Amendment No. 1 to Form 10-Q

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BheyrgkfqTLuCXkhj+kADwcTl8tVLKg7bdKzyaDmr2ayYuESZQ+EtZvlvdVxCCh/ 560Ni2+FQhK3WuBH6BlhJw== 0001193125-09-100124.txt : 20090505 0001193125-09-100124.hdr.sgml : 20090505 20090505172125 ACCESSION NUMBER: 0001193125-09-100124 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20090331 FILED AS OF DATE: 20090505 DATE AS OF CHANGE: 20090505 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Riverbed Technology, Inc. CENTRAL INDEX KEY: 0001357326 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER COMMUNICATIONS EQUIPMENT [3576] IRS NUMBER: 030448754 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-33023 FILM NUMBER: 09798595 BUSINESS ADDRESS: STREET 1: 199 FREMONT STREET CITY: SAN FRANCISCO STATE: CA ZIP: 94105 BUSINESS PHONE: (415) 247-8800 MAIL ADDRESS: STREET 1: 199 FREMONT STREET CITY: SAN FRANCISCO STATE: CA ZIP: 94105 10-Q/A 1 d10qa.htm AMENDMENT NO. 1 TO FORM 10-Q Amendment No. 1 to Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

Amendment No. 1

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2009

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-33023

Riverbed Technology, Inc.

(Exact name of registrant as specified in its charter)

Delaware

03-0448754

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification Number)

199 Fremont Street

San Francisco, California 94105

(Address of Principal Executive Offices including Zip Code)

(415) 247-8800

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer x		Accelerated filer ¨		Non-accelerated filer ¨		Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of shares of the registrant’s common stock, par value $0.0001, outstanding as of April 23, 2009 was: 68,500,832.

Explanatory Note

This Amendment No. 1 on Form 10-Q/A (“Amendment No. 1”) to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2009 (“Quarterly Report”), initially filed with the Securities and Exchange Commission on April 30, 2009, is being filed solely to correct an error in the table in Footnote 8, Deferred Revenue, of Part 1, Item 1 of the Quarterly Report. Deferred product revenue as of March 31, 2009 is lower by $7,673,000, and deferred support and services revenue as of March 31, 2009 is higher by $7,673,000, than the respective amounts originally filed in our Quarterly Report. The total reported current and non-current deferred revenue amounts in our Quarterly Report are correct, and there are no changes to the amounts shown in our condensed consolidated balance sheets.

No other changes in our Quarterly Report are being made by this Amendment No. 1. However, in accordance with Rule 12b-15 promulgated under the Securities Exchange Act of 1934, as amended, the complete text of Part I, Item 1, as amended, is included herein.

This Amendment No. 1 also amends and restates the exhibit list and refiles certain exhibits specified herein, including currently dated certifications of our chief executive officer and chief financial officer set forth as Exhibits 31.1, 31.2 and 32.1 hereto. This Amendment No. 1 speaks as of the date of the Quarterly Report, and has not been updated to reflect events occurring subsequent to the original filing date.

Riverbed Technology, Inc.

INDEX


		Page No.

	PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of March 31, 2009 and December 31, 2008	4
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2009 and March 31, 2008	5
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2009 and March 31, 2008	6
	Notes to Condensed Consolidated Financial Statements	7

Item 1.

Financial Statements

RIVERBED TECHNOLOGY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

As of March 31, 2009 and December 31, 2008

(in thousands)


	March 31, 2009			December 31, 2008
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	50,731		$	95,378
Marketable securities		207,502			172,398
Trade receivables, net of allowances of $1,145 and $770 as of March 31, 2009 and December 31, 2008, respectively		43,240			46,839
Inventory		8,737			10,637
Deferred tax asset		7,473			6,185
Prepaid expenses and other current assets		6,980			6,713

Total current assets		324,663			338,150

Fixed assets, net		22,701			21,993
Goodwill		11,711			—
Intangibles, net		22,974			—
Deferred tax asset, non-current		30,354			27,033
Other assets		11,157			11,341

Total assets	$	423,560		$	398,517

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	17,669		$	18,290
Accrued compensation and benefits		16,860			13,137
Other accrued liabilities		13,178			13,342
Deferred revenue		49,650			45,194

Total current liabilities		97,357			89,963

Deferred revenue, non-current		14,891			12,967
Acquisition-related contingent consideration		10,420			—
Other long-term liabilities		1,997			1,758

Total long-term liabilities		27,308			14,725

Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.0001 par value – 30,000 shares authorized, no shares outstanding		—			—
Common stock; $0.0001 par value – 600,000 shares authorized; 68,497 and 69,145 shares issued and outstanding as of March 31, 2009 and December 31, 2008, respectively		320,208			315,882
Accumulated deficit		(20,960	)		(21,934	)
Accumulated other comprehensive loss		(353	)		(119	)

Total stockholders’ equity		298,895			293,829

Total liabilities and stockholders’ equity	$	423,560		$	398,517

See Notes to Condensed Consolidated Financial Statements.

