Friday, July 10, 2015

Is there a problem in the DPI Market? (Part 2)

Dave Caputo [pictured], CEO of Sandvine, provided his views on the growth of the DPI market, in the company's Q2 earning call (revenues were $28.6M, as pre-announced, see "Sandvine Reports Q2 2015 Results" - here):

Q (by Richard Tse - Cormark Securities): Dave, can you give us a sense of the growth rate in the DPI market. We've seen only a competitor's sort of announced similar pull back or slowdown there. Maybe a tougher criterion so clearing these deals is there -- just a broader slowdown of market or just something else that sort of triggered all these requirements both getting other incremental and technical sign offs?

A: "well, I think this is the key question here. Based on a lot announcement in the past few days and are slower than expected start to the first half of the year. It's hard to imagine that the market or the market will likely not grow as quickly this year. And while we don't give guidance, we can say it will be a challenge to grow revenue as quickly as we did last year. But there are still opportunities for Sandvine to grow faster than the market .."  

Q (by Alex Henderson [pictured]- Needham and Company):  ". talking with the folks over at [Allot] it seemed quite clear in the way they discussed the trajectory of their business that they are seeing significant pressure on the growth rate particularly around the optimization portion of their portfolio whereas the service enablement functionality is actually still reasonably healthy. And they are talking about pivoting their strategy towards security because of that. They are really describing that is sort of change in the nature of the market as opposed to something they think is temporary. Now I know you guys have always focused more on the service enablement side but would you concur with that view of the world that the service enablement is the primary driver of the business going forward and that optimization is becoming less important?

A: "Yes. I would certainly agree with the idea of service creation and business intelligence has been the key drivers of our business for the past three and may be in four years. If I recall last year the traffic optimization and other part of our business was around 30% of our business back from -- if you back five years ago it had been 100% of our business. Although I do believe we grew at last year as well. And so I would say in general traffic management especially blunt force traffic management shaping and throttling, you could do increasingly available switches and routers out there .." 

See "Sandvine's (SNVNF) CEO Dave Caputo on Q2 2015 Results - Earnings Call Transcript", by SeekingAlpha, here.

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