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Why Are Shares Of Infoblox Tumbling?

Eric Niederer

Infoblox (NYSE: BLOX), an automated network control solutions company, reported Thursday that its current CEO and president Robert Thomas will be stepping down.

Thomas, who joined the company in 2004, said, "I am confident the board will select a world-class leader to continue to grow the company, and build on the strong base we have in place today."

Analysts, however, do not appear to share this same confidence.

Amid this news, investors and traders alike are running for the hills, as shares of Infoblox have plummeted almost 40 percent Friday morning.

A number of firms including Pacific Crest, Deutsche Bank and Citi issued notes Friday explaining their take on the outlook for Infoblox.

Brent Bracelin of Pacific Crest wrote, "The prospects for this promising new growth company have turned sour. We would reduce exposure to BLOX until visibility improves."

Bracelin downgraded shares of Infloblox from Outperform to Sector Perform and does not currently have a price target for the company.

In addition to the announcement that Thomas will be leaving the company, Infloblox also released its fiscal 2014 third quarter results. Despite posting a $0.03 EPS beat vs. consensus in the third quarter, the company reduced its guidance for the third straight quarter.

Speaking on the company's third quarter, Citi analysts said, "Infoblox's woes deepened during FQ3 with close rates coming under pressure due to a DDI resource squeeze, as IT organizations appear to be prioritizing other IT projects ahead of DDI projects."

There seems to be optimism among the previously mentioned firms for Infoblox's longer-term outlook, but the consensus is the near-term is too unclear and will likely continue to suffer from a "slow down" in product orders.

Analysts at Deutsche Bank echoed the sentiment at Citi, saying, "We think it is prudent to move to the sidelines in the near term, given our view that the 'Security' focus of Blox's IT customer base is not likely to wane over the next few quarters, which is likely to mute quarter-over-quarter sales trends for Blox's DDI."

Citi and Deutsche Bank currently rate Infloblox at Neutral and Hold, respectively, and have significantly cut its price targets, Citi from $25 to $15 and Deutsche Bank from $30 to $18.

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