Barclays Downgrades ALLT, Sees Limited Transparency Concerns

In a report published Wednesday, analysts at Barclays downgraded

. The price target was lowered from $11 to $9. The company is currently transitioning to primarily offering value added services due to the slowing of its core DPI segment. According to Barclays, "This transition will affect revenue, size of deals, geographic mix, bookings and backlog trends, GM, and OPEX." Although the move is expected to have a positive impact on Allot Communications' industry position in the long term, the company's strategy to offer limited guidance and transparency in the short term creates uncertainty. In addition, the company reported its 1Q results in-line with the estimates, although the book-to-bill ratio declined to below 1 for the first time in the past 9 quarters. While the management blamed the weakness in booking on Fx headwinds and "lumpiness," the analysts believe that the results reflect the weakness in Allot Communications' DPI business as well as the transition phase the company is going through in 2015. The company's transition to focusing on value added services and the Optenet acquisition are likely to drive growth in gross margins, although it might also lead to a permanent increase in opex as well.