Is Riverbed floating toward a deal?

Contact: Brenon Daly

Riverbed Technology is one of those companies that has seemingly been in play for as long as it’s been around. And that’s understandable enough, given that the company has an attractive profile as the fast-growing leader in a market that’s taking off. Add to that the fact that Riverbed plays in the networking space, which is dominated by deep-pocketed giants hungry for growth, and acquisition rumors are inevitable. The most-recent would-be buyer for Riverbed? Juniper Networks.

Of course, Juniper is just the latest in a long list of rumored suitors. Cisco Systems is said to have made at least two runs at Riverbed before the company went public in September 2006. More recently, we heard that EMC also looked very closely at Riverbed before its IPO. (We understand that while EMC was seriously interested in Riverbed, Cisco effectively killed the deal by telling its partner EMC that it wouldn’t look kindly on the information management giant stepping into the WAN traffic optimization (WTO) market.)

And last summer, we noted that Hewlett-Packard would make a logical buyer for Riverbed. The two companies have had a long relationship with HP reselling Riverbed boxes and integrating the Riverbed Optimization System into its ProCurve infrastructure. (Not to mention that HP could stick it to its new rival Cisco by picking up Riverbed.) And several sources have pointed to talks in the past between F5 and Riverbed. We suspect that would be a tricky combination because Riverbed’s current market capitalization ($1.7bn) is half that of F5’s market value ($3.5bn).

All of that leaves us with Juniper. However, we don’t think a deal between the two is likely. For starters, Juniper has already gone shopping once in the WTO market. It shelled out a princely $337m (most of it in stock) for Peribit Networks in April 2005. From Juniper’s perspective, the Peribit purchase gave the networking vendor a hot product to sell to its enterprise customers, many of which came via Juniper’s $4bn acquisition of NetScreen Technologies a year earlier. However, we wouldn’t hold out Peribit as a particularly successful transaction for Juniper. Certainly, it hasn’t generated the type of returns for Juniper that would make the company want to double down with a multibillion-dollar bid for Riverbed, we would think.