RIVERBED TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)


	Three months ended March 31,
	2009			2008
Revenue:
Product	$	60,465		$	57,729
Support and services		27,746			15,253

Total revenue		88,211			72,982

Cost of revenue:
Cost of product		14,405			13,936
Cost of support and services		8,509			6,010

Total cost of revenue		22,914			19,946

Gross profit		65,297			53,036

Operating expenses:
Sales and marketing		40,786			31,207
Research and development		16,038			13,608
General and administrative		8,993			9,373
Acquisition-related costs		1,520			—

Total operating expenses		67,337			54,188

Operating loss		(2,040	)		(1,152	)

Other income, net		638			2,300

Income (loss) before provision for income taxes		(1,402	)		1,148
Provision (benefit) for income taxes		(2,376	)		510

Net income	$	974		$	638

Net income per common share:
Basic	$	0.01		$	0.01

Diluted	$	0.01		$	0.01

Shares used in computing net income per common share:
Basic		68,728			70,597
Diluted		70,041			73,959

See Notes to Condensed Consolidated Financial Statements.

RIVERBED TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Three months ended March 31,
	2009			2008
Operating Activities:
Net income	$	974		$	638
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,207			2,117
Stock-based compensation		12,782			11,208
Excess tax benefit from employee stock plans		(91	)		(391	)
Deferred taxes		(3,790	)		—
Changes in operating assets and liabilities:
Trade receivables		6,398			7,862
Inventory		2,440			(2,719	)
Prepaid expenses and other current assets		(177	)		(565	)
Other assets		(418	)		—
Accounts payable and other current liabilities		1,081			3,347
Deferred revenue		4,650			4,639

Net cash provided by operating activities		27,056			26,136

Investing Activities:
Capital expenditures		(2,216	)		(4,983	)
Purchase of available for sale securities		(107,495	)		(92,193	)
Proceeds from maturities of available for sale securities		5,000			41,632
Proceeds from sales of available for sale securities		67,197			13,003
Acquisitions, net of cash and cash equivalents acquired		(20,469	)		—

Net cash used in investing activities		(57,983	)		(42,541	)

Financing Activities:
Proceeds from issuance of common stock under employee stock plans, net of repurchases		1,326			1,179
Payments for repurchases of common stock		(10,019	)		—
Payments of debt		(5,004	)		—
Excess tax benefit from employee stock plans		91			391

Net cash provided by (used in) financing activities		(13,606	)		1,570

Effect of exchange rate changes on cash and cash equivalents		(114	)		72

Net decrease in cash and cash equivalents		(44,647	)		(14,763	)
Cash and cash equivalents at beginning of period		95,378			162,979

Cash and cash equivalents at end of period	$	50,731		$	148,216

See Notes to Condensed Consolidated Financial Statements.

RIVERBED TECHNOLOGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1.	ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Organization

Riverbed Technology, Inc. was founded on May 23, 2002 and has developed a comprehensive solution to the fundamental problems of wide-area distributed computing. Our products enable our customers simply and efficiently to improve the performance of their applications and access to their data over wide area networks (WANs).

Significant Accounting Policies

Basis of Presentation

The condensed consolidated financial statements include our accounts and the accounts of our wholly-owned subsidiaries. Intercompany transactions and balances have been eliminated. The accompanying condensed consolidated balance sheet as of March 31, 2009, the condensed consolidated statements of operations for the three months ended March 31, 2009 and March 31, 2008, and the condensed consolidated statements of cash flows for the three months ended March 31, 2009 and March 31, 2008 are unaudited. The accompanying statements should be read in conjunction with the audited consolidated financial statements and related notes contained in our Annual Report on Form 10-K for the year ended December 31, 2008.

