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Riverbed Faces More Pressure to Sell

Dan O'Shea
7/14/2014
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WAN optimization vendor Riverbed is facing a renewed pressure to sell after warning that second-quarter revenue came in lower than previous guidance. Activist investor Elliott Management, which tried to acquire Riverbed Technology Inc. (Nasdaq: RVBD) earlier this year with an offer for $19 per share, but was rebuffed, has reiterated its most recent offering of $21 per share. The hedge fund, which owns just less than 11% of Riverbed, is asking that the Riverbed board in any case retain an advisor to help it pursue a sale. (See Riverbed Spurns Takeover Offer.)

The renewed demand to sell came after Riverbed updated its second-quarter revenue numbers, saying that unexpectedly long sales cycles in North America will drop second-quarter revenue to $264 million to $265 million from the previously anticipated range of $274 million to $280 million. After the update, MKM Partners came out with a research note suggesting that the miss could prompt Riverbed to take the next step toward a sale. "We think the company missing its growth targets could potentially serve as a catalyst for management to begin a deeper engagement with interested buyers," wrote Michael Genovese, managing director at MKM Partners.

Since rejecting Elliott's earlier takeover bid, Riverbed has put out a couple of new product announcements, but also saw Juniper Networks Inc. (NYSE: JNPR) kill an application delivery controller product based on technology it licensed from Riverbed. Also, it has been facing intense competition from a crowded field of WAN optimization vendors, including upstart Aryaka , which has claimed it has been doing quite well at the expense of Riverbed and others. (See Aryaka Spikes Unpredictable Enterprise WAN Traffic), Riverbed Announces Networking Solution for Branch Offices, Riverbed Debuts Virtualized Monitoring Appliance, and Juniper Cuts Headcount by 6%, Axes ADC .)

— Dan O'Shea, Managing Editor, Light Reading

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mrcynic
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mrcynic,
User Rank: Moderator
8/6/2014 | 8:03:11 PM
Re: Aryaka?
You could do a press release like Nutanix. See

http://www.nutanix.com/2014/08/06/nutanix-closes-strong-fiscal-year-exceeds-200-million-bookings-run-rate/

Contracts dont say much unless the dollar per contract is high. Lots of POP locations means you are spending money. 3000 customer locations also means very little if you only get $200 average per location. But if you are getting $1000 average per location, that is $3M per month, which is beginning to look meaningful.
mrcynic
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mrcynic,
User Rank: Moderator
7/31/2014 | 8:49:04 PM
Re: Aryaka?
And the monthly revenue is what?
sonalpuri123
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sonalpuri123,
User Rank: Light Weight
7/31/2014 | 6:41:56 PM
Re: Aryaka?
400+ customer contracts. 95% customer retention. Top-tier venture investors that carry billion dollar funds and continue to support us. 3000 customer locations in 50 countries across 280 cities.

Riverbed founded 2002. Silverpeak founded 2004. Aryaka founded 2009.

Claiming we're just a Riverbed killer would not do justice to who we are. Aryaka replaces vendors in multiple billion dollar markets- WAN optimization controllers, MPLS providers and CDNs and green fields. 

Sonal
mrcynic
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mrcynic,
User Rank: Moderator
7/31/2014 | 6:23:34 PM
Re: Aryaka?
Sonal, you seem very eager to learn the identity of richard and myself. Why do you care? 

I decided to do a little research on Aryaka and I am puzzled. You only list 50+ customers. Plus, it appears your last round was a tiny insider round when every major startup has raised large rounds. Plus, you recently raised a large debt round. This doesnt sound like a Riverbed killer. Silverpeak, which is a known competitor, has 1500 customers. Maybe, you earn a lot more per customer, maybe you dont want to list all your customers. We will never learn the truth here. These truths will probably remain a secret like my identity.
sonalpuri123
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sonalpuri123,
User Rank: Light Weight
7/25/2014 | 1:44:28 AM
Re: Aryaka?
Richard, thanks! It helps to have people question what we do. Let me see if I can address your queries one at a time. 

Doesn't your customer quote contradict your statement that Aryaka is not a managed service? Your customer called it the Aryaka managed-service model.

>> Aryaka is a managed service 'model'. But we manage our own service built from the ground up at Aryaka, not third party appliances. Different from MSPs.

I do consulting and have a few customers that use your service. And guess what? They all have Aryaka appliances onsite. The only difference is that your company manages the appliances and in the cost structure. Capex vs Opex. 

>> I am not sure which customers you're referring to because you (and mrcynic) don't share your identity. Less than half our customer locations have our optional appliance- the ANAP. The key is that the intelligence in the Aryaka service sits in our POPs. The onsite appliance is optional but remains cloud provisioned and managed. 

The feedback about turn up has been hit and miss. One of my customers had an awful turn up experience and extended way past their maintenance window, but stayed with it because it's cheap- not better.

>> Specifics will help me respond better to random comments like this. Yes, certain customer experience for turnup is not ideal. It usually is because of either limited knowledge on the customers side, last mile devices with expired maintenance, non standard configurations, no ports available, firewall issues etc. More than 65% of our customer locations have a zero-touch turnup experience. 

