News

posted on 29 April 2008 10:02

Riverbed's Q1 fy08 results showed a spanking 71 percent growth year-on-year but a sequential decline from the previous quarter as large deals slowed down as macroeconomic conditions in the USA affected Riverbed.

Riverbed is the leading supplier of wide area network data services (WADS) products that accelerate file transmission to and from remote offices via its Steel head appliances.

Its net Q1 fy08 revenue was $73 million, 4 percent down on the previous quarter. Jerry Kennelly, Riverbed's chairman, president and CEO said in the earnings call: "Our Q1 results represented the first quarter that Riverbed didn't grow sequentially. We believe that our results are related to the macroeconomic conditions as well as a seasonally softer quarter."

"During Q1, we saw a decrease in the closed rates on larger sales while smaller sales seem to be approved and closed at a normal rate. Overall, deals are closing but we did see some customers delay in the final approval process or making smaller initial purchases. This is most notable for new customers as revenues from our existing installed base grew modestly from the prior quarter."

A large deal is a million dollars or more. The slowdown did not affect Riverbed's rest-of-world results.

Nevertheless the company is still confident about its outlook, that being, as CFO Randy Gottfried said: "... revenues in the range of $315 million to $330 million and non-GAAP earnings per share of $0.46 to $0.51."

The company's net income (EPS) almost collapsed year on year with the Q1fy07 number being $3.3 million ($0.05/share) but the Q1 fy08 numbers being $638,000 ($0.01/share). This was ascribed to stock-based compensation, expenses and payroll taxes. Excluding these the Q1 fy07 number was $8.6 million ($0.12/share) with the Q1 fy08 numbers being $7.9 million ($0.11/share). This is not a good performance.

IP litigatation; the defending of the data de-duplication suit from Quantum and the prosecution of its own suit against Quantum, is a component of this EPS decrease. CFO Randy Gottfried said: "Expenses related to our IP litigation was a big component for the G&A increase in Q1 and reduced our EPS by about $0.01 per share."

He didn't see any decrease in the litigation spend this quarter.

Regarding the Blue Coat acquisition of Packeteer, Riverbed was sanguine. It sees it as removal of competition from its marketplace but also says there was little overlap between Packeteer's products and its own. It reckons that Blue Coat could have an eighteen month period of technology and operation integration ahead of it.

Eric Wolford, Riverbed's SVP for Marketing and Business Development, put it in context: "... Packeteer is a mature technology that wasn't particularly competitive on our space to begin with. We don't do enormous amount of battles with them and our win rate is exceedingly high. So we don't view the combination of the two as something that concerns us deeply, we respect it, we watch it for sure but going forward, looking at win rates in the amount of times we compete with them, it just isn't as significant as competing with Juniper and Cisco."

Storage

Riverbed has a new storage product that is expected to earn revenue in 2009. Kennelley said: "... we're finishing the coding now and we expect to go into Alpha in the early summer and try to get to Betas by late summer/early fall with the product being a revenue product in 2009."

"And our plan is probably late in the summer when we've had some experience with real customers that is validating, that we will come to the investment community and do a presentation, talk in detail about the product and our vision, and the early experiences of the early Alpha/Beta customers.."

Wolford added: "... we have found that many of the buyers of Steelheads also are quite interested in this project as well. And so that's because Data Center consolidation is -- it's very related."

So we have a storage product coming from a WADS supplier, with data de-duplication technology, responding to data center consolidation needs. What could it be?

^{[Paul Roberts, news editor.]}