Ahead of the Bell: Aruba Networks stock drops

NEW YORK (AP) -- Worries about increasing competition from Cisco weighed on shares of Aruba Networks Friday.

The wireless communications company on Thursday had reported a fiscal third-quarter loss, said it was disappointed with its results and cautious about trends in technology spending. Earlier this month, Aruba had said customers were delaying orders because of the weak economy. And there's another problem: Cisco's shift into Aruba's wireless market will likely continue, said Aruba CEO Dominic Orr on a conference call Thursday.

In premarket trading Friday, Aruba Networks Inc. shares fell $3.61, or 21 percent, to $14. The stock has dropped 15 percent in 2013.

Cisco Systems Inc., a maker of computer networking gear, on Wednesday said that its latest quarterly profit rose 14 percent and sounded an optimistic note about demand from customers.

Janney Capital Markets analyst Bill Choi to cut his rating for Aruba shares to "Neutral" from "Buy" and slashed his price target by $9 to $16. He said that while Aruba's wireless products remain superior to those made by Cisco, more customers are seeing Cisco's products as "good enough." That could keep Aruba from increasing its market share, he said.

Investors are also likely to remain wary in the near term about weak technology spending by companies and government agencies — Aruba's customers — said Jefferies analyst George Notter. That could hinder gains in Aruba's stock. He has a "Hold" rating on Aruba's shares.