F5 Networks (FFIV) opened slightly lower today after reporting its fiscal third-quarter earnings last night.

Its earnings per share (EPS) of $2.52 vs. $2.44 on a 4% gain in revenue to $563.4 million was in line with expectations, and these figures include two months of operations from the recently acquired NGINX.

Guidance for EPS in the fiscal fourth quarter of $2.53 to $2.56 was below analysts’ expectations of $2.65. However, it is important to note that many analysts had not yet taken into account the dilution that NGINX had brought to FFIV’s earnings in the near-term.

Despite the lower stock price, I was encouraged by the results, with software revenue up 91% to $67 million and now accounting for 12% of total revenue, as the company continues to make excellent progress towards being a software-oriented company that is ready to provide customers with a broader range of solutions for application delivery beyond hardware.

I am also impressed with the company’s continued cash generation, which is being aided by continued growth and stability in services revenues, as it rose 4% to $314.4 million in the current quarter.

FFIV continues to be somewhat of a work in progress, but its transition is going well. Furthermore, the stock is cheap at 14X forward EPS estimates and has net cash of $16 a share on its balance sheet. Buy FFIV below $155.00. My target is $170.00.