A10 Networks (ATEN), which is a supplier of network equipment that optimizes data center performance, is trading higher today (+12%) after guiding higher for Q3. In terms of quick background, A10 Networks is primarily a supplier of Application Delivery Controllers (ADCs) which allow customers to accelerate, secure and optimize the performance of their data centers and cloud applications. ATEN offers a broad portfolio of hardware, software, and cloud offerings. Its customers include cloud providers, web-scale companies, service providers, government organizations and enterprises.
For decades, businesses operated with applications based in physical, appliance-based data centers. However, a new genre of cloud-based applications is emerging. This is causing challenges in terms of how a business effectively manages secure application services across various data centers and cloud type - whether private, public or hybrid clouds.
ATEN believes businesses will need a platform that bridges both traditional and cloud-based application environments and centrally manage all secure application services holistically. ATEN helps customers with visibility, performance, and security. In the past, applications were forced to comply with the way networks were architected. Now IT vendors may increasingly build networks to conform to applications. As a result, traditional IT vendors need to shift from hardware-centric models to software-defined approaches to improve agility.
Also, the rapid growth of mobile and other internet-connected devices threatens to overwhelm the current Internet Protocol ("IP") addressing scheme, IPv4. This "Internet of Things" trend, combined with mobility and widespread access to the internet globally, all feed each other. As a result, application networking technology plays a significant role in managing two internet connection standards simultaneously, extending the viability of IPv4 while enabling customers to move to IPv6. As new trends like 5G emerge in coming years, the need for IPv4 preservation and IPv6 transition is likely to increase in importance.
So how do A10's products help?
Its primary product is its Application Delivery Controllers (ADCs). Its Thunder ADC provides server load balancing. ADCs are typically deployed in front of a server farm within a data center, including web, application and database servers. Another product is its Lightning ADS, which allows ATEN to service the growing demand for ADC functionality in the cloud. Introduced after the acquisition of Appcito in 2016, Lightning ADS is a cloud-native software-as-a-service (SaaS) platform designed to boost the delivery and security of applications and microservices across public, private and hybrid clouds, enabling "ADC-as-a-service."
ATEN also offers Carrier Grade Networking (CGN). Its Thunder CGN extends the life of increasingly scarce IPv4 address blocks and their associated infrastructure using Carrier-Grade NAT ("CGNAT" or "CGN"), and also provides migration services to the IPv6 addressing standard. Its CGN platform is typically deployed in service provider networks to provide standards-compliant address and protocol translation services between varying types of IP addresses. ATEN says it's an industry-leading product and has been successfully implemented in many large service providers around the world.
The company also offers its Threat Protection System. Thunder TPS provides high-volume, large-scale protection for customers' networks and server resources against massive DDoS attacks. TPS is typically deployed at the perimeter of customer networks to protect their internal network from cyberattacks. ATEN also offers Thunder SSLi which eliminates the inherent blind spot created by SSL encryption, offloading CPU-intensive SSL decryption functions that enable security devices to inspect and remove malware within encrypted traffic.
Guidance / Conclusion
Turning to the guidance, A10 Networks raised its Q3 revenue guidance to $59-60 mln, up from prior guidance of $53-57 mln. The company also expects to report a non-GAAP profit, which investors were happy to hear as analysts had been expecting a loss in Q3. ATEN expects to deliver a strong Q3 result, led by sales into its marquee service provider customers. Full Q3 results will be reported on Thursday, October 26, 2017 after the close. In sum, after guiding sharply lower ahead of Q2 results which led to a sell-off in the stock, this was a nice change of pace to see the company actually raise guidance this quarter.