Investors Refuse To Accept ShoreTel Inc (NASDAQ:SHOR)’s Report


A sharp decline in the core Products revenue offset all the gains that ShoreTel Inc (NASDAQ:SHOR) made in other segments in F3Q2016. As such, both revenue and EPS in the quarter fell short of the consensus estimate. But that was not the only factor that sparked sellout in the stock, light guidance for the current quarter further heightened investor concern.

Where things went right

According to ShoreTel Inc (NASDAQ:SHOR)’s CEO, Don Joos, the ongoing execution on the company’s business plan yielded gains across all categories but Products. Hosted revenue rose 22% to $32.8 million and support and services revenue increase 1% to $18.5 million. The gains come primarily courtesy of strong sales in the mid-market and enterprise categories.

ShoreTel said the number of installed customer seats increased 27% to reach 218,000.

Where things went wrong

However, a steep decline in Products segment offset the gains in all that ShoreTel Inc (NASDAQ:SHOR) made in all the other categories. Products revenue fell 14% to $33.9 million.

What was the impact?

The 14% decrease in Products revenue meant that overall revenue for ShoreTel Inc (NASDAQ:SHOR) in the quarter only increased 0.6% to $85.2 million. But that was not what Wall Street had set its eyes on. Analysts on the average modeled revenue of 88.6 million.

Coming to the bottom-line, ShoreTel Inc (NASDAQ:SHOR) posted EPS loss of $0.06, more than EPS loss of $0.04 a year ago and below the consensus estimate of $0.04.

Light F4Q2016 guidance

As if posting weak quarterly results wasn’t enough, ShoreTel Inc (NASDAQ:SHOR) went on to provide a light guidance for the current quarter. Revenue is forecasted in the range of $88 to $94 million. However, the consensus estimate calls for revenue of $96.2 million in the current quarter.

The soft guidance and the fact that ShoreTel Inc (NASDAQ:SHOR)’s core segment appears to be weakening is a cause for serious concern among investors and the reason the stock registered a massive pullback.


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