Investor support for a new start: Riverbed Technology takes refuge in bankruptcy protection
Riverbed Technology SD-WAN and WAN optimizer has started the announced in October implement financial restructuring. It is supported by all voting lenders as well as majority private equity owners Thoma Bravo and Ontario Teachers’ Pension Plan. The two investors took over the company in 2014 for around $ 3.6 billion. The most drastic measure here is the now submitted application for bankruptcy protection under Chapter 11. This step, which is often equated with a German application for insolvency, differs from the fact that the focus is not on satisfying the claims of the creditors, but on the continuation of the company.
According to Riverbed, the reason for the drastic measure are difficulties in business due to the COVID-19 pandemic. The reason is surprising, as the SD-WAN market in particular has benefited from the emergency measures taken by companies due to the pandemic. For example report the market researchers of the Dell Oro Group for the fourth quarter of 2020 of a 50 percent increase in this segment compared to the same quarter last year.
According to them, the market grew by 32 percent in 2020 as a whole. That is only half as much as in 2019, but in view of the overall economic environment “very impressive”, explains Shin Umeda, Vice President of the Dell’Oro Group. According to him, the five best-selling providers in this area are Cisco, VMware, Fortinet, Versa and HPE (thanks to the specialist Silver Peak, which was acquired in summer 2020). Gartner also sees these five top-selling providers as leaders in its analysis of the market for WAN edge infrastructure. Riverbed ranks a bit behind as one of ten niche providers. IHS names Vmware, Cisco, Fortinet, Aryaka and Silver Peak (HPE) as the providers with the highest sales in the SD-WAN 2020 segment (in that order).
Apparently, however, Riverbed had to struggle with delivery problems on the one hand, so that it could not fulfill all orders, but on the other hand with a lack of staff. In addition, the company may not have gotten to grips with the fact that sales couldn’t go to customers. At least this is how CEO Dan Smoot explains the poor economic performance in a press release.
At the same time, Riverbed’s second and older mainstay, the WAN optimization market, performed significantly worse. Riverbed itself even speaks of a decline, but market observers are somewhat more optimistic. According to them, the market segment in 2019 had a volume of around $ 2.35 billion. Forecasts went back then Assume an annual growth of just under 10 percent per year by 2027. Riverbed is one of the leading providers in this area, but with Cisco Systems and HPE (Silver Peak) it has two major competitors who can score points with their customers with the argument of a total solution from a single source.
Riverbed itself states that “declining demand during the pandemic for Riverbed’s products and services” put sustained pressure on liquidity, making the company unable to service its lenders’ demands. With the application for bankruptcy protection according to Chapter 11, measures are now to be introduced to reduce debts, increase liquidity and put the financial basis on a new, more solid basis. For example, the debt of two billion dollars is to be halved through the financial restructuring and liquidity is to be restored in the short term through a financial injection of 35 million dollars.
At the request of ChannelPartner, Kerstin Andersson-Kucharik, Channel Sales Manager for Germany and Austria at Riverbed Technology, was fundamentally optimistic. In the past third quarter, an increase in orders of 37 percent was recorded. Even the renewed merger Andersson-Kucharik sees it as positive with the APM (Application Performance Management) specialist Aternity, which was taken over in 2016 and which last operated as an independent department, because this will broaden the product portfolio.
Commenting on the bankruptcy measure, Andersson-Kucharik said, “After this process is completed, Riverbed will be able to invest more in business and innovation for our customers and partners and equip the company for even greater growth and long-term success.” The support of all previous investors is proof of their confidence in Riverbed and the company’s growth prospects. The channel manager also assures that activities in the EMEA region will continue “as usual” during the recapitalization process, which is expected to be completed in mid-December.