Riverbed's (RVBD) data-speedup technology is gaining momentum and CEO Jerry Kennelly is feeling a little invincible these days."We are crushing our competition," says Kennelly, jamming his thumb down on a coffee table. "Just smashing our massive competitors." Kennelly, in New York Friday to ring the bell at Nasdaq in Times Square, was having some fun with the image of his $2 billion company trouncing rivals like Cisco ( CSCO - Get Report) and Juniper ( JNPR - Get Report) with their market caps of $168 billion and $13 billion, respectively. He's not the only one having fun at Riverbed lately. With the stock up 111% since its IPO in September, these are obviously ebullient times for the networking-equipment upstart. Last month, the company signed on its 2,000th customer, and Kennelly raised 2007 sales guidance for the second time this year. The new target now calls for sales to more than double from the year-ago $90 million, with big fat 70%-plus gross margins. Riverbed's Steelhead product is a server-type device that compresses and stores data files on business networks. The technology is designed to make information delivery much faster by basically reducing duplication. Most documents or data files going back and forth on company networks contain a lot of the same information, says Kennelly. The Steelhead technology reduces the number of trips of redundant info and effectively quickens the transmission.
"The fastest trip is the trip you don't make," says Kennelly. As he describes it, increasing bandwidth gets you only so far. The next step, he adds, is to make the data go faster and more efficiently on the network. "This was a whole new area that no one was looking at," says Kennelly, who was formerly a CFO for Inktomi, a Web tech shop acquired by Yahoo! ( YHOO) in 2002. Investors who follow Riverbed say the company can probably count on a year, maybe two, of continued success until the
competition catches up. Riverbed has a big lead on the technology, but it's only a matter of time, say observers. "Those guys are done long term, as Cisco has them in their cross hairs," a hedge fund manager said recently. That's certainly the conventional belief, says Kennelly, who has grown familiar with the critique by now. But Kennelly doesn't sound worried. Cisco, he says, is stuck in a 10-year-old caching technology that can't compete. And he says there's not much chance of an innovative rival duplicating Riverbed's technology. Riverbed has 25 patents that serve as a "moat" around its kingdom, says Kennelly. Yes, as noted, Riverbed is having a royal time of it.