Infoblox Inc (BLOX), VMware, Inc. (VMW): Importance of Network Persistence Plays to This Company’s Strengths

I have January 2014 calls, and it would not require too much for me to realize a nice return on that as long as the stock moves before fall. With $45 billion in cash the company can do whatever it wants once it figures out what it wants to do. I think the company is being very careful about its next move, but I wish they would make the right choice faster.

Infoblox Inc (NYSE:BLOX) is profitable according to non-GAAP earnings, but moves slightly into the red with GAAP. The most recent quarter saw the company’s revenue increase 32% on a year-over-year basis. The company expects the next quarter to see around 30% YoY growth on the top line.

Gross margin is around 78% and is actually down, because the company now offers some more products that have lower margins. That kind of margin erosion is completely acceptable, because the product base is expanding. Right now, the company is still getting new customers and making sales, but eventually, support renewals will form a major part of the business, and is already forming a nice chunk of revenue.

Conclusion

People who actually know Infoblox Inc (NYSE:BLOX) will note that I have left a direct competitor, SolarWinds Inc (NYSE:SWI), out of the article. The reason for this is that both companies are relatively unknown, and I think Infoblox should be on watchlists that include Cisco Systems, Inc. (NASDAQ:CSCO) and VMware, Inc. (NYSE:VMW) as potential investments on the cloud and the heightened importance of networks. Networks facilitate so many important services from networking to productivity software to collaboration tools in the same office that they need to stay up all the time.

I would prefer to go over SolarWinds Inc (NYSE:SWI) separately, since it seems to have a broader product base. Infoblox is far newer with more growth potential. It forms a nice addition to Cisco Systems, Inc. (NASDAQ:CSCO), which is an old giant, and VMware, which is newer but has experienced huge growth.

Nihar Patel has the following options: Long Jan 2014 $30 Calls on Cisco Systems. The Motley Fool recommends Cisco Systems and VMware. The Motley Fool owns shares of VMware.