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
blog comments powered by Disqus
Insider Monkey Headlines
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

On the Move: The 10 Fastest Growing Businesses in 2015

Fast Money: The 10 Highest Paying Fast Food Restaurants

Mixing It Up: The 14 Best Music Mashups of 2014

Rito Pls Buff: The 10 Least Played Champions in LoL Season 4

10 Covers of Popular Songs that are Better than the Originals

Must See TV: The 9 Most Anticipated Shows of 2015

The 15 Biggest Box Office Bombs of All Time

10 Things The World Can’t Stand About Americans

Picture Perfect: The 6 Smartphones with the Best Cameras

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

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!