Thursday, July 21, 2011

Record Margins Should Remain the Focus for Riverbed Tech


After the close Tuesday night, Riverbed Tech (RVBD) reported inline earnings and revenues that were slightly lower than estimates. The stock was crushed in after hours as traders overreacted to the revenue disappointment and ignored the record margins.
The encouraging news was RVBD reporting record gross and operating margins. This means that RVBD wasn't cutting prices to just make the estimates. If anything, it backs up the claim that weakness in EMEA was as much about closing deals as competition.
Other good news was that it used a part of its $611M cash hoard to invest in two new companies, Aptimize and Zeus Tech, that will be accretive in 2012. Also, US product sales grew by 50% and sales would've met the midpoint of analysts estimates if it had been able to ship the surge of orders in the last few days.

Read the full article at SeekingAlpha.com. 

Disclosure: Long RVBD in client and personal accounts. Please review the disclaimer page for more details. 




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