Can These Tech Stocks Turn the Corner?
John is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
It is no surprise that the WAN technology market has slowed down with everything else. Riverbed Technology (NASDAQ: RVBD) has suffered because of this and also with a combination of things tasking place in the company that should set the stage for a bright future.
In 2011 the market grew and some consider it still having much room to ascend further with both Riverbed and Cisco (NASDAQ: CSCO) as sitting at the top of the market. One would logically think that since Cisco was dominant in the core networking, it would have the easiest entry into this market. Any manager looking at WAN optimization should think of Cisco since its network systems are already in place, but that is not how it has gone.
But Riverbed has done a remarkable job getting into the minds of IT managers and has twice the market Cisco has. Yet, the company has had great struggles on account of poor Q1 2012 revenue and weak Q2 guidance. Obviously in transition, the company has disappointed for more than a quarter now. New product transitions may be at the helm of the struggle. And I believe this is the key!
There was a time last year when Cisco struggled and was hovering around 15 until it reorganized itself and came back strong rising clear to 21 until a very sluggish economy helped it back track. Riverbed has done incredible job marketing against Cisco and coming up a winner so the company is no fluke. Unfortunately the market is very soft at the same time it is restructuring product. It is twice the market of Cisco and also comes in with little to no debt. Being much smaller than Cisco, maybe someone will swoop in for an acquisition. All this will do is helping the stock!
It may take a few quarters before anything positive is seen, but I am sure it will play out positive.
In the Microsoft TechEd show this year, Riverbed will be working with Microsoft to enable organizations to experience Microsoft enterprise software solutions over the WAN and in the cloud as if they were local. The company will be showcasing its software-based SCO solution Stingray Aptimizer, and Steelhead Cloud Accelerator. Companies rely on Riverbed for a lot of performance based enhancements for Microsoft applications. The Stingray Aptimizer has been said to increase page loading with Sharepoint of up to four times faster!
Riverbed has some amazing products and will continue to be the leader in the WAN field. The industry is by no means saturated but economic slowdown and uncertainty has caused problems for both Riverbed and Cisco. The stocks will turn, it may take a couple quarters, but the stocks will turn around. It may be a good time to consider looking for an entry point.
The Motley Fool has no positions in the stocks mentioned above. johnmylant has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.