The accompanying condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (GAAP) pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). They do not include all of the financial information and footnotes required by GAAP for complete financial statements. We believe the unaudited condensed consolidated financial statements have been prepared on the same basis as the audited financial statements and include all adjustments necessary for the fair presentation of our balance sheet as of March 31, 2009, and our results of operations and cash flows for the three months ended March 31, 2009 and March 31, 2008. All adjustments are of a normal recurring nature. Certain prior period amounts have been reclassified to conform to the current period presentation. The results for the three months ended March 31, 2009 are not necessarily indicative of the results to be expected for any subsequent quarter or for the fiscal year ending December 31, 2009.

Other than the adoption of the provisions of Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standard No. 141 (revised 2007), Business Combinations (SFAS No. 141(R)), and FASB Staff Position (FSP) No. 142-3, “Determination of the Useful Life of Intangible Assets,” there have been no significant changes in our accounting policies during the three months ended March 31, 2009, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the year ended December 31, 2008.

Use of Estimates

GAAP requires us to make certain estimates and judgments that can affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements, as well as the reported amounts of revenue and expenses during the periods presented. Significant estimates and assumptions made by management include the determination of the fair value of stock awards issued, the allowance for doubtful accounts, inventory valuation, the accounting for income taxes including the determination of the timing of the release of our valuation allowance related to our deferred tax asset balances, and the accounting for business combinations. We believe that the estimates and judgments upon which we rely are reasonable based upon information available to us at the time that these estimates and judgments were made. To the extent there are material differences between these estimates and actual results, our consolidated financial statements will be affected.

Revenue Recognition

Our software is integrated on appliance hardware and is essential to the functionality of the product. As a result, we account for revenue in accordance with Statement of Position (SOP) 97-2, Software Revenue Recognition, as amended by SOP 98-9, Modification of SOP 97-2, Software Revenue Recognition, With Respect to Certain Transactions, for all transactions involving the sale of software. We recognize product revenue when all of the following have occurred: (1) we have entered into a legally binding arrangement with a customer; (2) delivery has occurred, which is when product title transfers to the customer; (3) customer payment is deemed fixed or determinable and free of contingencies and significant uncertainties; and (4) collection is probable.

Product revenue consists of revenue from sales of our appliances and software licenses. Product sales include a perpetual license to our software. Product revenue is generally recognized upon transfer of title at shipment, assuming all other revenue recognition criteria are met. Shipping charges billed to customers are included in product revenue and the related shipping costs are included in cost of product revenue. Product revenue on sales to channel partners is recorded once we have received persuasive evidence of an end-user and all other revenue recognition criteria have been met.

Substantially all of our product sales have been sold in combination with support services, which consist of software updates and support. Software updates provide customers with rights to unspecified software product upgrades and to maintenance releases and patches released during the term of the support period. Support includes access to technical support personnel and content via the internet and telephone. Support services also include an extended warranty for the repair or replacement of defective hardware. Revenue for support services is recognized on a straight-line basis over the service contract term, which is typically one year.

We use the residual method to recognize revenue when a product agreement includes one or more elements to be delivered at a future date and vendor specific objective evidence (VSOE) of the fair value of all undelivered elements exists. Through March 31, 2009, in virtually all of our contracts, the only element that remained undelivered at the time of delivery of the product was support and updates. Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the contract fee is recognized as product revenue. If evidence of the fair value of one or more undelivered elements does not exist, all revenue is generally deferred and recognized when delivery of those elements occurs or when fair value can be established. When the undelivered element for which we do not have a fair value is support, revenue for the entire arrangement is bundled and recognized ratably over the support period. VSOE of fair value for elements of an arrangement is based upon the normal pricing and discounting practices for those services when sold separately, and VSOE for support services is measured by the renewal rate offered to the customer.

Our fees are typically considered to be fixed or determinable at the inception of an arrangement, generally based on specific products and quantities to be delivered. Substantially all of our contracts do not include rights of return or acceptance provisions. To the extent that our agreements contain such terms, we recognize revenue once the acceptance provisions or right of return lapses. Payment terms to customers generally range from net 30 to 60 days. In the event payment terms are provided that differ from our standard business practices, the fees are deemed to not be fixed or determinable and revenue is recognized when the payments become due, provided the remaining criteria for revenue recognition have been met.

We assess the ability to collect from our customers based on a number of factors, including credit worthiness of the customer and past transaction history of the customer. If the customer is not deemed credit worthy, we defer revenue from the arrangement until payment is received and all other revenue recognition criteria have been met.

