It’s hard to not be impressed by OPNET’s application management business, which is growing at a rate of 30%. And when you consider that it accounts for 60% of OPNET’s revenue, it’s a very attractive asset. Plus, this will now help Riverbed fight off Cisco Systems, Inc. (NASDAQ:CSCO), while having a business to offset sluggishness in WAN optimization. But Cisco Systems, Inc. (NASDAQ:CSCO) and F5 are not going to make it easy. F5 has been making moves of its own to solidify its market position by picking off LineRate Systems, a developer of software defined networking services.
What’s more, the company also announced the F5 Mobile App Manager, a new hybrid cloud solution for mobile application management. As with Cisco, both of these moves should allow F5 to better compete with Riverbed. The good news for Riverbed, though, is the current weakness in WAN might be temporary. And these rivals may be fighting for a bigger pie. According to research firm Gartner, roughly 80% of end-user traffic will be in WAN by 2014. Essentially, all Riverbed has to do is hold on to its lead. That’s easier said than done. But OPNET’s strong 30% growth should serve as a good catalyst.
What of the stock?
As often is the case in the tech sector, valuation is predicated on top-line growth and cash flow growth. While the top line has been OK for Riverbed, cash flow has suffered, including a 12.44% decline in the fourth quarter. And, despite the decent revenue growth, the company has posted a decline in earnings per share. So it’s tough to target where the stock is heading from this point forward.
Consequently, shares may now be in a holding pattern until Riverbed shows clear signs of progress. And this is a situation where an investor with an appetite for risk can profit. While there are some causes for concern, there is an equal amount to be optimistic about. And the bottom for this stock may hinge on whichever news surfaces last.
The article Will Riverbed Ever Find Bottom? originally appeared on Fool.com and is written by Richard Saintvilus.
Fool contributor Richard Saintvilus has no position in any stocks mentioned. The Motley Fool recommends Cisco Systems, F5 Networks, and Riverbed Technology. The Motley Fool owns shares of F5 Networks and Riverbed Technology.
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