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.

Barracuda bites again

Contact: Brenon Daly

A ravenous eater, Barracuda Networks has now gobbled up four companies in the past 14 months. (And that doesn’t even count the privately held security company’s unsolicited bid in May for publicly traded Sourcefire, the Snort vendor.) Barracuda’s latest bite is backup and recovery company Yosemite Technologies. The company will be lumped in with the technology Barracuda picked up in November 2008 when it bought another backup vendor, BitLeap.

As we have chronicled, Yosemite evolved from a tape-based backup vendor to a disk-based one, and then added technology for continuous data protection for notebooks and laptops with the acquisition of early-stage FileKeeper. We understand that Yosemite, under the leadership of storage veteran George Symons, had been investing heavily in commercializing the technology. However, we suspect that fully realizing the value of the FileKeeper technology would have likely required another round of funding, which is tough to come by these days.

Instead, Yosemite opted for a sale to Barracuda. Terms weren’t disclosed, but a Barracuda insider once characterized the company’s approach to M&A to us this way: ‘We don’t mind picking through the boneyard.’ Barracuda has already built a powerful distribution channel to SMBs, so it just wants more products to push through that. With data protection covered, where might Barracuda look next? Our bet is that it is still interested in WAN traffic optimization (WTO). As we have noted, Barracuda CFO David Faugno knows the market well, having served as the top numbers guy at WTO vendor Actona Technologies before its sale to Cisco.

Barracuda’s deals

Date Target Rationale
September 2007 NetContinuum Web application security
November 2008 BitLeap Backup and recovery
November 2008 3SP SSL VPNs
January 2009 Yosemite Technologies Backup, data protection

Source: The 451 M&A KnowledgeBase