Out Fox The $treet

Typical of the quarterly reports over the last couple of years,  Riverbed Technology  ( NASDAQ: RVBD     )   easily surpassed earnings estimates. The concerning part for investors are that the WAN optimization specialists failed to meet revenue numbers. On top of that, the primary Steelhead product had virtually flat growth from the prior year. The application performance company is still busy wrapping up the integration of the OPNET acquisition from the end of last year. So far the deal isn't generating the revenue synergies expected, but that could be due to a staggering slowdown in government spending. The company obtains a large portion of revenue especially during the third quarter of the year so a rebound in government spending could benefit Riverbed more than most. Read the full article here . Disclosure: Long RVBD. Please review the disclaimer page for more details. 

The market for network performance appliances has become so competitive that Riverbed Technology (NASDAQ: RVBD ) now trades at a below-market earnings multiple of 12. With the purchase of OPNET last year, the network performance company for globally connected enterprises is facing a weak market for network equipment while it still works to achieve the synergies promised as part of the merger. The network equipment sector is facing a couple of more » Disclosure: Long RVBD. Please review the disclaimer page for more details. 

Back at the end of October, in the midst of Hurricane Sandy, Riverbed Technology (NASDAQ: RVBD) made an accretive deal to purchase OPNET Technologies that caused the stock to plummet 18%. While investors clearly didn’t like the stock back then, the mood hasn’t improved significantly now with the stock trading between the original post announcement days range. The deal provided the leader in the WAN optimization market inroads more at Motley Fool » Disclosure: Long RVBD. Please review the disclaimer page for more details. 

The mantra continues to be that "cash is king." This mantra highlighted companies with cash on the balance sheet and generating strong cash flows, but it placed no emphasis on the use of that cash. Now after years of absurdly low interest rates, those companies hoarding cash might soon find out that using that cash for an accretive deal might rule the previous king. Prior to the market open on Monday that never happened due to Hurricane Sandy, Riverbed Technology, Inc. (RVBD) announced the deal to purchase OPNET Technologies, Inc. (OPNT) for cash and stock. The deal provides Riverbed with more access to the application performance management (APM) sector and ties in perfectly to extend the network performance management (NPM) of Riverbed's Cascade product. Read the full article at Seeking Alpha. Disclosure: Long RVBD. Please review the disclaimer page for more details. 

The stock of Riverbed Technology (RVBD) had been absolutely decimated over the last six months as the company reported back on the Q411 report in January that it would be going through the growing pains of a massive new product cycle. The stock dropped from $30 to $24 in January before rebounding back to $29 before falling off the cliff when Q112 results again disappointed. (See How Did A $5M Revenue Cut Turn Into A $1.35B Market Value Drop? article.) The company though remained resolute that the new product cycle and more importantly the important WAN Optimization market remained strong. After the close on Tuesday, the company reported Q212 numbers that blew past analyst estimates, sending the stock up over 20% after hours back above $18. Read the full article at Seeking Alpha. Disclosure: Long RVBD and CSCO. Please review the disclaimer page for more details. 

As Riverbed Technology (RVBD) cratered to a new 52 week low on Wednesday, analysts were battling over the future of the company's main market. Several analysts, including Jefferies, see the main WAN Optimization market of Riverbed mostly tapped out, while Needham sees 20% growth in the next 3-5 years. Why such a divergence in opinion? It all stems from whether the recent product transition is seen as a move leading to favorable dynamic in the second half of 2012 or an excuse for weak results. See previous article on the Q112 results, conference call highlights, and new products launched. Positive Recap To recap, Riverbed is a leading networking equipment provider that recently launched a host of new products. Management categorically denied the mature market theory suggesting that the market could be 10x the size of all the products previously sold. It also denied any loss of market share as the 3rd vendor has recently pulled back from the market and Cisco Systems (CSCO) appears ...

Riverbed Technology (RVBD) announced the doubling of the existing buyback program to $300M. This amounts to nearly 12% of the company. While our firm is a big fan of buybacks for large established firms, it isn't always the best use of capital for a company with a $2.5B market cap. Typically we'd rather see them spend the money or make an accretive deal. In the case of Riverbed though, it really is difficult to argue against at least the threat of a significant buyback. The stock has been absolutely crushed and if you believe management it is on the verge of a major new product explosion. The one fact that shorts or just sellers of the stock seem to miss is that Riverbed is a cash generation machine. The company has $600M in cash and will generate somewhere around $150M in positive cash flow this year. In essence, the doubling of the buyback will come directly from cash flow each and every day. The markets now see these great companies as just a piece of paper or more ...

