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Riverbed looking to expand by buying Expand

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Riverbed is looking to develop its WAN optimisation product line by buying its competitor, Expand Networks.

The Israeli Globes media outlet reports that advanced negotiations are under way, although neither company would comment.

Both companies have technology to speed the transmission of data across wide area networks (WAN). Riverbed is publicly-owned, led by CEO Jerry Kennelly, and on a roll with its Steelhead WAN optimising appliance. It 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.

Privately-owned Expand, led by CEO Elie Barr, was founded in January 1998 and has 145 employees. The USA headquarters is in Roseland, New Jersey, and there are additional offices world-wide. However the Research & Development centre is at the Company's international headquarters in Tel Aviv, Israel.

It has recently been positioned as a WAN optimising technology leader in a report by Forrester Research. The document said: "Expand offers excellent support for virtualised environments and non-traditional deployment scenarios such as those dependant on satellite-based WAN links. The vendor has pursued multiple device provider partnerships in the satellite space. Expand has excellent optimisation architecture – offering multiple levels of transparency with or without tunnelling, including all IP Layer 3 solutions and Layer 4 capabilities – storage architecture, client integration, and deployment architecture, earning it a top spot in current architecture offerings.”

The company has had sales success - more than 1,400 customers have deployed more than 27,000 of its Expand Accelerator appliances - but not financial success. The total funding Expand has received is around $82m through six funding rounds. Almost a dozen years after its founding, Expand has yet to realise an IPO and make its funders - and founders - a profit.

The Globes report says venture capital firm Tamir Fishman owns 16 per cent of Expand and it has written off 60 per cent of its Expand investment, saying that Expand failed to meet its business targets in the second quarter of this year. Expand was then valued at $50m, and a sale at that level would represent a probable loss for most investors.

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. ®

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