Riverbed Looks to Grow Beyond WAN Optimization in 2013
As U.S government sales slow, Riverbed plans to expand its footprint beyond Steelhead.
Riverbed has been in the WAN optimization business for 12 years and today represents nearly half of the total WAN optimization market. The vendor now looks to grow its business further, even in the face of an uncertain economy.
Riverbed reports weakness in Q1 financials
For the first quarter of its fiscal 2013, Riverbed reported revenue of $246 million, a thirty-five percent year-over-year gain. The company reported a net loss of $8.1 million for Q1, in contrast to the $6.9 million net income reported for the same period lastyear. Moving forward, Riverbed provided guidance for total revenue in the second quarter to range from $255 to $260 million.
As to the reasons for Riverbed's quarterly weakness, the company put some of the blame on the U.S. Federal Government.
"The government vertical was most notably below our original forecast with particular weakness due to sequestration," Jerry M. Kennelly, co-founder, executive chairman, CEO, and president of Riverbed, said during his company's earnings call.
Looking at the revenue mix for Riverbed's business, WAN optimization represented sixty-eight percent of Riverbed's first quarter revenues. Performance management came in at twenty-seven percent and application delivery controllers (ADC) at five percent.
"Sales of our new CX and EX Steelhead platforms continue to grow and now represent almost eighty percent of WAN optimization sales," Kennelly said. "We continue to see a large percentage of remote sites choosing the more powerful EX platform, which includes the virtual services, our VSP running the VMware ESX server."
Riverbed first announced its EX Steelhead platform in February 2012. The EX provides a Virtual Services Platform (VSP) that can run multiple services, including Granite, for block level optimization. The EX platform can also be leveraged to embed a VMware vSphere hypervisor on the hardware appliance, enabling additional virtual application delivery and optimization.
High hopes for network performance management
Riverbed has been busy trying to expand beyond WAN optimization appliances by offering a broader portfolio of performance management technologies. In October of 2012, the vendor acquired performance management vendor OPNET for $1 billion, with plans to integrate OPNET with Riverbed's existing Cascade network performance management technologies.
"By combining Cascade and OPNET, we have created a unique solution that provides a holistic view of application performance, including the end-user experience, application transaction, and underlying infrastructure and network performance management," Kennelly said.
He added that the sales teams for the two units have now been combined as part of the overall integration.
Eric Wolford, president of the products group at Riverbed, noted during the earnings call that Riverbed's goal is to be in every data center and every remote site.
"In its early adoption stage, WAN optimization was often tactically sold to solve acute pain points, including bandwidth limitations and the inefficiencies of application protocols like MAPI and CIF," Wolford said. "Steelhead is still purchased for these reasons today."
Riverbed plans to expand from that Steelhead base to sell other network performance solutions. "With more than 200,000 Steelhead units shipped, we have a strong piece of real estate at remote sites that can be leveraged by our vision for a converged and multi-functioning edge infrastructure," Wolford said.
Wolford noted that Cisco remains Riverbed's top competitor, against whom they win their fair share of deals.
"Yes, they do, at times, give it away at either huge discounts or sometimes just bundled into the deal," Wolford said about Cisco's WAN optimization technology. "If you're trying to do a big consolidation job, though, unfortunately just lowering the price doesn't work."
Sean Michael Kerner is a senior editor at Enterprise Networking Planet and InternetNews.com, the news service of the IT Business Edge Network, the network for technology professionals. Follow him on Twitter @TechJournalist.