Stock-Based Compensation

Effective January 1, 2006, we adopted the fair value recognition provisions of SFAS No. 123(R), Share-Based Payment, using the prospective transition method, which requires us to apply the provisions of SFAS No. 123(R) to new awards granted, and to awards modified, repurchased or cancelled, after the effective date. New awards granted include stock options, restricted stock units (RSUs), and stock purchased under our Employee Stock Purchase Plan (the “Purchase Plan”). Under this method, stock-based compensation expense recognized beginning January 1, 2006 is based on a combination of the following: (a) the grant-date fair value of stock option, RSU and employee stock purchase plan awards granted or modified after January 1, 2006; and (b) the amortization of deferred stock-based compensation related to stock option awards granted prior to January 1, 2006, which was calculated using the intrinsic value method as previously permitted under Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees.

Under SFAS No. 123(R), we estimated the fair value of stock options granted using the Black-Scholes option-pricing formula and a single option award approach. This model utilizes the estimated fair value of common stock and requires that, at the date of grant, we use the expected term of the option, the expected volatility of the price of our common stock, risk free interest rates and expected dividend yield of our common stock. This fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally four years.

On September 20, 2006, the effective date of the registration statement relating to our initial public offering (IPO), we implemented the Purchase Plan, which has a two year offering period and two purchases per year. The fair value of shares granted under the Purchase Plan is amortized over the two year offering period. Under the Purchase Plan, employees may purchase shares of common stock through payroll deductions at a price per share that is 85% of the lesser of the fair market value of our common stock as of the beginning of an applicable offering period or the applicable purchase date, with purchases generally every six months.

Accounting for Income Taxes

We use the asset and liability method of accounting for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes. Under this method, income tax expenses or benefits are recognized for the amount of taxes payable or refundable for the current year and for deferred tax liabilities and assets for the future tax consequences of events that have been recognized in our consolidated financial statements or tax returns. The measurement of current and deferred tax assets and liabilities are based on provisions of currently enacted tax laws. The effects of future changes in tax laws or rates are not contemplated.

As part of the process of preparing our consolidated financial statements, we are required to estimate our income tax expense and tax contingencies in each of the tax jurisdictions in which we operate. This process involves estimating current income tax expense together with assessing temporary differences in the treatment of items for tax purposes versus financial accounting purposes that may create net deferred tax assets and liabilities. We rely on management estimates and assumptions in preparing our income tax provision including forecasted annual income.

We record a valuation allowance to reduce our deferred tax assets to the amount we believe is more likely than not to be realized. In assessing the need for a valuation allowance, we have considered our historical levels of income and expectations of future taxable income. In determining future taxable income, we make assumptions to forecast federal, state and foreign operating income, the reversal of temporary differences, and the implementation of any feasible and prudent tax planning strategies. The assumptions require significant judgment regarding the forecasts of taxable income, and are consistent with our forecasts used to manage our business. The valuation allowance primarily relates to deferred tax assets established in purchase accounting. Any subsequent reduction of that portion of the valuation allowance and the recognition of the associated tax benefits will be recorded to our provision for income taxes pursuant to SFAS No. 141(R).

As part of our accounting for business combinations, a portion of the purchase price was allocated to goodwill and intangible assets. Amortization expenses associated with acquired intangible assets are generally not tax deductible; however, deferred taxes have been recorded for non-deductible amortization expenses as a part of the purchase price allocation. In the event of an impairment charge associated with goodwill, such charges are generally not tax deductible and would result in an increased effective income tax rate in the quarter any impairment is recorded.

Inventory Valuation

Inventory consists of hardware and related component parts and is stated at the lower of cost (on a first-in, first-out basis) or market. A portion of our inventory relates to evaluation units located at customer locations, as some of our customers test our equipment prior to purchasing. Inventory that is obsolete or in excess of our forecasted demand is written down to its estimated realizable value based on historical usage, expected demand, and with respect to evaluation units, the historical conversion rate and age of the units. Inherent in our estimates of market value in determining inventory valuation are estimates related to economic trends, future demand for our products, the timing of new product introductions and technological obsolescence of our products. Inventory write-downs are reflected as cost of product and amounted to $2.3 million and $0.5 million in the three months ended March 31, 2009 and 2008, respectively.

