Management has consistently shown its main objectives (among other things) include broadening the company and lessening its dependency on its storage business. Clearly, earnings showed the strategy has been working perfectly. But the company continues to be underestimated.
As enterprise spending continues to recover, Brocade will begin to see its stock price appreciate. I would be a buyer here at current levels and investors should expect shares to reach $8 by the second half of the year.
Of the group so far, Aruba Networks was 2012's best with gains of 12 percent. However, at one point the stock was up 35 percent on the year. Since then, shares have lost 26 percent of its value. As evident by a solid fourth-quarter report, which ended the year on a high note, investors should anticipate a much better performance from Aruba in 2013.
During the quarter revenue surged 22 percent year-over-year to $139.2 million. Aside from a 6 percent sequential improvement, sales topped analysts' estimates of $136.8 million. The company continues to do well in the U.S. as revenue soared 14 percent sequentially. Aruba earned $22.1 million or 18 cents per share, topping analysts' estimates by 1 cent.
Equally impressive was that gross margins improved year-over-year by three points and arrive one point better sequentially. The company also ended the year with almost $350 million in cash, equivalents as well as other investments. Equally impressive is that it does not have any significant outstanding debt.
With the stock trading just above $21 per share, there is a lot of potential here for a company still growing at 22 percent. Despite competitive pressures, Aruba's fundamentals are solid and seem poised to continue its growth momentum.
Value investors with some appetite for risk should consider this as an opportunity as part of a long term hold. The stock should see $25 by the second half of the year.
—By TheStreet.com Contributor Richard Saintvilus
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At the time of publication, Richard Saintvilus held no position in any of the stocks mentioned.