Riverbed Technology Falls Most Since IPO After Forecast
Riverbed Technology Inc. (RVBD) tumbled the most since its market debut five years ago after the maker of computer-networking products lowered its forecast for 2012 sales growth, citing the effect of new product introductions.
Riverbed dropped 29 percent to $19.85 at the close in New York, for the biggest drop since its initial public offering in September 2006. The San Francisco-based company’s shares have fallen 16 percent this year.
Riverbed, which creates technology to help customers keep their software in far-flung data centers more efficiently, has benefited from the growth of cloud computing. During the first quarter, the company introduced devices in the Steelhead product line that are designed to overcome bandwidth and geographic storage limitations. The bid to diversify its offerings crimped results, Chief Executive Officer Jerry M. Kennelly said.
“The combination of our product transition and a seasonally weaker quarter was challenging,” Kennelly said on a conference call yesterday. “We continue to feel the unavoidable growing pains associated with becoming a multiproduct company.”
The company said it now expects 2012 revenue to increase by 15 percent, down from a prior forecast for 17 percent to 20 percent growth.
“Riverbed’s product transition is resulting in a painful 2012,” Sanjiv Wadhwani, a San Francisco-based analyst at Stifel Nicolaus & Co., said in a report today. “While we do expect sales to accelerate in second-half 2012, we believe it might be hard for the company to hit its target of 15 percent year-over- year growth,” said Wadhwani, who recommends holding the stock.
Wadhwani is predicting total sales growth this year of 13 percent.
First-quarter sales increased 12 percent to $183 million from a year earlier, the company said. That fell short of the average $186.1 million analyst estimate compiled by Bloomberg. Earnings per share excluding certain items was 20 cents, matching estimates.