I’ve been traveling since the earnings announcement, so I’m only now getting caught up on everything. I don’t have much to add to Anirban’s great write-up.
For long-term shareholders, here’s the key comment from Pera in my opinion:
From the inception of the company, we haven’t had very predictable linear sales growth. Although, the growth has been spectacular, and there’s going to be ebbs and flows due to things like changing imports and import tax environment, currency exchanges, there’s vacation and holidays that cost some seasonality. So it’s very difficult to look at this company and say, “Okay. Well, they did such and such revenue last quarter, and they’re down 5% this quarter. And what will they be the next quarter?” If you look at from our IPO, I think, we’ve tripled up to this point within three years, and I – my aim is to triple the service provider business again in the next few years.
So I want to say that about the service provider business. Now we know there’s some unpredictability in the service provider business, and one of the things we’ve done to mitigate that exposure is we’ve diversified our R&D. We’ve introduced UniFi, which is our enterprise solution, a few years back. And that’s growing very fast, and we’re expanding it, and we think it’s probably about 30% of our business right now. And long term, we think it’s going to be close to an equal split between enterprise and service provider. The benefit of the enterprise is that it’s much more predictable. Even though a lot of it is going to emerging markets, it’s less prone to things like seasonality, where installers have a vacation or time off, and it’s – I believe it will bring more stability to predicting our future revenue growth.
And what Pera says about quarterly lumpiness is true, and is even identified as a risk factor in their annual reports: “Our quarterly operating results fluctuate significantly due to a variety of factors, many of which are outside of our control, and we expect them to continue to do so.”
This has also happened before, back in 2010, and even for the same quarters. From the S1:
**Three Months Ended**
**Dec 31, 2009** **Mar 30 2010** **Jun 30 2010** **Sep 30, 2010** **Dec 31, 2010** **Mar 31, 2011**
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**Revenues:** $36,294 $41,517 $40,299 $34,082 $45,087 $51,151
(in thousands)
So anyway, I’m content to wait it out. If Pera is correct and the business comes even close to tripling over the next 3-4 years, then we’ll all do just fine. I’m certainly not going to stress out over a couple of quarters.
Neil
Long UBNT