Warranty Reserve

Upon shipment of products to our customers, we provide for the estimated cost to repair or replace products that may be returned under warranty. Our warranty period is typically 12 months from the date of shipment to the end-user customer for hardware and 90 days for software. For existing products, the reserve is estimated based on actual historical experience. For new products, the warranty reserve is based on historical experience of similar products until such time as sufficient historical data has been collected for the new product. If actual product failure rates, repair rates or any other post sales support costs differ from these estimates, revisions to the estimated warranty liability would be required.

The following is a summary of the warranty reserve activity for the three months ended March 31, 2009 and 2008.


	Three months ended March 31,
(in thousands)	2009			2008
Beginning balance	$	1,205		$	1,089
Additions charged to operations		245			661
Warranty costs incurred		(230	)		(582	)
Other		(420	)		—

Ending balance	$	800		$	1,168

Deferred Inventory Costs

When our products have been delivered, but the product revenue associated with the arrangement has been deferred as a result of not meeting the revenue recognition criteria in SOP 97-2, we also defer the related inventory costs for the delivered items in accordance with Accounting Research Bulletin 43, Restatement and Revision of Accounting Research Bulletins. Deferred inventory costs amounted to $2.1 million and $2.2 million at March 31, 2009 and December 31, 2008, respectively, and are included in prepaid expenses and other current assets in the condensed consolidated balance sheets.

Service Inventory

We hold service inventory that is used to repair or replace defective hardware reported by our customers who purchase support services. We classify service inventory as other long term assets. At March 31, 2009 and December 31, 2008 our service inventory balance was $5.9 million. In the three months ended March 31, 2009 and 2008, we recognized $0.8 million and $0.4 million, respectively, to cost of support and services relating to service inventory.

Goodwill, Intangible Assets and Impairment Assessments

Goodwill represents the excess of the purchase price of an acquired business over the fair value of the underlying net tangible and intangible assets. In accordance with SFAS No. 142, goodwill is tested for impairment at least annually (more frequently if certain indicators are present). In the event that we determine that the carrying value of the reporting unit to which the goodwill is allocated is less than the reporting unit’s fair value, we will incur an impairment charge for the amount of the difference during the quarter in which the determination is made.

Intangible assets that are not considered to have an indefinite life are amortized over their useful lives. Each period we evaluate the estimated remaining useful life of purchased intangible assets and whether events or changes in circumstances warrant a revision to the remaining period of amortization. The carrying amounts of these assets are periodically reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable. Recoverability of these assets is measured by comparison of the carrying amount of each asset to the future undiscounted cash flows the asset is expected to generate. In the event that we determine certain assets are not fully recoverable, we will incur an impairment charge for those assets or portion thereof during the quarter in which the determination is made.

Concentrations of Risk

Financial instruments that are potentially subject to concentrations of credit risk consist primarily of cash, cash equivalents, marketable securities, and trade receivables. Investment policies have been implemented that limit investments to investment grade securities and the average portfolio maturity to less than six months. The risk with respect to trade receivables is mitigated by credit evaluations we perform on our customers and by the diversification of our customer base. No customer represented more than 10% of our revenue for the three months ended March 31, 2009 and 2008.

We outsource the production of our inventory to third-party manufacturers. We rely on purchase orders or long-term contracts with our contract manufacturers. At March 31, 2009, we had no long-term contractual commitment with any manufacturer; however, we did have a 90 day commitment totaling $7.8 million.

Recent Accounting Pronouncements

Effective January 1, 2009, we adopted SFAS No. 141(R). Under SFAS No. 141(R), an acquiring entity is required to recognize all the assets acquired, liabilities assumed, contractual contingencies, and contingent consideration at their fair value on the acquisition date. It further requires that acquisition-related costs be recognized separately from the acquisition and expensed as incurred; that restructuring costs generally be expensed in periods subsequent to the acquisition date; and changes in accounting for deferred tax asset valuation allowances and acquired income tax uncertainties after the measurement period be recognized as a component of provision for taxes. In addition, acquired in-process research and development is capitalized as an intangible asset and amortized over its estimated useful life. See Note 2 for a description of our acquisition of Mazu Networks, Inc.

Effective January 1, 2009, we adopted FSP No. 142-3, that amends the factors considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets. FSP No. 142-3 amends paragraph 11(d) of SFAS No. 142 to require an entity to consider its own assumptions about renewal or extension of the term of the arrangement, consistent with its expected use of the asset. The adoption did not have a material impact on our consolidated results of operations or financial condition for the three months ended March 31, 2009.

