Infoblox Revs Up Datacenters

One recent tech IPO that has managed (so far at least) to stay above its offering price is Infoblox (NYSE: BLOX), a leading provider of automated network control appliances that enable dynamic networks and next-generation datacenters.

Dynamic networks allow on-demand connections and configurations of devices and applications, giving organizations the ability to accelerate delivery of virtualization and cloud computing.

Priced in April at $16 a share, the stock opened at $22.50 and reached its post-IPO high of $23.35 on the first day of trading. After dipping to $16.80 in May, Infoblox shares have recovered into the low $20s ahead of the release of fiscal fourth-quarter results on Thursday.

Infoblox is seeing solid demand for its appliances, which are becoming more of a necessity as IT departments are forced to accommodate increased infrastructure requirements. In many cases, Infoblox solutions replace the use of Excel spreadsheets, a very inefficient way to manage IP addresses. According to research firm Tully Group, customers can save as much as 70% in labor costs by deploying Infoblox solutions and see a return on investment in as little as three months.

The company's solutions combine real-time IP address management with the automation of key network control and network change and configuration management processes. Infoblox's proprietary software is highly scalable and automates vital network functions -- including device configuration, compliance, network discovery, policy implementation, security, and monitoring.

Infoblox, which has a customer base of more than 5,400 organizations, competes with big enterprise vendors such as BMC Software (Nasdaq: BMC), EMC (NYSE: EMC), IBM (NYSE: IBM), and Hewlett-Packard (NYSE: HPQ).

The company has been spending as much as 20% of revenue on R&D to help stay ahead of the competition. Infoblox's new Trinzic appliances, introduced earlier this year, are being well received in part because they offer features (including remote operations control) not found in solutions from competitors.

In fiscal 2011 (ended July), revenue rose 30% to $132.8 million. The fiscal 2012 consensus revenue estimate of $167.7 million indicates expected growth of 26%. At a recent market cap of $1 billion, Infoblox trades at 5.1 times the fiscal 2013 consensus revenue estimate of $194.8 million.

For the fiscal third quarter (ended April), revenue rose 37% year-over-year and 5% sequentially to $43.4 million, topping the consensus estimate of $41.4 million, and per-share earnings of 5 cents beat the consensus by 4 cents. Product revenue rose 34% to $24.6 million. Gross margin was flat year-over-year at 78.5%, and operating margin improved 60 basis points sequentially to 5.5%.

Infoblox sees fiscal fourth-quarter revenue of $42.5 million to $44 million (the consensus estimate is $43.5 million), with per-share earnings of breakeven to 1 cent. Gross margin is expected to come in at 76%. JMP Securities, which has a $25 price target on the stock, says its checks indicate Infoblox is executing well with its channel partners, and it expects the company to beat expectations for the quarter.

With the recent release of the Trinzic 4030 carrier-grade DNS caching appliance, Infoblox is going after larger enterprise, government, and service-provider customers. The 4030 box is equipped to handle heavy workloads, ranging from social media traffic to large amounts of mobile data. It can handle as many as 1 million DNS queries per second, 25 times faster than legacy systems.

Prior to its release, the 4030 was in beta trials with three large customers, all of which came back with positive reviews. Service providers haven't even tested the 4030's peak performance levels because their workloads don't yet scale up to its maximum capacity.

Infoblox looks to expand its presence in the service-provider market, as the 4030 provides infrastructure support for customer-facing networks as well as managed services. In the April quarter, Infoblox's newest line of appliances accounted for about 40% of total revenue; this figure should jump to as much as 90% in the July quarter.