CacheFlow: Another High-Flier Bites the Dust

CacheFlow had all
the ingredients of a high-octane, late-1990s IPO. There were top VCs, such
as Benchmark Capital. Even Marc Andreessen is a board member.

And the technology is definitely whiz-bang. As the name implies, CacheFlow
is a leader in caching technologies. That is, the most often requested Net
content is stored and served locally – in order to speed-up delivery.
CacheFlow accomplishes this by using appliances, which run on the only
caching operating system (called CacheOS).

Why appliances? Well, it makes things much easier to implement. In fact,
it may take a few minutes to add the caching abilities within a network.
The appliances are also smart – so there is little maintenance.

No question, the company’s products are in high demand. This week, the
company announced that its sales showed a sequential growth rate of 45
percent to $32.5 million. In addition, net losses narrowed to $3.1 million.

But lately, Wall Street has been a losing proposition for earnings
announcements. Yes, CacheFlow saw its stock price plunge $39 to $37-13/16.
Of course, had this company announced these results six months ago,
investors would have pumped the stock 20 or 30 points.

Looking deeper into the company, there are many compelling fundamentals.
Increasingly, the company’s technology is getting better. Critical was the
acquisition of Entera, which will allow capabilities for streaming.

What’s more, in the past quarter, CacheFlow launched four new products. In
quick fashion, the company has built an end-to-end portfolio of
content-smart appliances.

The 52-week range on CacheFlow is $27-$182-3/16. The current stock is
obviously a much better value. But as has been seen during the past few
months, the blood-letting tends to continue. In other words, it would
probably not be smart to jump in to catch this falling knife.

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