Summit Research Downgrades Barracuda Networks Following Q3 Results; Stock Plummets

Summit Research issued a company report on Barracuda Networks Inc CUDA downgrading the IT security company following their third consecutive billings miss.

Currently, Summit Research rates Barracuda at Hold and lowered the price target from $32 to $15.

Srini Nandury, an analyst at Summit Research, wrote, "While Barracuda's execution issues were likely fixed (the two tier model is now working, new leadership in EMEA & APAC, etc.), for us now the bigger concern is customers moving to the public cloud. We believe this is the greatest threat to Barracuda given that there are many applications that are natively provided by public cloud providers [...] Barracuda will need to prove to the investor community that it can execute and deliver solid growth."

Related Link: Pacific Crest Downgrades Barracuda

Summit noted the primary reason billings were lower than expected was weak storage among their clients. The trend of lower storage can be attributed to cloud computing, which poses significant challenges to Barracuda's business operations. Going forward, Summit noted three main impacts of cloud computing on Barracuda:

• 1. Lengthening deal cycles
• strong>2. Long-term deals for services are being reduced to one-year contracts
• 3. Physical appliance billings are declining due to clients opting for virtual solutions

• 1. Lengthening deal cycles
• strong>2. Long-term deals for services are being reduced to one-year contracts
• 3. Physical appliance billings are declining due to clients opting for virtual solutions

Overall, Summit Research sees continued weakness for Barracuda as the move to cloud services has seen recent acceleration in growth.

Barracuda was recently seen trading down 32.08 percent at $11.11.