F5 a safe bet for channel, claims CEO

The CEO of application delivery networking specialist F5 Networks has outlined the company’s channel-centric model during a visit to the region this week, insisting that its healthy financial position might be attractive for resellers seeking stability from vendor partners in the current climate.

John McAdam, who is meeting with partners and customers as part of his three-day visit, said that the difficult economy was putting more scrutiny on “true business metrics” such as cash generation and profitability, citing the fact that F5’s stock price climbed on the back of recent second quarter results even though sales fell 3% year-on-year to $154m.

“The market is now taking a different view — the view that this [economic situation] will get better and when it does, who will be the major players,” said McAdam. “And our cash position is incredibly strong — we have half a billion dollars in cash, no debt whatsoever and we generate cash every quarter. We beat our cash projections again this quarter and profits on the GAAP side were above our guidance and at the high-end of our guidance on the non-GAAP side, so we are still very profitable and there is no risk.”

Although F5 has felt the impact of the industry slowdown — it shed 100 staff as part of a cost-reduction exercise — the company claims that a massive product refresh over the last 18 months has strengthened its proposition versus fierce rival Cisco.

On top of that, McAdam insists that alliances with vendors such as Microsoft, Oracle, VMware and SAP provides partners of all backgrounds with an ideal platform from which to deliver its solutions.

“Our pitch is that we are a partner company so we really want partners to make good margins, and because we are very software-oriented we believe they can do that. Secondly, we are not after the services revenue — we have the typical break-fix-type revenue, but if a partner can do services we will want to share that with them,” explained McAdam.

“If partners have got skill-sets with Microsoft or Oracle they can really differentiate and make money that way. In other words, we are not a commodity player, we are a real add-value company, and we would expect partners to add value and get the benefit of that as well,” he continued.

In the Middle East, F5 routes all its business through the channel, employing SecureWay as its exclusive distributor for the region.

With second quarter profits up 7% year-on-year to $19m and analysts praising its cost-control mechanisms, it would appear that F5 could be seen as an attractive acquisition target by some.

McAdam, however, refuses to be drawn into that debate: “This is one of these questions I am very wary of answering for obvious reasons, but clearly there is a lot of consolidation going on, nobody can deny that. Our job is really simple — not many companies get the chance to be successful, independent and at the forefront of technology, and we are in that place. While you do that there is a chance you are going to look attractive at the same time and it then becomes about the value of your market capitalisation.”

Print | Email | Discuss this article

| Share |

READERS' COMMENTS

Click here to post a comment

Add your Comment All posts are sent to the administrator for review and are published only after approval. ArabianBusiness.com reserves the right to remove any comment at any time for any reason. Please keep your responses appropriate and on topic. Arabian Business would like to point out that only comments relevant to the story will be published. Any containing personal insults or inappropriate language will not be approved.
Name *
Remember me on this computer
Email *	(Your email address will not be published)
City
Country
Subject *
Comment *
Notify me of further comments
Enter the words above *
Please click post only once - your comment will not be published immediately.

MORE FROM ARABIANBUSINESS.COM