The $670 million March acquisition of NGINX was the largest purchase in the history of Seattle’s F5 Networks, and financial analysts had several questions Wednesday about integration plans for CEO Francois Locoh-Donou during the first earnings conference call since the deal was announced.
And he had answers, clarifying how a major software product initiative from the first half of 2019 would work within the broader product portfolio F5 is acquiring and explaining how the two sales teams would work together. The details appeared to help limit the damage of an after-hours decline in its stock price following the release of first-quarter revenue numbers that missed analyst expectations.
As GeekWire reported earlier today, F5 was planning to release a new product designed to help cloud-native application developers manage those apps just a few weeks before it announced the acquisition of NGINX. That product will be combined with a similar product already sold by NGINX, Locoh-Donou said, and the combined companies will sell the NGINX version of the product after the close of the deal.
And when it comes to sales, NGINX employed more of an inside sales strategy for its commercial products built around open-source projects, Locoh-Donou said. A major enterprise supplier for many years, F5 has a “high-touch” outside sales operation that it thinks will allow NGINX products to reach a wider audience of corporate customers, and he said the two groups should complement each other well.
The addition of NGINX should definitely accelerate revenue growth at F5, which recorded just two percent growth in revenue during the quarter, with $544.5 million. Analysts were looking for $547 million in revenue, according to Yahoo Finance, and F5’s stock fell as much as four percent in after-hours trading before rebounding during the conference call.
Lagging revenue growth has been hanging over the company the last several years, which is trying to grow its software business as its traditional data center business flatlines. Revenue from software products grew 30 percent during the quarter, Locoh-Donou said.