US-based wide area network (WAN) optimisation specialist Riverbed Technology is reviewing strategic and financial alternatives as it struggles with declining sales in its core business. As part of its preliminary third quarter fiscal 2014 results…
US-based wide area network (WAN) optimisation specialist Riverbed Technology is reviewing strategic and financial alternatives as it struggles with declining sales in its core business.
As part of its preliminary third quarter fiscal 2014 results announcement, Riverbed revealed that has both initiated a restructuring plan to cut costs and mandated an unnamed adviser, believed to be Goldman Sachs, to assess its strategic options to enhance shareholder value.
The restructuring plan intends to reduce annual costs by US$20m to US$25m and improve annual operating margins by 1% to 2%. The company expects these efforts to be substantially complete by the end of 2014.
Jerry Kennelly, chairman and CEO of Riverbed, said: “In light of current business conditions, we are taking decisive steps to improve our cost structure in order to drive enhanced operating performance.
“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.”
Riverbed has revised its Q3 guidance down by around US$10m, predicting non-GAAP quarterly revenues in a range of US$276m-US$277m, rather than US$285m-US$291m. It blamed the revision on lower than expected growth in its WAN optimisation and virtual application delivery controllers (ADC) businesses.
In response to the announcement, 10.5%-shareholder Elliot Management revealed that it has resurrected its takeover bid for the company.
Jesse Cohn, portfolio manager at Elliott, said: “We commend the board for initiating a strategic review and believe that Riverbed is a great company with products customers value.
“We have made a US$21 bid for the company, and our team and advisers look forward to completing our confirmatory diligence in an expedited fashion.”
The activist hedge fund made an unsolicited US$19 per share cash bid for Riverbed at the start of the year, valuing the company at US$3bn. While that offer was rejected, the Riverbed management has since sought to appease its investors by changing its corporate governance, including appointing two new independent directors. Seven of the company’s nine directors are now independent.
In a research note commenting on the strategic review, FBR Capital Markets analyst Daniel Ives said: “It appears the clock has struck twelve for Riverbed and its board as the company has finally recognized that exploring strategic alternatives might be the right direction to take this company and thus speaks to Elliott’s activist view.”
Based in San Francisco, Riverbed provides a variety of satellite communication services and is predominantly focused on satellite WAN optimisation solutions.
