In just a few years, Riverbed Technology (NASDAQ: RVBD) has built a strong technology offering, which helps move large files -- such as Microsoft (NASDAQ: MSFT) PowerPoints, SAP (NYSE: SAP) data files and so on -- across networks at high speeds. In fact, last week I had a chance to meet the CEO, Jerry Kennelly, who was quite upbeat even though Riverbed's stock price was down about 28% to $34.61.
Although, based on the fiscal Q3 results, things seem fine. Revenues spiked 158% to $63.3 million and net income was $2.8 million, or $0.04 per share, which compares to a net loss of $3.1 million, or $0.16 per share in the same period a year ago. About $9.7 million of Q3's expenses came from stock option compensation.
Riverbed has continued its innovation. Back in August, the company launched its Steelhead Mobile product, which improves the performance of file downloads for laptops. Riverbed claims that about 41% of workers in the US are mobile, such as in remote offices, hotel rooms, coffee shops and so on.
Another key product release is RiOS 4.1, which has added security features, disaster recovery, and optimization for Oracle Corp (NASDAQ: ORCL) products.
Such products should help deal with the fierce competitive environment, which includes rivals like Cisco Systems (NASDAQ: CSCO), Juniper Networks (NASDAQ: JNPR), and Packeteer Inc. (NASDAQ: PKTR). "A big part of my job is finding top engineers and getting out of their way," said Kennelly, in a Fool interview.
So with all the good news, why is Riverbed's stock ailing? I think the main reason is that investors expected too much. As Riverbed gets larger, it is not as easy to post sizzling top-line growth. Besides, the investments in new products and the salesforce can mute profit growth.
Even though Riverbed's valuation is much lower, I still think the stock price could languish for awhile. After a big plunge, it's not easy for investors to warm up again, especially for momentum players who have flocked to the stock. So, for investors, there's probably no rush to get back into this one -- at least for now.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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Reader Comments (Page 1 of 1)
11-06-2007 @ 12:12PM
Justin Lofton said...
We are seeing Riverbed Steelhead appliances do very well against the competition. They are winning most if not all of the bake offs.
Justin Lofton
Systems Engineer
justinl@tredent.com
Tredent Data Systems, Inc.
http://www.tredent.com