Miss at F5 Networks

Among networking companies, F5 Networks has been a great performer delivering superior revenue growth and consistent margin. With its proprietary traffic management approach, it has competed successfully with the likes of Cisco in the application delivery controller market. However, last night it uncharacteristically pre-announced a large revenue and earnings shortfall.

NEW YORK (AP) -- Shares of F5 Networks Inc. tumbled before Friday's opening bell after the company cut its outlook for the January-March quarter, citing disappointing results from its North American business.

Seattle-based F5, which sells information technology and networking equipment and services, said telecommunications contract bookings dropped compared with the October-December quarter and the same period in 2012. Revenue from business with the federal government also fell.

The main culprit of the shortfall appears to be the company's North America business. The launching of multiple new products certainly lengthened the sales cycle and contributing to the miss. Not to be overlooked, the federal government business was also extremely weak. The market had essentially declared the sequester as a non-factor; however, as earnings season commences in earnest, we will find out if it is so. I will be very weary of companies with large exposure to the government vertical.