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IPO Riverbed Technology
September 15, 2006 -- Riverbed Technology Inc., which develops technology to help boost the performance of applications shared over networks, is set to go public the Nasdaq next week, as demand for its products grows along with competition.
The company's technology speeds up the transmission of applications -- such as e-mail, Microsoft Office or design software used by architects -- over wide area networks. The Internet is an example of a wide area network, as are the networks that connect the various branches of companies to one another and to headquarters.
Local area networks, within an office for example, work much quicker than wide area networks, sometimes as much as 100 times faster. So Riverbed's products, mainly software, help wide area networks act more like local area networks.
Typically the gross margins within this industry are fairly strong, 70 percent range," said Kaufman Bros. analyst Manuel Recarey, who covers some of Riverbed's rivals.
As companies consolidate data centers, demand for Riverbed's technology is growing, but so is competition, as industry behemoths such as Cisco Systems Inc. to smaller newcomers vie for a piece of the market.
Just last week, Cisco, by far the world's largest networking equipment maker, released WAAS, or Wide Area Application Services, networking software designed to help improve the performance of applications sent from central data centers to office branches. Cisco says WAAS also helps companies cut bandwidth costs and consolidate branch office server, storage and backup infrastructure into data centers.
In addition to Cisco, Riverbed also counts F5 Networks Inc., Citrix Systems Inc., Packeteer Inc. and others among its formidable competition. Citing Infonetix research, Recarey said Riverbed holds about 11 percent of the wide area network optimization market.
The company had 2005 sales of $22.9 million, up from 2.6 million in 2004. It plans to use the proceeds from the IPO, expected to total about $56.8 million, for working capital and to grow and develop new products.
The San Francisco-based company was founded in 2002 as NBT Technology Inc. and changed its name to Riverbed Technology the following year. In its first two years, the company mainly focused on research, shipping its first product in 2004.
Since then, the company's customer base has grown from 68 at the end of 2004 to more than 1,000 this year. Riverbed's customers range from large global corporations with thousands of branches, to small companies with as few as two offices.
Riverbed is offering 8.3 million shares at a price between $7 and $8.50, and a director, Steven McCanne, is selling another 100,000 shares. The stock will trade under the symbol "RVBD" on the Nasdaq.
The underwriters for the IPO are Goldman Sachs, Citigroup, Deutsche Bank Securities and Thomas Weisel Partners.
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