Riverbed Technology Stock Rolling Down the River

Riverbed Technology (RVBD) stock took a major hit on Friday, dropping 29%  to $19.85 following their earnings announcement on Thursday.      This was close to their  52-week low of $19.48 in October.  Riverbed Technology’s 52-week peak was   around $41 in July 2011. 

This tumble was the most for Riverbed most since its market debut five years ago. As part of the earnings announcement, Riverbed   lowered their forecast for 2012 sales growth, citing the effect of new product introductions.

“The combination of our product transition and a seasonally weaker quarter was challenging,” President and CEO Jerry Kennelly, said on a conference call.   “We continue to feel the unavoidable growing pains associated with becoming a multiproduct company.”

Riverbed announced their Q1 results on Thursday.  “In a seasonally difficult quarter, we completed a major product cycle and achieved results within our guidance range,” stated Kennelly.  Their Q1 revenue of $182 million was 12% greater year over year.  Their net income dropped from $13 million to $7 million, not an auspicious way to start the fiscal year. 

Riverbed is in the Leaders section of  the January 2011  Gartner Magic Quadrant for WAN Optimization Controllers. They rank  higher that the other two companies in the Leaders section, for both Ability to Execute and Completeness of Vision.   Blue Coat Systems and Silver Peak Systems are the other two companies in this portion of the quadrant.

Nonetheless, analysts were not kind to Riverbed on Friday following the earnings announcement.  The stock received seven downgrades,  from Mizuho, JP Morgan, Wedbush Securities, Capstone, Cantor, Oppenheimer, and RBC Capital.

Riverbed may be dealing with some further  financial rapids in Q2. 

http://www.bloomberg.com/news/2012-04-20/riverbed-technology-tumbles-as-sales-trail-estimates.html

 

http://ir.riverbed.com/phoenix.zhtml?c=198235&p=irol-newsArticle&ID=1685213&highlight

Blue Coat Systems to Operate as a Privately Held Company under Thoma Bravo

Blue Coat Systems, founded as Cacheflow, is no more on the NASDAQ. The private equity firm, Thoma Bravo completed its $1.3 billion acquisition of Blue Coat Systems on February 15.

“This marks our fifth platform investment in the security technology sector and our fourth in networking,” said Seth Boro, partner at Thoma Bravo. “We’re confident our approach and experience in identifying strategic opportunities, coupled with Blue Coat’s innovative solutions and proven leadership in Web security and WAN optimization, establishes a platform for the company’s continued success.”

Thoma Bravo (www.thomabravo.com) has a nice stable of technology companies. These include Blue Coat Systems, SonicWall, Attachmate Corporation Embarcadero Technologies, Inc., Entrust, Inc., Hyland Software, Inc., LANDesk Software, Inc., Roadnet Technologies, Inc., Sirius Computer Solutions, Inc., SonicWALL, Inc., Tripwire Inc., Vision Solutions, Inc.

The nice thing about being private is you can literally say as much or as little as you want to the public (incidents such as equipment ending up in Syria notwithstanding (a rogue reseller)) Missing earnings targets may involve the management team being given a talking to, but it won’t result in dramatic swings in stock price/market capitalization, because there is no stock. No Henry Vanderbilt like quotes, "The public be damned! I am working for my stockholders." will be issued.

Blue Coat has remained in the Leaders portion of the Gartner Secure Web and WAN Optimization Magic Quadrants over the last several years. However, companies like Zscaler, a cloud based web security solution (www.zscaler.com) “providing a high performance solution at low TCO” and Riverbed Technology (www.riverbedtechnology.com) have gotten a good share of buzz and market share recently. Riverbed Technology pulled away slightly from others in the most recent Magic Quadrant for WAN Optimization Controllers.

http://kensek.blogspot.com/2012/02/riverbed-technology-leader-in-2012.html .

Riverbed Technology (and who doesn’t) has an announcement planned with a partner during RSA San Francisco later this month. Something to do with best-of-breed wide area network (WAN) optimization and public Internet optimization.

"We were under a microscope, and when you are a public company you invest and have to know what the impact is going to be three or four quarters later," said Steve Daheb, Blue Coat's chief marketing officer and senior vice president of corporate and business development. "Now we have the kind of freedom to move quickly and invest where we need to.”

So what is the future for Blue Coat? They brought aboard Gregory Clark as their CEO in September, replacing Michael Borman. In November, they announced that total net revenue for the second quarter of fiscal 2012 was $114.1 million compared with net revenue of $109.5 million in the first quarter of fiscal 2012 and $121.0 million in the second quarter of fiscal 2011. Blue Coat Systems fiscal year isn’t the normal calendar year.

There could be another earnings announcement any day, now. The Thoma Bravo press release trumped an anticipated earnings announcement this week, it appears.

http://www.bluecoat.com/company/press-releases/blue-coat-operate-privately-held-company-and-aggressively-advance-its

Riverbed Technology Leader in 2012 Gartner Magic Quadrant for WAN Optimization Controllers

In the thought and technology leadership battle for supremacy in the WAN Optimization Controller market, Riverbed Technology is the clear leader among those in the 2012 Gartner Magic Quadrant for WAN Optimization Controllers (WOC). (January 2012 ID:G00219270)

Only three companies are in the Leaders portion of the magic quadrant- Riverbed Technology, Blue Coat Systems, and Silver Peak Systems. Riverbed Technology was rated both the highest in Ability to Execute, and Completeness of Vision. Silver Peak Systems and Blue Coat Systems are adjacent to each other and (noticeably) further down in the leaders quadrant. Kudos for being in the leaders section for all three! Eight products total are in the quadrant.

Cautions that may have cost Blue Coat Systems according to Gartner include – late features, management turnover, declining market share, weak softWOC.

Note - Private equity firm Thoma Bravo is acquiring Blue Coat Systems for $1.3 billion. This deal was announced in December. Thoma Bravo also owns SonicWall. http://dealbook.nytimes.com/2011/12/09/thoma-bravo-acquires-blue-coat-systems-for-1-3-billion/

Cautions that may have cost Silver Peak Systems include - No softWOC, lacks some application-specific optimization, some video on demand limitations for remote-office caching streaming.

Strengths for Riverbed Technology mentioned by Gartner – Broadest set of capabilities in the industry, overall innovations, broad solution for dynamic browser-based applications like SharePoint.

How Do You Use Gartner Magic Quadrants?

The below is from a great Gartner piece in utilizing their Magic Quadrant.

Clients use Magic Quadrants as a first step to understanding the technology providers they might consider for a specific investment opportunity.

Keep in mind that focusing on the leaders' quadrant isn't always the best course of action. There are good reasons to consider market challengers. And a niche player may support your needs better than a market leader. It all depends on how the provider aligns with your business goals

http://www.gartner.com/technology/research/methodologies/research_mq.jsp