Wedbush Maintains Neutral Rating On Aruba Networks

According to Wedbush, Aruba Networks ARUN Neutral rating is maintained. Wedbush said that it maintains its NEUTRAL rating due to valuation and to lack of leverage in the model despite robust top-line performance. “The company delivered yet another quarter of robust growth as adoption of 802.11n WLAN solutions continues uninterrupted; however, FQ3 EPS only slightly exceeded expectations, largely because of a ~300 bps decline in GM due to higher mix of international revenue. Furthermore, FQ4 guidance may not be good enough given past beats and raises, as it was generally in line with our expectations and appears conservative given the magnitude of the FQ3 outperformance. While we believe the company is continuing to show an impressive ability to execute and take share in the attractive WLAN market; we believe GM headwinds are likely to persist given higher mix of international revenue and the eventual ramp of lower margin OEM sales from Dell making continued margin expansion more difficult, in our opinion. Aruba's rich valuation and lack of leverage, despite robust revenue growth, suggest a less attractive risk/reward profile and, therefore, we remain on the sidelines and advise investors to build positions at lower levels.” Aruba Networks closed yesterday at $32.69.