Most people interpret cloud to be elastic and highly automated, but from what I've heard, everything you do is very manual during service turn up. I don't think that your bandwidth is elastic at the core, so in order for you to reach profitability, I'd imagine that it's very over subscribed there. If it isn't, then you don't have that many customers.

>> Less knowledge = wrong conclusions. Between the management team, we've built multiple world class global networks and know how to manage capacity while growing the business towards strong margins. No, its not oversubscribed and yes we are headed towards profitability. 

I could see a fit in some niche use cases where non-mission critical traffic could run through it, but anything mission critical should still stay on MPLS. I wouldn't bet my lunch money on it and definitely not bet my career on it.

>> Expand your horizons. 

I wish you good luck with the business and maybe there is a good market for WAN managed services, but I won't change my mind that the need for WAN-Op is going away slowly.

>> Everyone should have their opinions. Thats what makes us individuals. 

Riverbed just missed their number again, but it's because of the market- not Aryaka. 

>> No argument from me on this. Absolutely agree that its not just us. They have bigger problems. 

Thanks for playing. 

Sonal
richard888rocket
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richard888rocket,
User Rank: Light Beer
7/25/2014 | 12:43:17 AM
Re: Aryaka?
Doesn't your customer quote contradict your statement that Aryaka is not a managed service? Your customer called it the Aryaka managed-service model.

I do consulting and have a few customers that use your service. And guess what? They all have Aryaka appliances onsite. The only difference is that your company manages the appliances and in the cost structure. Capex vs Opex. 

The feedback about turn up has been hit and miss. One of my customers had an awful turn up experience and extended way past their maintenance window, but stayed with it because it's cheap- not better.

Most people interpret cloud to be elastic and highly automated, but from what I've heard, everything you do is very manual during service turn up. I don't think that your bandwidth is elastic at the core, so in order for you to reach profitability, I'd imagine that it's very over subscribed there. If it isn't, then you don't have that many customers.

I could see a fit in some niche use cases where non-mission critical traffic could run through it, but anything mission critical should still stay on MPLS. I wouldn't bet my lunch money on it and definitely not bet my career on it.

I wish you good luck with the business and maybe there is a good market for WAN managed services, but I won't change my mind that the need for WAN-Op is going away slowly.

Riverbed just missed their number again, but it's because of the market- not Aryaka. 

 
sonalpuri123
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sonalpuri123,
User Rank: Light Weight
7/24/2014 | 2:29:53 PM
Re: Aryaka?
All in good time- I promise:-) Stay tuned. Meanwhile, we have lots of momentum news including another announcement this week of a win against Riverbed and MPLS.

Customer says, and I quote:

"The high cost and poor reliability of our MPLS and Riverbed appliances based solution was a major concern for us. Sites took weeks, sometimes months to deploy and the quality of support was very poor. Aryaka's managed-service model perfectly synced with our requirements and their support is light years ahead of the competition. The overall cost of the Aryaka model is much lower and we no longer have the long term and complex contracts we had before. The results since we put our entire global network on Aryaka have been outstanding. Aryaka can bring up a new site within a couple of days, the application performance is much improved when compared to that of our older MPLS and Riverbed based solution, and Aryaka's managed service with a five minute SLA for support is world class."
mrcynic
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mrcynic,
User Rank: Moderator
7/24/2014 | 9:38:26 AM
Re: Aryaka?
sonalpuri123, you didnt answer my question. Will you publish verifiable Aryaka revenue numbers in a press release? Otherwise, everyone in this thread and outside will think Aryaka is just talk. Appears you have raised $70M+ over 5+ years in venture and debt, so you probably have very good revenues. 
sonalpuri123
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sonalpuri123,
User Rank: Light Weight
7/24/2014 | 1:51:07 AM
Re: Aryaka?
@mrcynic- you're right on the money- we do compete with three markets for wan optimization, global network services and CDN/ADN. We also compete with the do-nothing philisophy- where prospects find all existing services either too complex or too expensive and don't do anything to solve their application performance issues. 

Broad observations- the three markets above are coming together. We're just leading the charge. Akamai and Riverbed are working together to address SaaS apps. Cisco and Akamai are partnered too. Most global network providers have some form of CDN offering and also provide managed wan optimization. And cloud providers are trying to forge network partnerships. 

Seeing all these alliances in existing markets, I don't believe the Aryaka model of bringing it all together on one platform needs further validation. 

Anyway, I have to get back to work. Customers need to be rescued from their appliances. 

 
mrcynic
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mrcynic,
User Rank: Moderator
7/23/2014 | 10:55:51 PM
Re: Aryaka?
Well, if it makes you feel good that I joined to respond to you, I am happy. But, the truth is I have followed this site for some time. Today, I saw the Velocloud announcements and saw Dan's Velocloud article and joined to ask a question on Velocloud and then saw your post. So, technically, reply to your post is my second post.

But, your response made me more curious. Aryaka appears to be competing in 3 markets -- WAN Optimization, CDN/ADN and MPLS replacement. If you are taking serious business away from Riverbed, Akamai and telcos, then, you should not be shy to do a press release with your verifiable revenues.

If you can show that you are making a serious dent ito Riverbed's revenue (and Akamai and telcos) with this press release, the activist might swoop up Aryaka -- he gets a company that could win in three markets.
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