Riverbed Responds To Mounting Shareholder Pressure With Plan To Cut Costs, Explore Options

In response to mounting pressure from activist shareholder Elliott Management, Riverbed Technology said Thursday it's restructuring its business, trimming costs and starting to explore other strategic and financial options.

Riverbed's restructuring plans come just three days after Elliott Management again offered to acquire the San Francisco-based WAN optimization vendor, this time for $21 per share. Elliott Management since January has made repeated offers to buy Riverbed, which it has said is consistently "overpromising and under-delivering" to shareholders.

This week, Elliott Management launched a website called RepairRiverbed.com that it said is meant to raise awareness of Riverbed's "long history of broken promises and inconsistent results." The site details Elliott Management's takeover bids, along with the recent performance of Riverbed's stock.

Related: Riverbed Rebrands Product Portfolio, Looks To Broaden Reach Beyond WAN Op

Riverbed said the aim of its restructuring is to reduce annual costs by $20 million to $25 million and to improve annual operating margins between 1 percent and 2 percent. The company said it expects all restructuring efforts to be complete by the end of December.

"In light of current business conditions, we are taking decisive steps to improve our cost structure in order to drive enhanced operating performance," said Jerry Kennelly, chairman and CEO of Riverbed, in a statement. "We believe these actions enable us to deliver increased value to our shareholders while continuing to deliver the products and support expected by our customers."

In addition to cutting costs, Riverbed said its board is performing an end-to-end review of its business and working alongside advisers to explore strategic options.

Riverbed said there is no "set timetable" for this review process, and that it will not share further details of the review until its board decides on a specific course of action.

Riverbed in May began a rebranding effort designed to position itself as an end-to-end platform company and to sell more integrated network solutions. The change also was intended to help Riverbed extend its reach beyond WAN optimization, a market in which it still holds more than a 50 percent share.

Riverbed Thursday lowered its third-quarter outlook, saying it expects revenue to fall between $276 million and $277 million, down from its previous guidance of between $285 million and $291 million. The drop is due to lower-than-expected growth in its WAN optimization and virtual application delivery controller businesses, Riverbed said.

PUBLISHED OCT. 9, 2014