(Reuters) - Network gear maker F5 Networks Inc (FFIV.O) posted stronger-than-expected quarterly results as demand rose for its new data traffic management products but said its gross margins may suffer over the next year as it invests more in its consulting business.
The company’s shares rose 10 percent in extended trading, before paring some gains to trade up 3 percent at $89.25.
F5 Networks expects gross margins to fall 50 to 100 basis points as it increased investment in the lower-margin consulting services, Chief Financial Officer Andy Reinland said on a post-earnings conference call.
However, Chief Executive John McAdam told Reuters that the company’s main focus is its security business and the service provider market.
F5 and peers such as Riverbed Technology Inc RVBD.O and Juniper Networks Inc (JNPR.N) are benefiting as telecom spending recovers from a lull last year, with top mobile carriers AT&T Inc (T.N) and Verizon Communications Inc (VZ.N) spending billions to upgrade their networks.
Net income rose to $76.2 million, or 97 cents per share, in the fourth quarter, from $67.7 million, or 85 cents per share, a year earlier.
Excluding items, the company earned $1.26 per share.
Revenue rose 9 percent to $395.3 million.
Analysts on average had expected earnings of $1.19 per share on revenue of $384.7 million, according to Thomson Reuters I/B/E/S.
Juniper reported a better-than-expected second-quarter earnings on Tuesday as spending by telecom service providers recovers. <ID: nL4N0FT3WJ>
In the past year, F5 has upgraded some software modules and introduced new hardware that helps reduce load and manage traffic on data, voice and video networks.
The company forecast first-quarter adjusted profit of $1.17 to $1.20 per share on revenue of $390 million to $400 million.
Analysts on average expected earnings of $1.20 on revenue of $389.6 million, according to Thomson Reuters I/B/E/S.
F5’s shares have risen nearly 13 percent in the past three months.
Reporting by Neha Alawadhi and Lehar Maan in Bangalore; Editing by Maju Samuel and Don Sebastian