Riverbed Shares Plummet After Sales Miss Company’s Target
July 20, 2011, 4:33 PM EDTBy Zachary Tracer
(Updates with closing shares in fifth paragraph.)
July 20 (Bloomberg) -- Riverbed Technology Inc., a maker of computer networking products, dropped 23 percent on the Nasdaq Stock Market after second-quarter revenue missed the company’s forecast.
The company reported revenue of $170.3 million yesterday, falling short of the $171 million to $173 million it had predicted. Analysts had projected $172.75 million, according to Bloomberg data. Riverbed’s earnings of 21 cents a share, excluding some items, were in line with analysts’ estimates.
Before today, Riverbed’s shares had almost tripled over the past year, fueled by the growth of cloud computing. The company’s technology helps customers keep their software in far- flung data centers more efficiently. Last quarter’s slower growth caught investors by surprise, said Gary Spivak, an analyst with Noble Financial Group in Boca Raton, Florida
“There’s a fairly strong reaction when a high-growth story misses expectations to any degree,” he said. “People just expect more and when they get just OK, they get very disappointed.”
Riverbed dropped $9.35 to $32.05 at 4 p.m. New York time, the biggest decline in almost four years. The stock has lost 8.9 percent this year.
Chief Executive Officer Jerry Kennelly said customers should look beyond the shortfall and appreciate the company’s position in the market for information-technology performance products.
‘Long-Term Bet’
“If you can overlook a four-tenths of a percent miss on revenue and understand the underlying strengths of the company, it’s a good long-term bet for any shareholder,” he said yesterday in an interview.
Riverbed also announced the acquisition of two closely held companies: Zeus Technology, which makes software for cloud computing, and Aptimize Ltd., which provides Web content optimization. It will pay $110 million for Zeus and may spend an additional $30 million if the company meets certain goals. Riverbed expects the Zeus acquisition to be about break-even in the year’s second half and add to results in 2012. Terms of the Aptimize deal weren’t disclosed.
The acquisitions will help the company compete with F5 Networks Inc. in the market for products that improve the delivery of information and applications from central servers, Kennelly said.
“If you take a great technology and then give it the benefit of our brand and our sales distribution reach, it’s a chance to really drive revenue up and take important market share quickly,” the executive said.
--Editors: Nick Turner, Lisa Rapaport
To contact the reporter on this story: Zachary Tracer in New York at ztracer1@bloomberg.net
To contact the editor responsible for this story: Tom Giles at tgiles@bloomberg.net.
