November 18, 2010 / 12:04 AM / 7 years ago

Aruba sees strong Q2 on tablet, smartphone surge

BANGALORE (Reuters) - No. 2 U.S. wireless LAN provider Aruba Networks Inc forecast a robust second quarter, in contrast with market leader Cisco Systems Inc's weak outlook, as it sees increased usage of smartphones and tablet devices driving growth.

"The number of mobile devices in the workplace is exceeding desktop devices and IT managers are forced to rethink the type of network connectivity that they want to provide," which plays to Aruba's strength in enterprise grade Wi-Fi, Gleacher and Co analyst Stephen Patel said.

Sunnyvale, California-based Aruba, which also competes with Hewlett-Packard and Motorola, forecast second-quarter adjusted earnings of 12-13 cents a share, on revenue of $86-$88 million.

Analysts on average were expecting earnings of 12 cents a share, excluding special items, on revenue of $84.7 million, according to Thomson Reuters I/B/E/S.

Shares of Aruba, which fell as much as 4 percent after the company's first-quarter results, reversed direction and were up 5 percent in aftermarket trading following the bullish forecast.

"The more pervasive the adoption of smartphones and mobile devices, the greater the catalyst for their top-line growth over the next few years," Mizuho Securities USA analyst Joanna Makris told Reuters.

Last week, Cisco gave a dismal revenue outlook that stunned investors who had hoped for proof of a recovery in technology spending.

"I actually think that we are well poised to gain market share because of this whole trend about the wireless LAN deployment getting into general enterprise because of smartphones and smart pads," Chief Executive Dominic Orr said in an earnings call.

Aruba also expects its acquisition of Azalea Networks to give it a foothold in the Chinese market. The integration has gone smoothly to date, Orr said.

"China has been a massive addressable market that has been untapped by Aruba or any WLAN supplier in a meaningful way. So, we are very excited about the prospects there," Makris said.

Gleacher and Co's Patel does not expect to see a lot of revenue coming from China in the next 1-2 quarters but expects that market to ramp in the second half of 2011.

Aruba, listed on Deloitte's list of 500 fastest growing technology companies in North America, added 800 customers in the quarter.

The company, which counts Microsoft Corp, Google Inc and the U.S. Air Force among its customers, said the new wins include one of the busiest airports in the world and the largest privately owned real estate company in the United States.

Aruba shares have doubled in value this year, compared to the Nasdaq telecommunication index, which has been mostly flat.

Reporting by Supantha Mukherjee in Bangalore; Editing by Unnikrishnan Nair

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