Riverbed Aims to Build ADC Appliance, Grow Multi-Product Strategy

Riverbed reports second quarter revenue and plans for an appliance version of its ADC software platform.

By Sean Michael Kerner | Posted Jul 25, 2014
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Sometimes selling multiple products to the same customer takes more time and effort than simply selling them one. That's one of the key messages coming from the executive team of Riverbed Technology during the company's second quarter fiscal 2014 earnings call.

For the quarter, Riverbed reported revenue of $264 million, a six percent year-over-year gain. Net income was reported at $6.8 million for a 23 percent gain. Looking forward, Riverbed provided third quarter fiscal 2014 guidance for revenue in the range of $285 million to $291 million.

In recent months, Riverbed has been rebranding and refocusing as a multi-product company that offers more than just WAN optimization. This new strategy is having an impact on the sales cycle for its products.

"We experienced longer sales cycles on some of our larger and more complex transactions in the second quarter," Jerry M. Kennelly, co-founder, executive chairman, CEO and president of Riverbed, said during his company's earnings call.

Kennelly added that some of the larger deals involved state and local government agencies, and the approval processes took longer than expected. In other cases, Riverbed was one part of a multi-vendor solution.

"Our challenge, as we continue to navigate the transition from a single product to a multi-product platform company, is to continue to improve forecasting and selling into this environment," Kennelly said. "We are committed to improving by more closely reviewing and monitoring the progress of these multi-product transactions through our sales processes."

Kennelly said that it has become clear that the challenge of a multi-product lineup is now most evident with the company's SteelCentral product line. SteelCentral is Riverbed's rebranded name for its OPNET and Cascade product lines, which help to deliver application performance management capabilities. Riverbed rebranded its product portfolio during its first quarter as a way of unifying the company's business.

Riverbed acquired OPNET in October of 2012 in a deal valued at $1 billion and has been seeking to fully capitalize on the opportunity ever since.

"We are integrating these products into an increasing number of proposals to provide customers with a more comprehensive solution set for Location-Independent Computing," Kennelly said. "This results in larger revenue opportunities and this also broadens the base of decision-makers and often extends the sales cycle time."

Ernie Maddock, Riverbed's CFO, noted during the earnings call that of the 15 largest multi-product deals, SteelCentral was represented in about 75 to 80 percent of deals.

"It was often represented to a very significant degree, sometimes as much as 50 percent of the transaction," Maddock said. "We've been talking for a while about how synergistic the WAN optimization business is with the SteelCentral business."

There are also more opportunities for growth for Riverbed's core SteelHead WAN acceleration business. Kennelly said that there are opportunities for growth in what are under-penetrated verticals for Riverbed.

"As an example, one of the largest SteelHead purchases in the quarter was in the retail vertical for a chain seeking to improve the in-store experience for its customers by accelerating and improving page load times from almost 1 minute, down to only 5 seconds," Kennelly said.

The other area of potential future growth for Riverbed is by making hardware appliances out of its software Application Delivery Controller (ADC) platform.

"We have multiple examples of customers who love our software, love our approach, love our functionality, but wanted it in the appliance form factor," Kennelly said. "We'll do a big launch late in the year with pricing and features. Fundamentally, it's the form factor to deliver what is a really great piece of software."

Sean Michael Kerner is a senior editor at Enterprise Networking Planet and InternetNews.com. Follow him on Twitter @TechJournalist.

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