Bloomberg News

IBM Squeezing Kramer Triggers 44% Stock Plunge: Israel Overnight

April 13, 2014

IBM NY Offices

The International Business Machines Corp. logo is displayed in front of the company's offices in New York. Photographer: Craig Warga/Bloomberg

Shlomo Kramer, the Israeli entrepreneur who made his name by co-founding the world’s second-largest security networks maker, is seeing investor support vanish for his latest cyber venture.

Imperva Inc. (IMPV:US), the Redwood Shores, California-based company that builds security systems for data centers, sank 44 percent last week after scaling back its first-quarter revenue growth outlook to a third of its previous forecast. Almost all of the declines came in a single day, April 10. The rout erased $584 million of market value and sent the stock to a 20-month low.

Imperva, one of six Israeli online-security firms that Kramer has founded or financially backed over the past two decades, is facing growing competition from global powerhouses including International Business Machines Corp. (IBM:US) and F5 Networks Inc. (FFIV:US) Kramer, who is also the chief executive officer of Imperva, said the company missed its sales projection as competition for larger deals delayed orders, according to an April 9 statement.

“They had a significant miss,” Jonathan Ho, a Chicago-based analyst at William Blair & Co., said in an April 10 telephone interview. Investors were surprised as “the company would always downplay their competitors and always viewed themselves as having a strong competitive position,” he said.

Imperva will provide more details on first-quarter performance when it reports earnings May 1, according to the statement. Ralph Pisani, the company’s senior vice president of worldwide sales, informed the company he would leave Imperva effective June 30, according to an April 1 regulatory filing (IMPV:US).

Cloud Security

The revenue miss was caused by “extended sales cycles” and by “sales execution challenges in the U.S.,” Kramer said in the statement announcing preliminary earnings.

Samuel Potter, an investor relations representative for Imperva, didn’t respond to an e-mail and phone call requesting comment on the earnings report and the departure of Pisani.

Imperva is also in the midst of integrating two cloud security companies it acquired in the fourth quarter. The acquisitions will leave “little room for error,” Shaul Eyal, a New York-based analyst with Oppenheimer & Co., wrote in an April 10 note. He lowered Imperva shares to the equivalent of hold from buy.

The stock added 0.4 percent to $28.11 on April 11. Imperva’s slump last week has made the shares attractive because there is still growth potential for its security platform, according to Robert Breza, an analyst at Sterne Agee & Leach Inc. who raised Imperva to a buy on April 11.

“Imperva has great technology, what they need to do is just improve their sales force execution,” Breza said in an April 10 telephone interview. “This is not a broken company.”

The Bloomberg Israel-US gauge fell 2.6 percent last week to 114.15, the biggest weekly loss since Jan. 24, trimming this year’s advance to 2.6 percent. The benchmark TA-25 Index dropped 1.2 percent today in Tel Aviv, paring the year-to-date gain to 5 percent.

To contact the reporter on this story: Gabrielle Coppola in New York at gcoppola@bloomberg.net

To contact the editors responsible for this story: Tal Barak Harif at tbarak@bloomberg.net Robert Lakin


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Companies Mentioned

  • IMPV
    (Imperva Inc)
    • $29.11 USD
    • -0.02
    • -0.07%
  • IBM
    (International Business Machines Corp)
    • $192.3 USD
    • 0.30
    • 0.16%
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