Will Riverbed Technology Turn Growth Into Profits?

Next Monday, Riverbed Technology (RVBD.DL) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Cloud computing is an area with huge promise, and Riverbed Technology is aiming to take its share of the opportunity that cloud computing presents. Yet, the company's network optimization business hit a rough patch last quarter, raising questions about its future growth prospects. Let's take an early look at what's been happening with Riverbed Technology over the past quarter and what we're likely to see in its quarterly report.

Stats on Riverbed Technology

Source: Yahoo! Finance.

Will Riverbed Technology get its growth mojo back?
In recent months, analysts have reined in their expectations on Riverbed slightly. They reduced their earnings-per-share call for the just-finished quarter by $0.01 as part of an $0.08 per share reduction for their full-year 2013 consensus. But the stock has gotten hammered, losing more than 20% of its value since mid-January.

Most of Riverbed's losses came right after its fourth-quarter earnings report in February, in which the company said that its wide-area-network optimization business had seen less rapid growth than investors had wanted to see. A reduction in guidance for the first quarter also sent the stock plunging.

Investors shouldn't automatically conclude that the problem is specific to Riverbed, though. Networking peer F5 Networks (FFIV -1.26%) had to give unfavorable revenue guidance for the remainder of the year when it released its own earnings earlier this week. Moreover, Juniper Networks (JNPR -0.28%) sported falling sequential revenue, and guided the current quarter toward the low end of sales expectations. A tough spending environment has made it hard for any networking players to hold their own.

Yet, Riverbed has faced another significant challenge this quarter in integrating its new Opnet Technologies division after having spent about $1 billion to buy the company late last year. With the transaction having closed just in mid-December, Riverbed is still struggling to realize all the potential synergies it saw from making the purchase, and Opnet may well keep pulling down margins until it's fully integrated into Riverbed's business structure.

When Riverbed reports, be sure to tune in to hear what newly hired chief technology officer David Wu has to say about coming innovations. With Wu stepping in the shoes of co-founder Steve McCanne, he'll be an important voice in Riverbed's turnaround.

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