Cloud computing is still The Next Big Thing. How do I know? Customers can't stop buying Riverbed Technology's (Nasdaq: RVBD ) deduplication appliances.
Not sure what deduplication means? Think of it as packing a suitcase with only the essentials. In a similar fashion, Riverbed's Steelhead products combine hardware and software that strip needless 1s and 0s from data packets as they travel over a network. Lighter data moves faster.
Customers still like that pitch. Product revenue ballooned 50% in the first quarter while total revenue soared 45%. Gross margin improved a percentage point year-over-year, to 76.2%, and returns on capital more than doubled over the same period.
Overall, Riverbed reported $163.6 million in Q1 revenue and $0.20 in per-share earnings. Both results beat expectations, which analysts revised last week to $0.19 per-share profit on $161.9 million in revenue.
You'd think that would be enough to lift the stock during today's bullish action. Not so. Shares of Riverbed are down more than 2% even as peers Cisco (Nasdaq: CSCO ) and F5 Networks (Nasdaq: FFIV ) rally.
Guidance may be the issue. In last night's conference call with analysts, Chief Financial Officer Randy Gottfried told investors to expect $171 million to $173 million in second quarter revenue and $0.21 in adjusted per share, about in line with what Wall Street was already expecting. Investors were apparently hoping for better. Dumb.
All signs point to Riverbed filling a massive need (i.e., faster data delivery over private and public networks) at a very attractive price point. In this sense, today's sellers are focusing on the trunks of the Redwoods in a Very Big Forest. Buy before they look up to see what they're missing.
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