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

Page 1 of 2

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.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!