Riverbed Makes It Official

As expected, Riverbed Technology is looking to go public, using the emerging WAN optimization market and its strong partnerships as the springboard.

The startup filed for an IPO with the SEC after hours last night, one day after Byte and Switch reported it was poised to take the plunge. (See Sources: Riverbed Reaches for IPO. Riverbed is looking to raise $74.75 million in the offering; Sachs & Co., Citigroup, Deutsche Bank Securities, and Thomas Weisel Partners LLC are the underwriters.

Riverbed did not disclose the estimated price of shares, number of shares, nor the target date for the offering but it is not expected to price shares until the second half of the year.

In the filing, the startup revealed it has yet to make a profit. Riverbed lost $17.4 million in 2005, which followed $9.8 million in losses in 2004. Riverbed and its investors apparently were satisfied with its revenue growth last year, however. Revenue jumped from $2.5 million in 2004 to $22.9 million last year. The vendor also reported 68 customers for its Steelhead appliances in 2004 and 501 new customers last year.

According to the filing, Riverbed's revenue for the fourth quarter of 2005 was about $10.1 million, up from $7 million the previous quarter.Riverbed's revenue is expected to receive a boost from OEM deals with Hewlett-Packard and switch vendor McData. (See McData Hits Remote Control and HP Upgrade Features OEM Crowd.) The filing says it has customers through those partners but has not recognized revenue yet. The HP deal started last June, and McData began its OEM deal with Riverbed in March.

According to Infonetics Research, the fast-growing WAN optimization appliance market increased 49% worldwide in 2005 to $236 million, and unit shipments increased 39%. Infonetics forecasts double-digit annual growth at least through 2009, with annual unit shipments almost tripling and revenue more than doubling. (See WAN Market Tops $236M.)

Riverbed's main competitors are public companies Cisco, Juniper Networks, and Packeteer, and startups Expand Networks, Tacit Networks, Availl, and Silver Peak Systems.

While frequently billed as a WAFS appliance, Riverbed's Steelhead product in fact works much like a WAN optimizer. It tweaks TCP to reduce protocol "chattiness" caused by repetitious packet exchanges. At the same time, it offers application-specific algorithms to reduce the overhead caused by Windows, HTTP, and MAPI traffic. The Steelhead appliance also reduces file transfer times by sending a reference to a file in place of the actual file.

Riverbed is the second storage startup to file for an IPO in the past month. Backup software vendor CommVault filed for an IPO of up to $150 million March 20 (See CommVault's Taking the Plunge.)Other startups are generating similar buzz. Force10 Networks has also been identified as a possible IPO prospect, and security specialist Sourcefire, which Check Point recently tried (and failed) to acquire, is said to be mulling its own IPO. (See Force10 Takes $40M, Talks IPO, US Checks Check Point, and Check Point, Sourcefire Team.)

James Rogers and Dave Raffo, Senior Editors, Byte and Switch

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