The ongoing transition of F5 Networks from a hardware to a software company continues to drag on its growth.
For its first fiscal quarter, which ended Dec. 31st, Seattle’s F5 reported revenue of $543.8 million, an increase of four percent compared to the same period last year. Analysts polled by Yahoo Finance were expecting revenue of $547.36 million for the quarter, and investors sent the company’s stock down slightly in after-hours trading.
Excluding special items, earnings per share were $2.70, which exceeded expectations. The company cut five percent of its employees last July, and has been able to deliver consistent profits while forecasting slow revenue growth during its transition.
Like a lot of enterprise tech companies that rose to prominence in the data center era, F5 has been shifting its business to focus more on application delivery and security software used by companies running applications in public clouds and on their own equipment. Last year during a presentation to Wall Street analysts CEO Francois Locoh-Donou predicted that the company’s revenue would grow by just “low-to-mid single digit(s)” throughout its 2019 fiscal year and into 2020.
“We see 2019 as a significant pivot point for our business,” Locoh-Donou said on a conference call following the release of the results. The company has been teasing the introduction of new cloud services over the last few months, and significant new products will arrive in the first half of the year, he said.
Software accounted for just 19 percent of F5’s product revenue during the first fiscal quarter, but that category is growing much more quickly than its overall revenue, said Frank Pelzer, executive vice president and chief financial officer, during the call. F5 expects revenue from software to grow between 30 percent and 35 percent over the next few years, Locoh-Donou said.
F5 remains on track to move into its swanky new digs downtown at the beginning of April, Locoh-Donou said, and the moving process is expected to last until July.
[Editor’s note: This post was updated several times as more information became available.]
