Cisco has a market cap of $129 billion and a revenue base of nearly $50 billion, suggesting the company will have a difficult time turning the focus towards a WAN Optimization market where its revenue can’t be much more than $100 million on a quarterly basis. The company has a net cash hoard of $30 billion, providing it with the resources to control the market if it so chooses. Even with this massive size, the stock trades at a similar forward multiple of around 11 times earnings, highlighting the value in Riverbed’s stock.
F5 Networks has a market cap of $6 billion and a revenue base of around $1.5 billion, but with a very mature application delivery controller market the company is looking for other segments to penetrate. With the company gaining market share in the WAN optimization market it might be a bigger threat than Cisco.
Stocks are always cheap for a reason so the question exists whether the growth of the domestic enterprise market was more indicative of the total market or not. Either way, it doesn’t appear Riverbed Technology, Inc. (NASDAQ:RVBD) can get cheaper with the company able to repurchase $25 million in stock and repay $50 million of debt during Q1 alone.
As with any tech sector, the market will remain competitive but Riverbed appears to have the products to combine the network and application performance segments. With any success integrating OPNET in the second half, the stock offers a very cheap and compelling valuation with a major catalyst to propel the stock higher.
Mark Holder and Stone Fox Capital Advisors, LLC own shares of Riverbed Technology. The Motley Fool recommends Cisco Systems, F5 Networks, and Riverbed Technology. The Motley Fool owns shares of F5 Networks and Riverbed Technology. Mark is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article Synergies to Provide a Catalyst for Riverbed originally appeared on Fool.com and is written by Mark Holder.
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