Last November's IPO, InvenSense (INVN) , had lived a charmed life during the roughly six months since its IPO. The stock started trading around $9 and eventually traded as high as $22 in March. For an IPO mostly missing the initial day hype, the after market results were spectacular. On Friday, InvenSense got a rude awakening to the realities of the public market. After reporting solid Q412 results, the company provided slightly lower revenue guidance for Q113. This led the stock to plunge 23% on Friday. The stock went from trading over $18 on Thursday to sub $13 on Friday. In what has been an earnings season of massive selloffs, InvenSense wasn't even the largest sell-off on Friday. Body Central (BODY) saw a 48% decline; previously Riverbed Technology (RVBD) saw a nearly 30% loss on similar warnings (see my article on the plunge of Riverbed Technology). In light of the size of these other sell-offs, maybe the fact that InvenSense was only down 23% can be seen as construc...

Clearly the market doesn't work in very precise ways, but honestly how does a $5M revenue cut in guidance lead to such a dramatic loss of market value? Maybe "fuzzy math" is at work. Most investors probably saw that Riverbed Technology (RVBD) lost nearly 29% of its market value on Friday. The company reported basically in-line Q112 numbers. Not too bad at this point considering the major product transition going on. Then the wheels started falling off during the conference call. The CFO guided to revenue that at the high end would miss the $202M Q2 estimate by roughly $5M. Yes, anybody doing the math is probably struggling to understand the stock plunge. It dropped 29% due to a 2% reduction in revenue. All while investors should've known that the company was going through a product transition that would muddy up the financials for the 1H of the year. Read the full article at Seeking Alpha. Disclosure: Long RVBD and CSCO. Please review the disclaimer page for mo...

Its always a bad situation to have a stock that plunges after hours. Do you panic and sell immediately? Do you hold and hope for a rebound? Or do you read the earnings report, listen to the conference call, and use your past research and knowledge on the stock to make an educated decision? Honestly, it really depends on what the company says compared to expectations. Knowing the company and the stock is the key. The stock reaction can have nothing to do with the company. It might be a buying opportunity. Or if the story has changed, investors have to be willing to cut and run. After the bell tonight, Riverbed Technology (RVBD) reported Q112 numbers that were essentially in-line. Unfortunately, the company guided to Q212 numbers that were a major disappointment to the market. The stock plunged nearly 18% in after hours. Was this move justified? Is the valuation so stretched that bad numbers suggest the stock should plunge? Riverbed is in the middle of a massive product refresh...

Back in October I wrote an article about how stocks could reclaim highs from July. At the time, numerous stocks were down 50-60% from those July highs after the dramatic summer sell-off that didn't appear to be justified. Since that article, numerous stocks such as Toll Brothers (TOL) and F5 Networks (FFIV) have already recaptured the July highs and more. Much to my surprise, homebuilders lead the market higher. Not to mention the Nasdaq composite has soared to 11 year highs. Clearly the theory has worked in some situations, such as the above growth stocks and particularly with most dividend-paying stocks. Numerous stocks still trade considerably below those July highs, providing opportunities for investors. The original report focused on Riverbed Tech (RVBD), Terex (TEX), Hartford Financial (HIG), and Weatherford International (WFT) . None of these stocks has recaptured those July highs providing plenty of opportunity for investors to still get in on these stocks. Read ...

Just about every stock segment I caught on Friday and over the weekend talked about the tech sector being very extended. The talk is of massive gains that reach bubble levels. The Nasdaq Composite hit 11 year highs so clearly it must be time to sell. Or is it? When finally taking a closer look at the Technology SPDR Select ETF (XLK), I'm actually dumfounded by all the pessimism. Sure the XLF has hit new highs. Sure the RSI and CCI are both showing an ETF that is overbought. Though I wonder about the accuracy of those measurements or the immediacy of the negative outcome. First, the index is only at $27.72 after first reaching over $26.50 back in mid February 2011 so over a year ago. Second, not more than 2 months ago the index was at $26.50 again. Third, the index hit similar overbought numbers in October 2010 and continued rallying the next couple of weeks prior to a shallow pull back and another 3 month run. Facing a similar run as Sept 2010 though Feb 2011 one would have...

After the close on Thursday, networking equipment stocks Juniper Networks (JNPR) and Riverbed Technology (RVBD) reported earnings that sent both stocks lower on Friday. One company missed estimates and focused on issues with carrier spending and the European debt crisis. The other exceeded estimates and talked about a product transition in Q1 leading to a major new product cycle. So which stock was down 18% and which one was down 3% at the close on Friday? That might surprise most investors who read the earnings reports and listened to the conference calls. Read the full article at Seeking Alpha. Disclosure: Long RVBD. Please review the disclaimer page for more details. 

