Aruba Networks, Inc. (ARUN)
February 26, 2013 4:20 pm ET
Executives
Michael M. Galvin - Chief Financial Officer and Principal Accounting Officer
Dave Logan
Analysts
Jeremy David - Morgan Stanley, Research Division
Presentation
Jeremy David - Morgan Stanley, Research Division
All right. Let's get started, everybody. Good afternoon. My name is Jeremy David. I work on the communications equipment team here at Morgan Stanley with Ehud Gelblum, who unfortunately, could not be here today with us. So welcome to the Aruba session. It's my pleasure to introduce Michael Galvin, CFO; as well as, Dave Logan, VP of Product Development. Mike, Dave, welcome.
Michael M. Galvin
Thank you.
Dave Logan
Thank you. Good afternoon.
Question-and-Answer Session
Jeremy David - Morgan Stanley, Research Division
So I'd like to get off to a few questions. First thing, the earnings call last week, great results. We saw a reacceleration in your revenue growth, which was really nice to see. Do you think that reacceleration is sustainable as we look forward over the next couple of quarters? And what is your -- has your view changed on the long-term growth of the wireless LAN market over the past couple of months?
Michael M. Galvin
Yes. So the last -- our Q2 results. I think maybe, maybe the theme of that quarter for us was that we felt very good about the breadth of the platform that we've rolled out and kind of the performance of the products our traditional WLAN products along with our instant platform, our ClearPass platform and we talked a little bit about the switches and the success we had there. So I think from kind of a geographic and a product perspective, just the breadth and kind of consistency of the performance, we are really encouraged by it. We -- in terms of go-forward, we obviously only guide out 1 quarter. But really, what we're trying to do is the disruption, if you will, that's going on in the market that we're playing in and the evolution of mobility, BYOD, these things that you're hearing so much about, as those TAMs and those growth rates and those market sizes get disrupted, it's really trying to position ourselves, platform-wise to capture the growth of those markets. We feel good about the size of the markets we're playing in. And we're trying to execute to -- we felt good about the growth last quarter, obviously, we put a guidance out for the next quarter that we used the same process every quarter in terms of trying to put a -- the analytics, et cetera, around the pipeline and what our sales force is telling us and factoring in things that exist out there. Europe is still a tough environment, overall. We've got this new phenomenon of sequestration that's lingering out there. So we try to factor in some macro elements to that, on top of the detailed analytics and pipeline that our fueled organization is telling us. So we put a guidance out there for the next quarter. But felt good about the growth that happened in Q2.
Jeremy David - Morgan Stanley, Research Division
So you seem to be still worried a little bit about EMEA, but it was up about 32% last quarter, sequentially. And other companies, Infoblox, which reported last week as well, also summarized growth in Europe. So, are those growing shoots, or you think that we're not quite there yet in terms of the recovery in Europe?
Michael M. Galvin
Yes. One way I described it was, for several quarters now, Europe has been a concern. And maybe the difference this quarter was it's been a concern for a while now. And maybe you could even say it was a worsening concern, each quarter, maybe this quarter, it didn't turn around, but maybe it was no worse of a concern. It's kind of the way I have thought about it. So maybe a little bit of stabilization there and -- but we're still pretty cautious. There's a -- there's a bigger portion of our Europe business that is based on -- that derives from public sector funding, just because of the nature of Europe versus the U.S. And so, with that tied to the public service, public sector funding, it is still a cautious environment.
Jeremy David - Morgan Stanley, Research Division
What led the recovery there in Europe? Was that the public sector piece or that was just broad based overall?
Michael M. Galvin
And I'm sorry, the recovery...
Jeremy David - Morgan Stanley, Research Division
Last quarter that you saw in Europe? Was it broad based? You mentioned in the quarter...
Michael M. Galvin
Yes, maybe to use my -- I don't put it in the category of recovery yet. I guess I'd put it in just not quite as descending as much as the prior quarters. Still, in terms of what the makeup was, I'd say the mix was pretty consistent with the past year. It was just still a tough environment, but not quite descending as much as it had been over the past year. I wouldn't call it a recovery.
Jeremy David - Morgan Stanley, Research Division
Okay. Second rate of -- secondary activity is always important, the investing indiscernible] that's always a positive. As you look forward over the next several quarters, which verticals are you most excited about in terms of amounts of greenfield you can go after? Or in terms of penetration, you can get to from your current base?
Michael M. Galvin
Yes. For everyone's perspective, we've kind of are -- we've kind of had a big 5 in terms of verticals that have been solid business for us for a couple of years now. Those are higher education, retail, healthcare, the U.S. federal piece and then what we call the general enterprise. General enterprise is a little bit of a catch all bucket for everything not in specific buckets and those have, those have been strong verticals for us for a while. I've seen in the last 12 to 24 months, the up and comers have been K-12, which we distinguish from higher ed in financial services. Financial services is kind of a late adopting IT industry by nature. And that has really shown strong growth. And so in terms of looking forward, I'd definitely put, I think continued strength in financial services is -- we feel pretty good about. The other piece in the last 12 months and something, we did some big announcements on -- this week, in Barcelona, is the managed service offerings with the service providers. Where they are offering our platform out to enterprises. And so it's almost a little more of a vertical, if you will -- or I'm sorry, a channel, if you will, than a pure vertical. But the managed service business in what we've been leveraging, we've been talking for several quarters about very good growth there and kind of how that's evolving. So I think that's when we feel good about.
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