Will Riverbed Technology, Inc. (RVBD) Ever Find Bottom? – Cisco Systems, Inc. (CSCO), Juniper Networks, Inc. (JNPR)

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Shares of Riverbed Technology, Inc. (NASDAQ:RVBD) are still struggling to find their footing ever since the company’s fourth quarter earnings report sent the stock tumbling down 22%. I felt the level of punishment was an exaggerated reaction by investors, especially since Riverbed’s earnings arrived broadly in line with expectations. The Street, however, felt differently. Since then the stock has tumbled another 8% to a recent low of $14.82, and I’m wondering will this stock ever find a floor.

Riverbed Technology, Inc. (NASDAQ:RVBD)Are there reasons to be fearful?
Granted, that’s a very general question. And I’m sure there’s always a reason to be fearful in every investment. In this sector, carrier spending is a big concern. But Riverbed has done as well as it can from what has been a brutal spending environment, which has also affected F5 Networks, Inc. (NASDAQ:FFIV) and Juniper Networks, Inc. (NYSE:JNPR).

However, somewhere along the way, it seems Riverbed Technology, Inc. (NASDAQ:RVBD)’s management has lost the Street’s confidence. And judging by the stock’s movement lately, so have investors. But can management regain faith that the company can navigate out of what has been a weak wide area network — or WAN — optimization business? But the numbers tell a different story. Despite the recent slowdown, Riverbed was still able to secure 52% market share, surpassing rivals like Cisco Systems, Inc. (NASDAQ:CSCO) .

Cisco Systems, Inc. (NASDAQ:CSCO)’s recent attacks on the Riverbed Technology, Inc. (NASDAQ:RVBD)’s WAN business are cause for concern, however. Cisco Systems, Inc. (NASDAQ:CSCO) continues to spend aggressively in that area. These include paying $141 million in cash for Cariden, followed by $1.2 billion for Meraki and then Cisco picked off BroadHop to leverage its enterprise mobile position. While Riverbed Technology, Inc. (NASDAQ:RVBD) enjoys a 52% share today in WAN optimization, the net effect of these recent acquisitions by Cisco might eat into that lead. To that end, Riverbed Technology, Inc. (NASDAQ:RVBD)’s management guided very cautiously. And it was at that point that investors got spooked.

Can OPNET revitalize growth?
Despite what the stock has done recently, growth has not been a problem for Riverbed Technology, Inc. (NASDAQ:RVBD). After all, the company posted a 17% year-over-year increase in revenue, which also advanced 9% sequentially. That’s all well and good. But it speaks to the present, while saying very little about where the company is going. The Street understood this. Astute investors also appreciate that this performance was prior to Cisco’s recent acquisitions.

Similarly, investors are hoping that Riverbed’s $1 billion acquisition of OPNET eventually pays off. So far, however, the scenario has not been favorable. In fact, in the recent quarter it actually hurt Riverbed’s core business, causing a miss in operating margin, which arrived at 27%. But excluding the OPNET acquisition, Riverbed’s operating margin was actually 1% higher. But it can’t be all-bad forever. I didn’t care for the timing of the acquisition. But it was one that Riverbed had to make.

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