Riverbed Technology Inc. Q3 2009 Earnings Call Transcript

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2009-10-22 19:28:09.0

Tags: Revenue, Operating Margin, Riverbed Technology Inc., U.S. Bancorp Piper Jaffray Inc., Call Transcript, Earnings, RSP, Operational Accounting, Finance, Seeking Alpha

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Troy Jensen - Piper Jaffray.

Troy Jensen - Piper Jaffray

Could you just go over the gross margin guidance? I guess kind of surprising to believe that you guys would be down 200 basis points sequentially here given that revenues are expected to grow here?

Randy Gottfried

I think in general, Troy we’ve been pleased about the overall progress we’ve made in the gross margin line. What we are saying is Q3 was a fantastic quarter. It was a unique combination of product mix and channel mix, basically a perfect storm.

The Q2 numbers we had were basically about 76% and we’re assuming we go back to that level, which has always been closer to our long term target. So we still think the gross margin is still pretty good number. We’re pleased by Q3 and just assume we’re going to go back to a more normalized number in Q4.

Troy Jensen - Piper Jaffray

Another one really quick, any sense like a revenue level or timeframe you need to hit kind of your operating margin targets now that you’re at gross margin levels here?

Randy Gottfried

We’re most focused as a company and there’s been no change to this philosophy. The primary focus is growing the revenue line. We think again this is a very under penetrated market in the very early stages. So we’re very focused on reigniting the growth in the business and I think we’re optimistic about that. The second priority would be growing profits. The last on the list would be increasing the percentage. We still think it’s important. We think we can generate a respectable profit line as a percentage, but we’re most focused on growing revenues and absolute dollars and profit.

Jerry Kennelly

In this recent economic environment, number one is market share and revenue growth, and when the economic winds blow stronger again, we’ll be back to chasing that operating margin target for sure.

Operator

Your next question comes from Douglas Ireland - JMP.

Douglas Ireland - JMP

I wanted to ask about virtual mobile controller and the RSP, if you could give us any color on how those are performing?

Eric Wolford

They’re very related, so I just to clarify for everyone, virtual mobile controller runs on the RSP. So let me first start by addressing RSP. RSP had another really strong quarter and increased its attach rate from the previous quarter. We are nearly at 20% now and so RSP continues to be an important part of our pitch to the market and to our customers. It’s being received very well. The notion of the branch office box, that Gartner as spoke about is something that we fully believe and then subscribe to and are trying to make happen.

 

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