Riverbed Buys Zeus, Aptimize, But Shares Fall

Riverbed Technology (RVBD) continued to expand its performance optimization portfolio beyond WAN-optimization through acquisitions of  Zeus Technology and Aptimize. Riverbed also reported second quarter earnings for 2011, but fell short of revenue expectations and saw its shares drop more than 20 percent in after-hours trading.

Zeus Technology

Riverbed announced that it has acquired Zeus Technology, a privately-owned company that delivers high-performance software-based load balancing and traffic management solutions for virtual and cloud environments. The $110 million purchase will enhance Riverbed's application delivery controller (ADC) offering, where the Zeus virtual ADC is used by over 1,500 customers worldwide, including seven of the top 10 telcos, leading cloud service providers, major broadcasters and top media and e-commerce companies. U.K.-based Zeus was interviewed recently at GigaOm Structure 2011 and discussed how the software ADC helps optimize traffic in the cloud.

“According to industry analysts, the virtual ADC market is expected to grow about four times faster than the traditional ADC market over the next 4 years,” said Riverbed president and CEO Jerry Kennelly. “Zeus is well positioned within this market as customers look for ADC solutions for public and private clouds that truly integrate into their application stack."

Aptimize

Riverbed also announced the acquisition of privately-held web content optimization company Aptimize.  As the second part of its "asymmetric optimization" strategy Aptimize will become the new Web Content Optimization product group at Riverbed. “Aptimize provides a new type of optimization that can be applied to all types of Web-based content,”  Kennelly said. “Much like our Steelhead solutions optimize the protocols that web pages move over, Aptimize optimizes the actual content of the page for the end user’s device.”

Aptimize CEO Ed Robinson discussed The biggest market you've never heard of on GigaOm last month and talked about the state of web content today. Aptimize is typically deployed in tandem with WAN optimization controllers and ADCs to enhance performance. "Aptimize and Riverbed bring together the two powerful technologies for accelerating applications inside and outside the firewall," said Ed Robinson, CEO of Aptimize. "The coming together of these two companies will create a unique offering in the marketplace."

Quarterly report

On Tuesday Riverbed reported financial results for its second quarter ended June 30, 2011.  Revenue for the second quarter was up 35 percent to $170.3 million and operating profit increased 83 percent year over year. During the quarter Riverbed was listed as the WAN optimization controller Advanced Platform worldwide market share leader by Gartner, announced a partnership with Akamai, and introduced three new Whitewater cloud storage gateway models.

"Our top-line growth was led by a 38% year-over-year increase in product sales. Non-GAAP product gross margin reached an all-time high of 81.5%, and we achieved a record non-GAAP operating margin of 29.6%. Our competitive position is stronger than ever, our product portfolio is even more robust with the acquisitions announced today, and our market opportunity is growing. We expect a strong second half of 2011," said Riverbed president and CEO Jerry M. Kennelly.

While earnings were in line with estimates, revenues fell well short of Wall Street estimates of $182.86 million.  Riverbed (RVBD) shares were up almost 7 percent during the day Tuesday, closing at $41.40, but dropped more than 23 percent in after hours trading to about $33.