NEW YORK (TheStreet) -- Shares of Riverbed Technology Inc (RVBD) are up 3.04% to $18.63 today after the company said it would review its alternatives and start a restructuring program to cut costs as it trimmed its third quarter guidance due to lower than expected growth in the WAN optimization and virtual ADC businesses.
The restructuring is aimed at lowering expenses by $20 million to $25 million and increasing operating margins by 1% to 2%.
The IT solutions company narrowed its adjusted earnings guidance for the third quarter to a range of 30 cents per share to 31 cents per share from its prior forecast range of 30 cents per share to 32 cents per share, compared to the 31 cents per share analysts estimate.
The San Francisco-based company updated its adjusted revenue to between $276 million - $277 million for the quarter, down from the previous outlook of between $285 million - $291 million.
Also, activist investor Elliott Management, which has a 10.5% stake in the information technology solutions firm offered to buy the company for $3.4 billion, or $21 per share earlier this week.
Portfolio manager at Elliott Management Jesse Cohn said, "We have made a $21 bid for the company, and our team and advisers look forward to completing our confirmatory diligence in an expedited fashion."
Elliott Management made its initial offer to acquire Riverbed in January 2014.
Separately, Riverbed Technology was downgraded to "neutral" from "buy" at Citigroup today, citing the company's third quarter top-line shortfall.
TheStreet Ratings team rates RIVERBED TECHNOLOGY INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate RIVERBED TECHNOLOGY INC (RVBD) a HOLD. The primary factors that have impacted our rating are mixed, some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income and expanding profit margins. However, as a counter to these strengths, we find that we feel that the company's cash flow from its operations has been weak overall."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- RVBD's revenue growth has slightly outpaced the industry average of 4.3%. Since the same quarter one year prior, revenues slightly increased by 5.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Communications Equipment industry. The net income increased by 140.9% when compared to the same quarter one year prior, rising from -$16.52 million to $6.77 million.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry, implying reduced upside potential.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Communications Equipment industry and the overall market, RIVERBED TECHNOLOGY INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has declined marginally to $36.73 million or 1.54% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, RIVERBED TECHNOLOGY INC has marginally lower results.
- You can view the full analysis from the report here: RVBD Ratings Report