Effective January 1, 2009, we adopted FSP No. 157-2, “Effective Date of FASB Statement No. 157.” FSP No. 157-2 delayed the effective date of SFAS No. 157, Fair Value Measurements, for all non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), until the beginning of the first quarter of fiscal 2009. The adoption of FSP No. 157-2 did not have a material impact on our consolidated results of operations or financial condition for the three months ended March 31, 2009.

2.	ACQUISITION

We acquired Mazu Networks, Inc. (“Mazu”) on February 19, 2009 (the “acquisition date”), by means of a merger of a wholly-owned subsidiary with and into Mazu, such that Mazu became a wholly-owned subsidiary of ours. The results of Mazu’s operations have been included in the consolidated financial statements since the acquisition date. We acquired Mazu, among other reasons, to meet enterprise and service provider customer demands by extending our suite of WAN optimization products to include global application performance, reporting and analytics.

The estimated acquisition date fair value of consideration transferred, assets acquired and the liabilities assumed for Mazu are presented below and represent our best estimates.

Preliminary Fair Value of Consideration Transferred

Pursuant to the merger agreement we made payments totaling $23.1 million in cash for all of the outstanding securities of Mazu promptly following the closing. In addition, we will potentially make additional payments (“acquisition-related contingent consideration”) totaling up to $22.0 million in cash, based on achievement of certain bookings targets related to Mazu products for the one-year period from April 1, 2009 through March 31, 2010 (the “Earn-Out period”), with up to $16.6 million to be paid to Mazu shareholders and up to $5.4 million to be paid to former employees of Mazu as an incentive bonus provided generally that such former Mazu employees are employees of Riverbed at the time the acquisition-related contingent consideration is earned.

The total acquisition date fair value of the consideration transferred is estimated at $33.0 million, which includes the initial payments totaling $23.1 million in cash and the estimated fair value of acquisition-related contingent consideration to be paid to Mazu shareholders totaling $9.9 million. The total acquisition date fair value of consideration transferred is estimated as follows:


(in thousands)
Payment to Mazu shareholders	$	23,051
Acquisition-related contingent consideration		9,909

Total acquisition-date fair value	$	32,960

In accordance with SFAS No. 141(R), a liability was recognized for an estimate of the acquisition date fair value of the acquisition-related contingent consideration based on the probability of achievement of the bookings target. Any change in the fair value of the acquisition-related contingent consideration subsequent to the acquisition date, including changes from events after the acquisition date, such as changes in our estimate of the bookings targets, will be recognized in earnings in the period the estimated fair value change. The fair value estimate is based on the probability weighted bookings to be achieved over the earn-out period. Actual achievement of bookings below $16.0 million would reduce the liability to zero and achievement of bookings of $35.0 million or more would increase the liability to $16.6 million. A change in fair value of the acquisition-related contingent consideration could have a material affect on the statement of operations and financial position in the period of the change in estimate.

We estimated the fair value of the acquisition-related contingent consideration using a probability-weighted discounted cash flow model. This fair value measurement is based on significant inputs not observed in the market and thus represents a Level 3 measurement as defined by SFAS No. 157. Level 3 instruments are valued based on unobservable inputs that are supported by little or no market activity and reflect our own assumptions in measuring fair value. The estimated fair value of acquisition-related contingent consideration of $9.9 million includes amounts to be distributed directly to shareholders, discounted at 13%, but excludes a fair value estimate of $3.8 million to be paid to former employees of Mazu. As of March 31, 2009, there were no significant changes in the estimated fair value of the contingent consideration recognized as a result of the acquisition of Mazu.

The estimated fair value of acquisition-related contingent consideration of $3.8 million to be paid to the former employees of Mazu is considered compensatory and will be recognized as compensation cost, recorded in operating expense, over the Earn-Out period provided generally that such former Mazu employees are employees of Riverbed at the time the acquisition-related contingent consideration is earned.

Acquisition-related Costs

Acquisition-related costs recognized in the three months ended March 31, 2009 include transaction costs, integration-related costs and changes in the fair value of the acquisition-related contingent consideration. During the three months ended March 31, 2009, transaction costs such as legal, accounting, valuation and other professional services were $0.6 million and integration-related costs were $0.8 million.

The following table summarizes the acquisition-related costs, including the acquisition-related contingent consideration to be paid to the former employees of Mazu, recognized in the three months ended March 31, 2009 and 2008.


