JMP Downgrades Aruba Networks, Shares Fall 5%

JMP Securities downgraded Aruba Networks, Inc. ARUN Monday from Market Outperform to Market Perform.

Analysts Erik Suppiger and John Lucia commented that their “checks suggest that the steps Aruba Networks has taken to cut costs and optimize sales efficiency may have frustrated some of the sales organization, likely impacting sales execution, and as a result, we believe the shares may experience volatility over the coming quarters.”

Suppiger noted that the changes included “cutting compensation and raising sales targets for many of the top-performing sales people” which “may have impacted morale and demotivated some sales reps” causing some to resign.

“While we are concerned about the near- to intermediate-term impact from the sales force changes, we believe Aruba remains well-positioned from a product perspective, and given the large volume of additional sales people hired last fiscal year, we believe the company will eventually work through the issues noted,” according to the analysts.

The firm lowered its F2Q15 revenue estimate to $210 million (consensus $211 million) from $211 million and maintaining its EPS estimate of $0.27, inline with consensus. For F3Q15, the firm lowered estimated EPS of $0.26 (consensus $0.28) on revenue of $212 million (consensus $217 million) from EPS of $0.28 on revenue of $219 million.

Aruba Networks recently traded at $16.71, down 5.75 percent.