Riverbed's Swimming in Opportunity

Data production is growing exponentially with market researchers pointing to a 4,300% annual increase in data generation by 2020. As the switch to digital technologies gains steam, it will be up to network optimization specialists like Riverbed Technology (Nasdaq: RVBD  ) to ensure the process is seamless and smooth.

Fool writer Lee Samaha thinks the turning point is an increase in spending on data center infrastructure, with Cisco Systems (Nasdaq: CSCO  ) profiting handsomely from the greater attention the sector is receiving. Riverbed's also an interesting play since it already is the go-to choice for data-heavy bandwidth.

Riverbed Technology snapshot

Market Cap $3.5 billion
Revenues (TTM) $774 million
1-Year Stock Return 9.5%
Return on Investment 8.7%
Est. 5-Year EPS Growth 20.9%
Dividend and Yield N/A
Recent Price $22.67
CAPS Rating ****

Source: N/A = not applicable; Riverbed doesn't pay a dividend.

Setting the table
The mobile computing revolution was in danger of passing Riverbed by. Essentially a one-trick pony, this network optimization specialist was going to see Akamai (Nasdaq: AKAM  ) , Cisco, and even F5 Networks (Nasdaq: FFIV  ) cash in on the tumultuous events reshaping the industry while it was sidelined. To its credit, Riverbed recognized the stakes and launched a turnaround effort that positions it as perhaps the best able to capitalize on the changes. Even though 2012 is a transition year, it's when you want to strike to maximize your profit.

The wireless network equipment maker diversified its product lineup just in time to see customers hold back on making purchases as the economy blindly stumbled along. At a time when mobile communications and computing were soaring, Riverbed found itself in the midst of a product transition phase. But that's coming to an end now, and 2013 ought to be the time where its technological edge gives it a competitive foothold. Analysts are now upgrading their view of its future, seeing government purchases picking up ahead of schedule and its data center offerings pushing it forward as big data becomes big business.

It's a big tent
According to the market analysts at IDC, big-data technology and services will grow from a sleepy $3 billion business in 2010 to almost $17 billion by 2015 -- a 40% compounded annual growth rate. IBM (NYSE: IBM  ) says we create 2.5 quintillion bytes of data every single day. In fact, helping businesses get a handle on the information flowing into their operations is becoming one of the cornerstones of its future growth plays. Big Blue's business analytics division saw revenue jump 28% last quarter, making it the company's fastest-growing segment.

In addition to the huge amounts of data, there has been significant growth in the systems and technologies required to leverage data. And at 19 times earnings estimates, and with its enterprise value trading at 17 times its free cash, Riverbed might not be the same bargain stock it was just a few months ago, but it has greater growth prospects now that it has a better handle on controlling them.

I made a CAPScall on the company in June, believing the turnaround opportunity was ripe, and even though Riverbed's stock has advanced 34% since then (compared to a 7% rise in the market), I think this is only the next step on its next leg higher.

Tell me in the comments section below if you agree Riverbed Technology is best able to capitalize on an expanding flash memory market.

A sky-high opportunity
IBM, Cisco, and Riverbed cover only a portion of the companies looking to make it big in big data, but The Motley Fool has identified the one company it believes will profit best from this new technology revolution. To find out who's breaking all the rules to become the one that makes the rules, this special free report can be accessed right now -- for free.

Fool contributor Rich Duprey owns shares of Cisco Systems, but he holds no other position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of F5 Networks, Cisco Systems, International Business Machines, and Riverbed Technology. Motley Fool newsletter services recommend F5 Networks, IBM, and Riverbed Technology. The Motley Fool has a disclosure policy.
We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 28, 2012, at 12:40 AM, heyburtmn wrote:

    Rich - think you mis-spoke, RVBD is not "The wireless network equipment maker "

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