BCSI Executing Well On Operational Restructuring Effort

Analysts at ThinkEquity Partners reiterate their "buy" rating on Blue Coat Systems Inc (NASDAQ: BCSI), while raising their estimates for the company. The target price for BCSI is set to $31.64.

”We believe Blue Coat's strategic product focus is riding the tailwind of several industry trends (proliferation of video content, Web 2.0, increased regulation, bandwidth constraints, and server consolidation), which should support continued top-line growth. A renewed focus on operational execution, workforce rationalization, and strengthening R&D capability should drive operating efficiencies and cash flow, in our opinion” the analysts say.

“Overall, we thought management's tone was positive and portrayed confidence in the fundamental outlook and competitive positioning. Based on recent quarterly performance, we think Blue Coat is executing well on its operational restructuring effort, as evidenced by the strong operating margin expansion from 12.5% in 1Q10 to 19.9% in 3Q10. Management suggests that it will continue focus on driving operational efficiencies and invest in opex behind revenue growth. As a result, we see no reason why the company would not be able to drive continued margin improvement over time. In addition to improved operational execution, we believe the company's accelerating revenue growth over the last quarters demonstate improved sales execution around the Application Delivery Networking (ADN) market opportunity,” the analysts add.

ThinkEquity Partners has raised its EPS estimate for FY11 from $1.60 to $1.68.

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