Riverbed to Review Options Under Pressure From Elliot

Riverbed Technology Inc., the target of a $21-a-share bid from activist investor Elliott Management Corp., said its board will review its strategic options as the computer-networking company starts a cost-cutting plan.

Riverbed has hired advisers to consider “strategic and financial alternatives to enhance shareholder value,” the San Francisco-based company said in a statement today. There’s no timetable for the review, Riverbed said, as it also announced a restructuring to reduce annual costs by $20 million to $25 million and improve operating margins.

Almost a year ago Elliott acquired a 10 percent stake in Riverbed and pushed the company to review its business, saying it was “significantly undervalued.” It made an unsolicited bid in January and raised the offer the following month. Since then Elliott has been in a tug of war with Chief Executive Officer Jerry Kennelly about selling his company. This week, it ratcheted up the pressure by debuting RepairRiverbed.com, which details its research and campaign.

“We commend the board for initiating a strategic review and believe that Riverbed is a great company with products customers value,” Jesse Cohn, Elliott’s activist portfolio manager, said in a statement. “Our team and advisers look forward to completing our confirmatory diligence in an expedited fashion.”

Missed Forecast

Riverbed shares rose 2.8 percent to $18.59 at the close in New York today. The stock has posted the same gain for the year so far.

The software company also today announced preliminary third-quarter results that missed its own forecasts. Sales are projected to be $276 million to $277 million, compared to the previous guidance of $285 million to $291 million, it said. Profit is now expected to be 30 cents to 31 cents a share, trimming the top end of its expectations by a cent.

The company in July reported preliminary second-quarter results that also missed its own forecast, an announcement Riverbed used to argue that change was needed at the company.

“We are taking decisive steps to improve our cost structure in order to drive enhanced operating performance,” Kennelly said in the statement today. “We believe these actions enable us to deliver increased value to our shareholders while continuing to deliver the products and support expected by our customers.”

Elliott reaffirmed on Oct. 6 its offer to buy Riverbed, a bid that the company rejected in February as too low. The offer valued Riverbed at $3.36 billion. Earlier this year, Bloomberg News reported that buyout firms including Silver Lake Management LLC, Thoma Bravo LLC and KKR & Co. had informally expressed interest in Riverbed with offers approaching $25 a share, citing people with knowledge of the process at the time.

Elliott, founded by Paul Singer in 1977, has pressured technology providers including NetApp Inc., BMC Software Inc., Compuware Corp. and Juniper Networks Inc. to boost shareholder value after taking stakes in the companies. It is currently pressing for a sale or breakup of EMC Corp.

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