Sources: Riverbed Reaches for IPO

After months of speculation, Riverbed is about to take the first steps to IPO, according to industry sources, who say the firm's S-1 filing is imminent. (See In the Public Domain.)

One Wall Street analyst, who asked not to be named, says the WAFS and WAN optimization startup has hired bankers and is looking for an IPO in the second half of the year. He expects Riverbed to be cashflow positive this quarter and profitable next quarter.

A storage analyst, also requesting no attribution, says Riverbed's investors favor filing now rather than waiting for profitability. "I had heard that their VCs were pushing them to file, even though they weren't profitable yet," he says.

The startup, which was one of the first vendors to offer both WAFS and WAN optimization, has seen a number of its competitors snapped up by larger predators and is widely regarded as best positioned of the remaining privately held companies in this space. (See Top Ten Private Companies: Spring 2006, Cisco Acts on Actona, Peribit Deal: More to Come, and Brocade Invests in Tacit.)

Another industry source says Riverbed generated around $25 million in revenue in 2005, and its first-quarter 2006 revenue was around $13 million -- up from about $10 million in the previous quarter.Last summer, after just a year of shipping, Riverbed claimed 200 Steelhead customers. And just a little over five months later, that figure has topped 500, including the likes of software giant Mercury Interactive Corp. and financial services firm Allied Capital. The startup is also expanding into the lucrative Japanese and Korean markets. (See Riverbed Opens in Japan and Riverbed Launches in Korea.)

"We arent able to comment," a Riverbed spokeswoman says of the IPO talk, although if the firm does file its S-1, it will be the second storage company to do so this year. CommVault filed on March 20. (See CommVault's Taking the Plunge.)

All the signs suggest that this is the direction Riverbed is heading. "Based on their revenues last year and their traction in the market, it wouldn't be at all surprising if this was the time they are choosing to go public," says Joe Skorupa, research vice president at analyst firm Gartner. "From a product standpoint they have a lot of good features and they have also done the commercial side right," he added, highlighting the vendor's OEM deals with HP and McData. (See Riverbed, McData in OEM Deal, HP Upgrade Features OEM Crowd, and Riverbed Licenses Tech to HP.)

"It seems like a good time to do it -- you don't want to go out and do your roadshow in July when everyone's on vacation," added Skorupa. "It's either now or the fall."

All that said, there's no guarantee that even if Riverbed files an S-1 it will follow through. Prior to CommVault's filing, no storage related startup had gone public in years, and Engenio, the last to try, turned back on its own filing in 2005. (See In the Public Domain.)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.

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

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