Riverbed Technology Shares Dropped: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of network efficiency expert Riverbed Technology (NAS: RVBD) looked highly inefficient today, falling as much as 10% on heavier trading than normal.

So what:'s earnings miss made investors nervous about enterprise IT spending, which cuts directly at Riverbed's core markets. Then CNBC poured kerosene on the fire by comparing Riverbed's market prospects in 2012 to Netflix (NAS: NFLX) in 2011, which conjures up some scary charts.

Now what: When only 6% of the float is held by retail investors like you or me, some negative airtime on CNBC or Bloomberg TV can cause a stampede at the exits -- there just aren't that many active buyers and sellers available. That doesn't mean Riverbed's business is broken, but this stock does trade for a very rich 66 times trailing earnings. A few adjustments along the way may be expected, but the destination stays the same, as efficient networks have become sort of a holy grail for IT managers.

Interested in more info about Riverbed Technology? Click here to add it to My Watchlist.

At the time this article was published Fool contributor Anders Bylund owns shares of Netflix but holds no other position in any of the companies mentioned. The Motley Fool owns shares of Oracle. Motley Fool newsletter services have recommended buying shares of Riverbed Technology and Netflix. Motley Fool newsletter services have also recommended writing covered calls in Riverbed Technology. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Check out Anders' holdings and bio, or follow him on Twitter and Google+. We have a disclosure policy.

Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story