Friday, February 8, 2008

This doesn't just REEKS...

We have an early leader in February's BS of the Month contest. Aruba Networks just announced their quarterly numbers. The Street expected $51.5 million; they announced preliminary numbers of $40-41 million. Okay, hey, everybody has a train wreck of a quarter sometimes. Blame it on the channel, then move along. Nothing to see here. We'll fix the channel, one-time hit, pip-pip, cheerio, onto the next Q.

But, c'mon. If you're Cisco and you blow the federal number by $10 million, no worries. But if you're a company that misses numbers by nearly 20% and you blame the biggest piece of that miss on the federal channel, I assume you have one of three problems: A) your federal team has been so historically good, and the rest of your team so historically bad, that you're content to let the fed team be that big a piece of your business (and I'm sure they still brought in business during the previous quarter, since their customers in existing programs could obviously buy off of continuing resolution); B: whoever's running sales has never dealt with a federal component before, meaning he/she has no idea how to trust the forecast that the federal team provides; or C) whoever wrote the press release and signed off on it must both understand so little about how a federal sector contributes to a network equipment provider's business that they probably shouldn't be writing a press release like this...or sure as hell not being the one to sign it. Since I doubt it's the former, I don't see many other options but the latter. We're not talking General Dynamics here folks. We're talking a Silicon Valley startup. I highly doubt that they were counting on the federal sector to be that big a piece of their business, so I find it totally disingenuous to blame the shortfall on their fed team. Blame 'em second, after the channel. Blame 'em third, after the supposedly longer sales cycle. But don't blame the guys in D.C.

This is so smelly that I've just gone out to Edgar to look at Aruba's 10-Q from the previous quarter. If you know me, you know that I look at 10-Qs pretty much, uh, never. But I was curious to see what risk factors were called out. Sure, the 10-Q calls out everything top to bottom, including the fact that an earthquake here in the Bay Area or bad things happening in China could materially impact the business. Nowhere in the entire 10-Q does it even mention federal or government business, meaning that the thing that's bitten them in the butt didn't even show up on anybody's radar as recently as last quarter? C''re killin' me here.

I mean, maybe I'm making a mountain out of a molehill (and Lord knows, it wouldn't be the first time), but there's a ginormous disconnect. I've come across some really, really smart folks at Aruba over the years, which is why this is so surprising.

This comes down to one of two things. This could simply be a poorly written press release that was unfortunately signed off on by otherwise smart folks.

Or is it the canary in the coal mine?


  1. Or maybe they have lost their edge and someone has come along that's eating their lunch?

  2. Aruba is the best product in the WLAN space. It scales and is at the forefront of future enterprise needs such as FMC. What Aruba also has is a VP of Sales that does not have a clue on how to build a channel and make relationships. The channel and a good channel plan create the broad demand for ANY product. Folks it boils down to when you are the small dog in a fight with the biggest dog (Cisco) you better have created loyalty through relationships. The VP of sales at Aruba has no idea how to do this.