Can Riverbed Become a Global IT Power?

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In today's world, most companies span several regions and sell across the world. As Foolish colleague Morgan Housel notes, 10 years ago, less than a third of S&P 500 revenue growth came from abroad. Today, that area makes up half of the S&P 500's growth.

And that number is growing. The truth is, investors regularly underestimate how much demand comes from abroad. More importantly, for large, multinational corporations that have already established a presence in their home markets, much of their future growth comes from abroad.

With that in mind, today we're looking at Riverbed (NAS: RVBD) . We'll examine not only where its sales and earnings come from, but how its sales abroad have changed over time.

Where Riverbed's sales were five years ago
Five years ago, Riverbed produced 73% of its sales within the United States.

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Source: S&P Capital IQ.

Where Riverbed's sales are today
Today, America is still Riverbed's largest market, but its influence is shrinking.

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Source: S&P Capital IQ.

As I've discussed in previous videos on the subject, one of the great opportunities in investing is truly great companies with advanced hardware and software products whose solutions can be embraced globally. If you're investing in, say, a shoe company, the whims of Brazilian and Chinese consumers could be different, but best-of-breed technology will sell across borders.

As Riverbed has become the dominant leader in wide area network optimization, it has been able to push its own technology across borders. While company growth in total has been exceptional across the past five years, the best growth has come from abroad.

Segment

5-Year Sales Growth

United States

512%

Europe, Middle East and Africa

1,469%

Rest of the World

988%

Competitor checkup
One last point to check is how Riverbed's footprint compares with some of its peers':

Company

Geography With Most Sales

Percent of Sales

RiverbedUnited States55%
F5 Networks (NAS: FFIV) Americas59%
Cisco (NAS: CSCO) United States and Canada53%
Juniper Networks (NYS: JNPR) United States45%

Source: S&P Capital IQ. Results for most recently reported fiscal year.

Overall, the networking companies seen above have pretty similar geographic profiles. All have sales to the United States that are likely within the 45% to 55% range. That's not to say there isn't sufficient opportunity for these companies to find growth abroad in coming years. Like Riverbed, F5 Networks has actually seen some of its strongest growth across Europe and the Middle East during the past few years.

Cisco saw its results boosted by an unexpected region during its last quarterly report. The company saw its fastest-growing Asian market not in China, Indonesia, or any of the usual markets you might expect. Instead, Cisco experienced its fastest growth in Japan.

Finally, Juniper remains more levered to the global service provider industry and is hoping continued advancements in global telecom markets will fuel its growth in coming years. That might not be a bad bet; even in poorer regions like Africa, more people have access to mobile devices than clean drinking water. That's a sad statistic, but it shows the spread of the global telecommunications industry. As telecommunications becomes one of the strongest global industries, their need to continually upgrade is a boon to Juniper.

Keep searching for global opportunities
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At the time this article was published Eric Bleeker owns shares of Cisco. The Motley Fool owns shares of Cisco Systems. Motley Fool newsletter services have recommended buying shares of and writing covered calls on Riverbed Technology. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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