Window on WANs

Nov 17 2009   9:12PM GMT

Riverbed eyes Israeli WAN optimization start-up for acquisition, but why?

Jessica Scarpati Jessica Scarpati Profile: Jessica Scarpati

Oh, how the rumor mill churns! Israeli business publication Globes reports that “sources” say Riverbed Technology Inc. may buy Expand Networks, a Tel Aviv-based fellow WAN optimization vendor.

The reporters at Globes haven’t gotten any official word from Riverbed or Expand, but their sources say the deal could be somewhere between $30-40 million. Globes hints that Expand has run into some financial troubles, and it seems the vultures are circling:

Gartner said that Expand was a small private company in a market led by large companies. In other words, it would not survive independently for long.

The sources added that Expand had been in contact with other potential buyers, and another communications equipment vendor may end up acquiring it, or else a company that wants to enter the sector.

Interesting that Riverbed would be making this play. It is already an established leader in the WAN optimization market, so what does Expand have that Riverbed wants? The blogosphere seems pretty quiet on it.

British IT outlet The Register speculates the two companies are just in the right place at the right time.

[Riverbed] earned $102m in its third 2009 quarter, a 12 per cent increase on the second quarter and 18 per cent up on the year-ago quarter. Net income was $5.5m, which compares to a net loss a year ago of $11m. It reported a $38m cash flow from operations and $297m in cash and marketable securities and no debt. That’s a nice situation to be in with a bottoming out, or maybe recovering economy.

The previous two quarters had been disappointing and a much-heralded Atlas deduplication product technology has been shelved. So it appears Riverbed’s growth is going to be by acquisition and not by organically developing its own technology.

… It looks as if, with that funder’s vote of no confidence in Expand, the company is on the selling block and looking to be bought, with Riverbed a front runner.

Fellow TechTarget blogger Shamus McGillicuddy also points out any possible acquisition is something Riverbed partners (and IT shops who use these VARs) to keep an eye on:

If the Riverbed-Expand deal happens, Riverbed and Expand partners should watch carefully how Riverbed incorporates Expand’s technology into its product portfolio. Certainly Riverbed would prioritize the integration of Expand’s remote and virtual desktop acceleration capabilities into its Steelhead appliances.

Riverbed might also try to integrate Expand’s vision for software-only WAN optimization appliances. Riverbed’s approach focuses more on having physical boxes between each location, although its Steelhead Mobile technology has departed from this vision, allowing enterprises to deploy acceleration software on end user devices.

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