NEW YORK (TheStreet) -- Riverbed Technology Inc. (RVBD) spiked 11.5% to $19.90 a share just before noon on Wednesday after billionaire Paul Singer's Elliott Associates hedge fund made a $3.08 billion offer to acquire the company. As of 12:05 p.m., the stock had a volume of 9.5 million compared to its average volume of 3.46 million.
Elliott offered $19 a share in cash for all of the outstanding shares of common stock in the San Francisco-based computer networking equipment maker. The company first claimed a stake in Riverbed in September and had increased its stake to 10.4% by November.
Riverbed shares had plummeted 34% in the last two years.
TheStreet Ratings team rates Riverbed Technology 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 robust revenue growth, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Despite its growing revenue, the company underperformed as compared with the industry average of 22.1%. Since the same quarter one year prior, revenues rose by 19.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The gross profit margin for RIVERBED TECHNOLOGY INC is currently very high, coming in at 85.09%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, RVBD's net profit margin of 1.45% significantly trails the industry average.
- Despite currently having a low debt-to-equity ratio of 0.60, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that RVBD's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.59 is high and demonstrates strong liquidity.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Communications Equipment industry. The net income has significantly decreased by 84.6% when compared to the same quarter one year ago, falling from $24.73 million to $3.82 million.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. 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.
- You can view the full analysis from the report here: RVBD Ratings Report