Fortinet (NASDAQ: FTNT), a major cyber security provider, reported after Tuesday’s market close its preliminary third quarter results which sent investors running for the exit.
Fortinet said that it now expects to earn $0.15 to $0.16 per share in the third quarter on revenue of $311 million to $316 million. The company previously expected to earn $0.17 to $0.18 per share in the quarter on revenue of $319 million to $324 million.
Wall Street analysts were projecting the company to earn $0.18 per share on revenue of $322.4 million.
Fortinet’s downward revised guidance prompted a massive sell-off in shares which were trading lower by around 14 percent during the after hours trading session.
Fortinet offered an explanation for its poor results. The company’s CEO Ken Xie said that the results were mostly impacted by the lengthening of deal cycles as its clients have become “more strategic” when it comes to buying cyber security protection. The executive also noted that clients are now doing so with “less urgency” compared to the same time period a year ago.
Xie also cited “sales execution challenges” within the North American American due to the “newness” of its sales organization. In addition, macro issues affected its operations in Latin America and the United Kingdom.
“Though we are disappointed with our third quarter performance, we continue to feel good about our competitive-differentiating and market-leading security fabric,” Xie added. “We remain confident in the underlying strength of our business and long-term growth opportunity, and committed to delivering returns to our shareholders.”
In conjunction with the earnings warning, Fortinet said that its Board of Directors authorized a $100 million increase to its already existing stock buyback program. The addition brings the current program to $300 million.
Fortinet added that during the third quarter it bought back $25 million worth of its common stock and throughout the entire 2016 it bought back $75 million worth of stock.
Fortinet’s after-market decline on Tuesday has more than wiped out all gains the stock has made since the start of the new year. Not including the 14 percent decline, shares of the cyber-security stock was higher by nearly 10 percent since January 1.
Fortinet’s announcement also resulted in shares of other cyber security-related names to trade lower. For instance, FireEye (NASDAQ: FEYE) saw its stock move lower by nearly 3 percent,