* What: Q2 results
* When: Thursday, July 23
* Q2 expected to beat market expectations
By Shrutika Verma
BANGALORE, July 22 (Reuters) - Chief information officers around the world fancy Riverbed Technology Inc's RVBD.O products a lot.
The company's hardware and software help businesses access data over wide area networks (WAN) through the Internet without requiring to upgrade bandwidth, thus enabling overall IT cost reduction.
Investors fancy the stock as well. Shares of the company have more than doubled this year. Which is why when the company reports quarterly results this Thursday, investors and analysts will be expecting it to top Wall Street expectations.
What's more, analysts are not just betting on the company's second-quarter results but also hold high expectations for the third-quarter outlook.
The fact that the WAN optimization market declined at a much smaller clip than the overall networking industry in the first quarter of 2009 supports the view that the technology is a "must-have," Piper Jaffray analyst Troy Jensen said in a note dated July 6.
The mass adoption of networked applications, growth in remote offices and telecommuters, ongoing bandwidth constraints and the growth in Internet traffic have been driving demand for the technology.
The WAN optimization market -- dominated by Riverbed Technology RVBD.O, Blue Coat Systems BCSI.O and Cisco Systems (CSCO.O) -- was estimated at $1.1 billion to $1.3 billion in 2008, up about 43 percent from 2007, according to marketing research firm Gartner.
Channel checks suggest strong business trends including strength with the system integrators and service provider customers that Riverbed has, Lazard Capital Markets analyst Ryan Hutchinson said.
However, what needs to be seen is whether the company has the ability to show signs of growth and improvement in end-market demand coming into the next quarters.
"If they are seeing evidence and offer evidence that the economy is starting to show signs of picking up as opposed to just simply stabilizing, then I think you will have a good shot of seeing some upward movement in some of these enterprise oriented equipment vendors," Miller Tabak & Co analyst Alex Henderson said.
Lazard's Hutchinson also believes that the company, given its recent stock performance, needs to demonstrate that it can beat its outlook as well as raise the numbers.
He is forecasting $95 million in revenue for the second-quarter, with expectations of an upside of $2 million to $3 million to that number.
In April, Riverbed said it expected to earn 14 cents a share on revenue of $92 million to $94 million for the period.
According to Reuters Estimates, the company is expected to post earnings of 14 cents a share, excluding items, on revenue of $93.5 million. However, many analysts continue to have valuation concerns on the stock.
"Our view here is that the fundamentals remain sound. The expectations, however, have reached a high point," added Hutchinson, who has a "buy" rating on the stock.
Riverbed is expected to continue to gain share from its competitors and grow at a higher pace than others in the sector.
"They (Riverbed) are the clear leader in the WAN optimization market, which is a nascent and the fastest growing segment of the data networking market and we anticipate that they will be the fastest-growing company within this segment in 2009 as well as 2010," Hutchinson said.
The WAN optimization market has been particularly robust and a recent market share study from Gartner indicates Riverbed is pulling away from the competition, given the company's technological advantage and solid sales execution, Piper Jaffray's analyst Jensen said.
"We would point that the new Cisco WAAS product release continues to have significant performance limitations and it appears to us that the sales force at Cisco is not as engaged to sell the product as originally hoped for," Hutchinson said.
Currently, WAN optimization accounts for a small portion of the total revenue for Cisco.
Another positive surprise in the quarter comes from Riverbed's new line of products -- Cascade -- which formed a part of its recent acquisition of Mazu Networks.
"Between their core business and then $4 million to $5 million incremental contribution from Mazu, we think consensus estimates look well within reason," Canaccord Adams analyst Paul Mansky said. (Editing by Saumyadeb Chakrabarty and Aradhana Aravindan)