below analyst expectations when it posted its first quarter results yesterday.

The news was not well received by investors. In after-hours trading, Foundry shares were down $3.85 (27.2%) to $10.30. In regular trading yesterday, shares fell $1.04 (6.85%) to $14.15.

Revenues for the first quarter of 2004 were $104 million, compared to $91.1 million in the first quarter of 2003. Foundry net income was $19.9 million, or 14 cents per diluted share in the first quarter, compared to net income of $13.4 million, or 11 cents per diluted share in the same period last year.

However, these figures were some way below analyst expectations of 17 cents per share and $113 million revenue.

Foundry executives on last nights earnings call attributed the company’s weak results to its first quarter performance in Japan, and ‘seasonality’, citing the fact that the first and third quarters of the year are traditionally its most ‘challenging’.But it wasn’t all doom and gloom. Foundry continues to be a strong player in the federal government space, which accounted for nearly a third of the company’s Q1 revenues. Key wins came from the US Army and US Navy.

The company is also planning to build on its recent product announcements in the Layer 4-7 switch space. Foundry CEO Bobby Johnson says, “We will shortly have more product announcements in the 10 Gigabit Ethernet arena with a specific focus on decreasing the price per port.”

Foundry will also be announcing 10-Gigabit Ethernet and Gigabit Ethernet interfaces for its Terathon offering this quarter, according to Johnson. These will be capable of full wire speed IPv6 at 480 million packets per second.

And, tantalizingly, there is more to come at the forthcoming NetWorld + Interop. conference in Las Vegas. Johnson says, “We expect that we will have new announcements not yet covered on this conference call that will involve strengthening our overall product portfolio and strengthening our security appliance offerings.”

— James Rogers, Site Editor, Next-gen Data Center Forum0