Patient Bears Win Battle for Riverbed Technology
Originally Published In the News April 4, 2008 11:30 AM
When I first wrote about Riverbed Technology I expected a thrill a minute:
December 4, 2006
The Street was split on the prospects for Riverbed Technologies (RVBD-NASDAQ) last we checked in. But Ol’ Riverbed just keeps rolling along...Indeed, the stock has offered up a pot of riches. It is arguably the most successful deal of 2006, given the 240% rise in the shares since its IPO a scant 51 trading days ago.
But it seems the good ship Riverbed has attracted naysayers as well. The rise in the short interest could mean we have stumbled upon the next installment in our Battleground Stox series. Not much of a contest thus far; the bears buttocks have been firmly paddled. No doubt they are skeptical about Riverbed’s valuation, which seems mighty rich to us too.
....the SS Riverbed is chock-a-block full of riverboat gamblers warily eyeing one other across a poker table.
The question is, who will blink first?
Bears who shorted into the ramp, or hopped aboard later, have been well compensated for their efforts. On February 6th I had opined the stock would be a worth a look in the mid-teens, for some reason I was waiting to enter the long side when the stock got washed out.
With the stock down 8% to $13.50, I have my chance:
Cowen & Co notes that last night Riverbed Technology (NASDAQ:RVBD), a leading provider of WAN optimization solutions, pre-announced that its Q1 revenue would be roughly $72.0-$73.0mm, well below its original guidance range of $79.0-$82.0mm. Riverbed’s main competitors include both Cisco (CSCO) and Juniper (JNPR).
On the call, management noted that the shortfall was mainly the result of delayed purchases with respect to its larger deals. Furthermore, it noted that while some larger deals got pushed others were downsized..... RVBD represents the sexiest part of networking. With these guys failing to come at least in-line with guidance, people should be worried about the current state of business at CSCO & JNPR.
Riverbed’s absurd valuation is now a thing of the past. But stepping up here might not pay immediate dividends....sometimes the planets never align.
Riverbed Technology: Increased risk for CSCO, JNPR - Cowen
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