Some Updates from the Networking Stocks

A very busy evening as the Amazon.com (AMZN) numbers were good, but with the stock up 10% ahead of earnings, it was "not good enough" and that seems to be weighing on tech stocks after hours. Typical buy on the rumor, sell on the news.

Off to stocks in the portfolio
#1) Juniper Networks (JNPR) is a 1.3% position. Much like Amazon.com the numbers looked fine but expectations had gotten a bit ahead of themselves. The company beat nicely on revenue and beat by a penny on the bottom line; and gross margins are expanding. Solid all around but in this market, for a stock up nearly 100% this year and at a premium valuation, you need to do more than that. So the stock looks to be selling off 5% after hours. Juniper is part of my "networking basket" and not one of the major names, as I already culled this position as I mentioned yesterday.

however with its large run and slower growth than some of the other fish in the kettle, I have pulled back exposure to this name.

This is a solid stock and company, but at current valuations I don't see a ton of upside right now.

#2) Riverbed Technology (RVBD) is a 1.7% position, quite related to one of the fund's top holdins Blue Coat Systems (BCSI). (large parts of their businesses overlap). This stock is down 20% after hours and I am not clear exactly why. I believe the headline number of $.04 EPS might have scared off the lemmings...err investors. In fact in my personal account I bought some around $39 since this appears to be a knee jerk reaction, but within Marketocracy rules I cannot buy in after hours. So if the stock opens at a similar level tomorrow I will actually be adding to this position.

As is typical with tech companies especially, who love to lavish stock options, there are earnings before special items and after special items. So the $0.04 came after special items, but the analysts play a game of wink wink with these companies, and everyone ignores the costs of stock options, so the expectation for EPS was $0.17 which the company matched. Now perhaps, "matching" estimates is a no no for such a high flying stock but its not worth a 20% haircut in my book. Revenue came in at $63.3M vs $61.4M, and gross margins improved from 69.7% to 71.4% just from last quarter to this quarter - that's great!

So this just appears to be a stock that hit estimates instead of 'beating' them and in this stock investing world of what have you done for me lately that is not good enough. As I have been saying throughout the blog, Riverbed is not a cheap stock and hence why I have been overweight Blue Coat Systems for the past 2 months (but with Blue Coat's huge run its closed the gap by a large margin). At $39 the stock trades at >48x 2008 estimates, but for small fast growing tech companies that is sort of par for the course. Revenue is growing at >150% year over year and gross margins are expanding... that's all you can ask. I like it a lot more at $39 then I did at $52 it was trading last week. Hopefully confusion reigns overnight and the stock opens this weak tomorrow - another drawback of this fake mutual fund business, I cannot buy in after hours. I usually don't mess with after hours, but occasionally there are anomalies like this one appears to be. I did not see any guidance given, so that could be another issue and perhaps the conference call will clear up the matter.

If this persists in the morning, I will consider closing Juniper Networks and just moving the money into Riverbed Technology - thus keeping my networking exposure flat but moving to the stock with more long term potential.

Blue Coat Systems (BCSI) is down 7% in after hours as well in sympathy with Riverbed.

Long Juniper Networks, Riverbed Technology in fund; long Riverbed Technology in personal account