Fortinet shares tumble on 1Q guidance cut

Fortinet shares fall on reduced 1st-quarter earnings and revenue outlook

Associated Press

NEW YORK (AP) -- Shares of Fortinet Inc. tumbled Thursday after the network security provider cut its first-quarter profit and revenue forecast.

THE SPARK: The company said late Wednesday that it now expects adjusted earnings of 10 cents per share, down from its previous prediction of 11 cents to 12 cents per share. Analysts polled by FactSet had been expecting 12 cents per share.

The company now expects total revenue of between $134 million and $136 million range, down from the company's earlier guidance of $138 million to $141 million. Analysts estimated $140.2 million.

THE BIG PICTURE: The Sunnyvale, Calif.-based company said that a number of U.S. service provider deals did not close as expected. It also struggled with larger economic pressures overseas and, to a lesser extent, problems with timing of new product releases and inventory shortages.

THE ANALYSIS: The news prompted Morgan Stanley analyst Keith Weiss to cut his rating for the company to "Equal Weight" from "Overweight."

Weiss said that changing purchasing patterns among Fortinet's customers could continue to affect its results for the next several quarters. He said investors need to see multiple quarters of solid results from the company before buying its shares.

But Pacific Crest's Rob Owens said that while the guidance cut may spook investors, Fortinet's results for the rest of the year should get a boost from demand for network security, refreshed products and a new operating system. He backed his "Outperform" rating for the stock.

THE SHARES: Down $3, or 14 percent, to $18.85 in afternoon trading, after dropping as low as $17.55 earlier in the day and coming within 2 cents of their 52-week low.

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