• Pure Storage's stock plunges, weak guidance is an ominous sign for tech infrastructure vendors

    Pure Storage CEO Charles Giancarlo.

    Ryan Anson | Bloomberg | Getty Images

    Pure Storage, a manufacturer of high-speed storage equipment for data centers, became the latest tech infrastructure provider to issue weak guidance, at least in part because of worsening macroeconomic conditions and the U.S.-China trade war.

    Pure Storage shares plunged 15% on Friday to close at $16.86, a day after the company's fiscal third-quarter earnings report missed analysts' estimates on its fourth-quarter outlook. In recent weeks, Arista and Cisco, which sell communications equipment, also gave revenue guidance that trailed Wall Street's expectations.

    In its conference call with analysts, Pure blamed a troublesome macroeconomic environment and falling prices for the disappointing numbers. CEO Charlie Giancarlo cited Brexit and "trade tensions" with Asia as some of the challenges the company faces.

    "Those are the things where we saw more slowdown than the other areas, and that just indicates a little bit of global economic headwinds," said Giancarlo, a former top Cisco executive who also happens to sit on Arista's board.

    Pure said in a statement that it expects sales of $484 million to $496 million in its fiscal fourth quarter, below the $511.3 million consensus estimate among analysts polled by Refinitiv.

    Companies are taking longer to make their buying decisions, creating a "market that's a little bit more challenging to forecast," Giancarlo said.

    The CEO of Cisco, Chuck Robbins, is seen during his presentation on ‘The Next Generation’ in the Mobile World Congress Barcelona 2019 on February 27, 2019 in Barcelona, Spain. (Photo by David Zorrakino/Europa Press via Getty Images)

    David Zorrakino | Europa Press | Getty Images

    Last week, Cisco said it expects revenue in its fiscal second quarter to decline by 3% to 5%. Analysts polled by Refinitiv had expected 2.6% growth. CEO Chuck Robbins told analysts the company faced macroeconomic pressure in the quarter and that some large deals were made but "got done smaller."

    "If you recall on the last earnings call, I did say that we began to see some early signs of some macro impact towards the end of Q4, and then we just basically saw that continue throughout the quarter," Robbins said. "Obviously the entire quarter was worse than we had expected when we began, and it was fairly broad-based."

    Arista's disappointing guidance had less to do with global conditions and more to do with declining business from a large cloud customer. Still, CEO Jayshree Ullal, also a former Cisco executive, said on the conference call that if macroeconomic challenges mount, it would hit everyone including Arista. Networking vendor Juniper, meanwhile, said in October that "there have been some overall macroeconomic factors that have impacted the timing of orders."

    Pure rival NetApp gave revenue guidance last week that met analysts' estimates, though the company also highlighted macro concerns.

    "Both macroeconomic and enterprise spending indicators show continued weakness," NetApp CEO George Kurian said on his company's earnings call.

    Dell, another competitor in the data storage market, reports earnings on Tuesday, and investors can expect to hear more about the state of the global economy and its impact on technology. On a conference call with analysts in September, CFO Tom Sweet said, "We've got some different macro dynamics going on."

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