After a strong 2009 and 2010, 2011 was a year to forget for this portfolio. The market hit highs around the end of April and this model was soaring to new heights at the time. Many of the holdings had valuations nowhere near the 2007/08 peaks or even close to what would normally be considered rich. Regardless, leverage was reduced since some gains were significant. Then, unfortunately most of the stocks collapsed and even in a few cases approached 2009 lows. With too much leverage left, the model was hit very hard. The good news is that valuations started the year as attractive as during the financial collapse of 2009. 2012 Outlook Portfolio Construction The portfolio remains overweight on the global growth theme. Most of the stocks in this sector trade as if emerging markets are headed towards a recession instead of continued growth. The biggest challenge to our investment strategy in 2011 was the major inflation fears in emerging markets like China, India, and Brazil. As 201...

October was an exceptional month with a 47.9% gain versus the 10.8% gain for the benchmark leading to a 37.1% outperformance. Unfortunately, this was only a small recovery from the July, August and September selloff. With many stocks in the model still trading far below the July highs, substantial upside remains just to recapture those levels. Though global GDP growth came under pressure during the summer and fall months, US corporations are reporting record profits. The yield curve remains very positive suggesting an attractive environment exists for equities. On a daily basis, it's becoming more apparent that the summer swoon was more of investor panic than a economic reason suggesting a return to even the April and May highs of 1,370 on the S&P 500 is probably warranted. China remains a key focus of the model. While investments in China based stocks have been greatly reduced, the model still relies heavily on the demand for materials and construction related items coming...

After a summer of watching the markets tank-- especially in the global growth sectors, the economic news and earnings reports clearly haven't backed up the market dive. This apparent fear of a 2008 repeat without the matching reality got us to thinking about what would happen if stocks reclaimed prices prior to the summer swoon. Nothing aggressive like 52 week highs or even all time highs, just a simple recent stock price that the numbers suggest shouldn't have been thrown away. Considering numerous high fliers and leading dividend stocks were able to maintain prices at 52 week highs, why couldn't others recapture those recent highs? In some cases, levels not even close to 52 week highs. Read the full article at Seeking Alpha. Disclosure: Long HIG, RVBD, TEX, WFT. Please read the disclaimer page for more details. 

Riverbed Technology (RVBD) just reported numbers that were truly amazing. Not for the level that they beat estimates, but more for the fact that analysts spent the 90 so days since the last earnings report downgrading the stock and lowering estimates. In turn, RVBD beat the original estimates. Makes one just wonder what analysts do all day. Apparently they sit around and dream op scenarios that just aren't true. These results back up our theme that many stocks have been unfairly punished since July highs. RVBD in escense has a double top in July around $42 and the stock traded just north of $22 today. How does a stock drop 50% when earnings actually grew faster than expected? RVBD reported record margins, operating profit, and net income. It earned $.24 versus the reduced estimates of $.21. Revenue came in at $191M versus $185M estimate. Guidance for Q4 was $.24 to $.25 at revenue levels around $200M. Solid numbers generally above estimates that likely will be exceeded easil...

Ciena ( CIEN ) soared after  reporting  an EPS beat and non-GAAP profits for the first time in several quarters. CIEN had a impressive mix of improved revenue combined with a reduction in operation expenses. The real question is whether this combination can last in the competitive environment. Ciena has long been a leading optical and networking equipment provider back to the internet bust in 2000. Since the bust, CIEN has had some good periods, but it has never been able to flourish. The company continues to make lower highs every 4 or so years with peaks around 2004, 2007 and 2011.  Read the full article on Seeking Alpha.  Disclosure: Long RVBD. Please review the disclaimer page for more details. 

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. 

The Opportunistic Levered (Arbitrage on Covestor.com) model had another rough month. The model was again hit by fraud concerns among Chinese companies and emerging markets stocks fell due to concerns over inflation pulling down growth. Over the 29 months of tracking this model, it has had numerous months of 10% plus swings. Unfortunately some cases were to the downside. In those cases the stock holdings just got more attractive in the process. Even with China fraud scares, the three stocks owned in this model still appear to be worth more than our original purchase prices not to mention multiples of that. The size of declines in some of the stocks in this model caught us off guard. It didn't surprise us that June was weak, but the level of weakness in several sectors such as industrials and emerging markets such as China caught us off guard. Bottom Performers The bottom performers were again lead by the China stocks in the model. ChinaCache International (CCIH) and Lihua Int...