Packeteer's Patchy Performance

Even though its market is growing quickly, Packeteer's (Nasdaq: PKTR) shares have slumped 27% so far this year. The stock seems to have stabilized, but the company still faces serious challenges as its competition intensifies.

Packeteer develops wide area networks, or WANs -- advanced systems that allow companies to transfer documents, videos, and VOIP traffic at high speeds. The company's fiscal first-quarter results were not so speedy, alas. Revenue increased 7% to $34.7 million, even though the company ramped up sales and marketing expenses from 38% to 46% of revenues over the past year.

All those costs took a toll on the bottom line, as Packeteer suffered a net loss of $6.1 million, or $0.17 per share. In the year-ago period, the company posted net income of $4.5 million, or $0.13 per share.

In light of its complex product line, it's not uncommon for Packeteer to see deals slip into the subsequent quarter. Indeed, the company forecasts a robust Q2, with sequential growth ranging from 5% to 10%.

Even so, the company still must deal with growing competitive threats. On the heels of its recent IPO, Riverbed Technologies (Nasdaq: RVBD) is gaining lots of traction, quadrupling sales year over year to $90.2 million in 2006. Packeteer also faces pressure from Juniper Networks (Nasdaq: JNPR) and Cisco Systems (Nasdaq: CSCO)

Over the next few months, Packeteer will launch a myriad of new products, which should help bump up sales. All the same, the company must fight hard for new business, and it's already demonstrated problems delivering new products. Foolish investors still face lots of uncertainty here, so it's probably best to wait on any prospective investments.