Riverbed's billion-dollar Opnet buy could pay off big, analysts say

Despite a substantial decline in Riverbed's stock price after the news of its $1 billion acquisition of Opnet this week, industry experts say that the buyout leaves Riverbed in a uniquely strong position in the network management arena.

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For Forrester Principal Analyst Andre Kindness, the deal represents a recognition that Riverbed will need to transform itself in the future.

"Honestly, I think it's brilliant. ... The reality is, hardware companies have to transition into hardware/software companies, and that's the only way they're going to live," he says.

The deep-diving network monitoring capabilities Riverbed gains as a result of the Opnet deal are more critical than the market realizes -- and this, as much as anything, is the reason for the company's stock sliding.

"I think the problem is that people don't realize [monitoring's importance] ... even within IT, people still don't put monitoring at the top. The problem is that everyone follows the shiny ball, and the shiny ball right now is cloud, or software-defined networking -- monitoring hasn't been sexy," according to Kindness.

He contrasts the deal to VMware's recent purchase of Nicira.

"Nicira is about control, it's not about monitoring ... they didn't have any revenue coming in, and [VMware] spent a billion dollars and the market was all excited about that," Kindness says, noting that Opnet has established revenue streams.

"Everybody talks about the system and managing it," he adds, "but no one ever talks about monitoring and money isn't spent on that side. But you can't have the system be automated and respond to data and users and applications floating all over this ethereal world without monitoring and making adjustments."

Monitoring is "a fundamental need" for modern network management, according to Kindness.

"I think that's why ... they bought a company that had the capability for Layer 2 to Layer 7 visibility and management in that area," he says.

EMA Managing Research Director Jim Frey says that the deal gives Riverbed a uniquely diverse and complementary set of capabilities.

"The one thing that's really kind of unique about this is that Riverbed has, already, beyond the [monitoring and management] Cascade tools ... they also have the active optimization side of their business. In particular, they have an ADC ... called Stingray, which, when they put this deep and rigorous monitoring and troubleshooting capability for applications together with the optimization products that are represented by Stingray -- that's a pretty unique combination. No other vendor right now has all that under one brand name," he says.

The key to making the deal a success, according to Frey, will be effectively blending the two companies' offerings.

"[Riverbed's competitors] will have to take notice of this," he says. "We'll have to see how well Riverbed goes about integrating the technology and bringing this into a more complete, end-to-end solution before most of the bigger [application performance management] companies will be concerned. Opnet has been working on APM aspects of their solution and acquiring property that would fill out that portfolio for the last couple years."

Email Jon Gold at jgold@nww.com and follow him on Twitter at @NWWJonGold.

Read more about infrastructure management in Network World's Infrastructure Management section.

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