Network Engines (NENG) Update

Well Network Engines (NENG) closed up nicely today giving us an over 45% gain from our initial recommendation.What´s driving this move in NENG? Probably the almost daily press releases touting one or more new partnerships for the company´s NS Series of Network Security Appliances based on Microsoft´s ISA Server platform.

Today´s press release stated:
"Anticipating the needs in the SMB market, Network Engines now delivers the top choice for organizations that wish to protect mission-critical applications including Outlook® Web Access, IIS, and SharePoint® Portal Services at a price point that meets customer requirements," said Mike Riley, vice president of marketing and corporate strategy for Network Engines. "Tight integration of Microsoft and Websense technologies with NEWS(TM) enables NS Series solutions to be deployed quickly and managed with unparalleled simplicity."

Overall, without any new financial numbers, it´s difficult to say how justified this 45% move is, but once again we´re sitting tight and holding NENG because we believe the company will see significant revenue and earnings growth in the coming years under the guidance of its new CEO. The company also is positioned well in what we believe is a solid growth industry, server appliances. Furthermore, it pays to mention that technology stocks generally move up dramatically, way in advance of any real earnings results (the market is priced on expectation, not reality). As such, the valuation of NENG may seem out of whack at times, but its important to remember that this is merely the market discounting huge future growth.

To read our initial recommendation of NENG, please click here.