Riverbed Technology quarterly revenue won't meet expectations


Leading network equipment manufacturer Riverbed Technology says it expects second quarter revenue will be lower than a previous forecast after a number of delays have occurred in closing a number of large North American deals.

The revised revenue figures puts the company in a position where it will need some rebounding in the third quarter to meet annual projections.

In early trading this week, the company saw its shares, as a result of the new projection, drop over 7 percent, highlighting the need for Riverbed to make good on previous promises and get deals finalized and in the books.

"This was a reality check quarter for Riverbed as the company faces a myriad of company-specific and secular challenges in the field," says FBR Capital Markets analyst Daniel Ives.

The news also comes as hedge fund Elliott Management again reaffirmed its $3.36 billion bid for Riverbed, which has turned down the offer twice already.

Sadly, it comes as analysts say that Riverbed is seeing a much lower demand for its wide area network optimization products, which have stalled as more and more users have 4G data plans that allow them to access the Internet through their smart devices, such as phones and tablets.

But for businesses, Riverbed is still a leader, where its WAN optimization allows for an increase in speed over a larger network, which reduces traffic congestion and allows the speed of software implemented to run smoother and faster.

Elliott did raise its initial bid to $21 per share in February, up from a previous bid of $19, but Riverbed's board denied the takeover, and is looking at other strategic alternatives, as called on by Elliott and others to diversify its technology and revenue.

"All Riverbed stakeholders will end up paying for this reckless gamble, in which the board clearly put the interests of a deeply entrenched management team ahead of shareholders," Elliott said in criticizing Riverbed's failure to act on its proposed deal.

For many, the Riverbed conundrum, and its failure to accept a takeover offer, shows that the company still believes that WAN technology can be popular and useful in today's fast-paced technological world where smartphones and tablets have largely taken over. But for businesses with large offices that need to streamline their software and network, Riverbed still remains a leader in this sector and should, if it can integrate a number of recent deals into its optimization framework, continue to be a top WAN company.

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