Shares in Packeteer Inc lost more than a quarter of their value after the optimization/acceleration vendor warned that first-quarter sales are likely to fall 25% from the previous quarter.
For the three months ended March 31, the Cupertino, California-based company said it expects to report disappointing net revenue of between $31m to $33m, down 25% from the fourth quarter of 2006. Packeteer had previously expected first-quarter revenue to be flat or slightly higher than the fourth quarter.
The markets had also been expecting Packeteer to post first quarter 2007 sales close to the $43m mark, compared to sales of $32.3m in the first quarter of 2006. The huge miss sent shares in the company down 27.7% to $9.08 on Nasdaq Wednesday. The share price had closed trading on Tuesday at $12.57.
These preliminary revenue results are very disappointing, said Packeteer president and CEO Dave Cote. While they will also have a significant impact on our bottom-line results for the first quarter, we remain optimistic about our long-term business opportunities.
The company also said Arturo Cazares, its vice-president of worldwide sales, had resigned after three years at the company. Cote will assume responsibility for the management of the sales unit until a replacement has been hired. Packeteer will formally report its first-quarter results on April 19.
Packeteer is one of the best known names in the optimization/acceleration market. It was one of the pioneers in the 90s, but its expertise was entirely in bandwidth-management. It delivered QoS by prioritizing traffic types such as VoIP, or a CEO’s presentation to the staff, over web surfing, for instance. That technology is still valid, but forms only a part of optimization/acceleration, which also encompasses things like removing the chattiness of TCP, disk-based and memory-based compression, and eliminating repeated strings of packets.
The company has been on the acquisition trail to add functionality. Two years ago it acquired Mentat for its TCP optimization skills, and last year it bought Tacit Networks for its wide-area file services capability in the area of CIFS and MAPI. That in turn has led to integration issues because it has to decide which OS to run as the kernel for the multi-function appliances it plans with all these technologies. Tacit was a Windows shop when Packeteer acquired it, but Packeteer itself uses a hardened open source kernel.
While it might ultimately integrate all the disparate strands of its portfolio successfully, the process appears to have stalled its sales efforts.
Packeteer has clearly missed its targets and Arturo Cazares seems to have been singled out to take the fall. CEO Dave Cote is taking over the management of the sales operation, and it will be interesting to see whether he can restore the fortunes of the company in the next couple of quarters. If he does, he will be a hero, and the market will pin the first-quarter sale miss on Cazares. If Cote fails however, then there is clearly more going on than meets the eye.