Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
So what: A couple days ago, Riverbed said that it would purchase OPNET for $1 billion in cash and stock, valuing OPNET at $43 per share, hence OPNET's jump today. Riverbed has been in the midst of a broader transition beyond its niche WAN optimization market and into becoming a multi-product company. Adding OPNET will expand Riverbed's network and application performance management offerings.
Now what: This is a huge bet for Riverbed, as in taking-out-$500-million-in-debt-while-issuing-7-million- new-shares huge. Strategically, the deal makes sense, because Riverbed and OPNET's businesses are indeed complementary and there are synergies to be had. Investors are skeptical today, though, considering the hefty premium that Riverbed is paying for OPNET, as well as the financial risk associated with how the deal is being financed.
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