Riverbed Technology Hits Milestone of $100M in Quarter
November 6, 2009
For Riverbed Technology co-founder, president and CEO Jerry Kennelly, crossing the $100 million mark in quarterly revenue for the first time is something to savor.
To celebrate, San Francisco-based Riverbed, which sells equipment that speeds up applications over business communications networks, distributed checks of up to $1,000 to 561 of its 1,000 employees (excluding sales and management).
“It’s a sign that we have a product that’s in a mainstream market. It’s not just a niche market,” Kennelly said. “It indicates that we can aspire to be a long-term, stand-alone technology company that can aspire to do billions and billions of dollars of business, and have thousands and thousands of employees for years to come.”
Riverbed’s main products are its Steelhead appliances, which dramatically speed up corporate networks while reducing operating costs. Companies buy the hardware and software, then pay a fee each year to receive improvements and updates.
Total revenue for the third quarter, ending Sept. 30, was $102 million, an increase of 18 percent from $86.5 million in the third quarter of fiscal year 2008. Net income for the quarter was $5.5 million, compared with a net loss of $12.4 million in the same quarter in 2008.
Riverbed has been growing headcount as well, adding 139 employees this year, including 33 in the third quarter.
The earnings beat Wall Street expectations, yet ironically Riverbed stock lost value after the announcement.
Rahul Khanwalkar, a stock analyst with Jefferies & Company Inc. in New York, said shortly afterward that some analysts were concerned that a surge in government spending in the third quarter would end and Riverbed would not be able to pick up enough enterprise business.
“We find that their new products are not getting any traction,” he said.
Kennelly responded by saying that analysts want to see a repeat to believe the trend is real.
“Wall Street would like to see us put two to three back-to-back quarters with the same results. Our guidance was that we will do that,” he said. The company predicted revenue will be $104 million to $107 million in the fourth quarter.
Riverbed is well positioned to take advantage of the so-called cloud computing trend, in which companies seek to consolidate their computing operations either in-house or with third party providers, Kennelly said. Competitors include giant networking companies like Cisco Systems, Juniper Networks and Blue Coat Systems.
Riverbed’s stock rebounded after Piper Jaffray analyst Troy Jensen upgraded Riverbed, saying doubts about Riverbed’s enterprise business appeared overblown.
One enterprise customer pleased with Riverbed’s services is Eugene Alfaro, manager of global IT operations and support for Pleasanton-based Simpson Manufacturing Co. Inc.
Alfaro said Simpson, which has 2,600 employees in widely distributed locations, found Riverbed’s products increased its efficiency as much as 42 percent.
“I was surprised,” he said. “I would have been happy to see 20 to 25 percent.”