	Three months ended March 31,
(in thousands)	2009		2008
Sales and marketing	$	151	$	—
Research and development		133		—
General and administrative		83		—
Acquisition-related costs		1,520		—

Total other acquisition-related costs	$	1,887	$	—

Preliminary Allocation of Consideration Transferred

Under the purchase method of accounting, the identifiable assets acquired and liabilities assumed were recognized and measured as of the acquisition date based on their estimated fair values as of the February 19, 2009, the acquisition date. The excess of the acquisition date fair value of consideration transferred over estimated fair value of the net tangible assets and intangible assets was recorded as goodwill.

The following table summarizes the estimated fair values of the assets and liabilities assumed at the acquisition date. Estimates of both current and non-current deferred tax assets are subject to change, pending the finalization of certain tax returns.


(in thousands)
Cash and cash equivalents	$	2,582
Accounts receivable		2,569
Other tangible assets		1,481
Intangible assets		23,500

Total identifiable assets acquired		30,132
Accounts payable and other liabilities		(2,379	)
Loan payable		(5,004	)
Deferred revenue		(1,500	)

Total liabilities assumed		(8,883	)

Net identifiable assets acquired		21,249
Goodwill		11,711

Net assets acquired	$	32,960

Intangible Assets

Management engaged a third-party valuation firm to assist in the determination of the fair value of the intangible assets. In our determination of the fair value of the intangible assets we considered, among other factors, the best use of acquired assets, analyses of historical financial performance and estimates of future performance of Mazu’s products. The fair values of identified intangible assets were calculated using an income approach and estimates and assumptions provided by Mazu’s and our management. The rates utilized to discount net cash flows to their present values were based on a weighted average cost of capital of 19%. This discount rate was determined after consideration of the rate of return on debt capital and equity that typical investors would require in an investment in companies similar in size and operating in similar markets as Mazu. The following table sets forth the components of identified intangible assets associated with the Mazu acquisition and their estimated useful lives:


(in thousands)	Useful life	Fair Value
Existing technology	5 years	$	12,100
Patents	5 years		2,700
Maintenance agreements	5 years		6,100
Customer contracts	5 years		2,000
Trademarks	3 years		600

Total intangible assets		$	23,500

In accordance with FSP No. 142-3, we determined the useful life of intangible assets based on the expected future cash flows associated with the respective asset. Existing technology is comprised of products that have reached technological feasibility and are part of Mazu’s product line. There were no in-process research and development assets as of the acquisition date. Patents are related to the design and development of Mazu’s products and this proprietary know-how can be leveraged to develop new technology and products and improve existing products. Customer relationships and maintenance agreements represent the underlying relationships and agreements with Mazu’s installed customer base. Trademarks represent the fair value of the brand and name recognition associated with the marketing of Mazu’s products and services. Amortization of existing technology and patents is included in cost of revenue, and amortization expense for customer relationships and trademarks is included in operating expenses.

Goodwill

Of the total estimated purchase price, $11.7 million was allocated to goodwill. Goodwill represents the excess of the purchase price of an acquired business over the fair value of the underlying net tangible and intangible assets. In accordance with SFAS No. 142, goodwill is tested for impairment at least annually (more frequently if certain indicators are present). In the event that management determines that the value of goodwill has become

impaired, we will incur an accounting charge for the amount of impairment during the fiscal quarter in which the determination is made. None of the goodwill is expected to be deductible for income tax purposes. As of March 31, 2009, there was no change in the recognized amounts of goodwill resulting from the acquisition of Mazu.

Deferred Revenues

In connection with the purchase price allocation, we estimated the fair value of the service obligations assumed from Mazu as a consequence of the acquisition. The estimated fair value of the service obligations was determined using a cost build-up approach. The cost build-up approach determines fair value by estimating the costs relating to fulfilling the obligations plus a normal profit margin. The sum of the costs and operating profit approximates, in theory, the amount that we would be required to pay a third party to assume the service obligations. The estimated costs to fulfill the service obligations were based on the historical direct costs and indirect costs related to Mazu’s service agreements with its customers. Direct costs include personnel directly engaged in providing service and support activities, while indirect costs consist of estimated general and administrative expenses based on normalized levels as a percentage of revenue. Profit associated with selling efforts was excluded because Mazu had concluded the selling efforts on the service contracts prior to the date of our acquisition. The estimated research and development costs associated with support contracts have not been included in the fair value determination, as these costs were not deemed to represent a legal obligation at the time of acquisition. We recorded $1.5 million of deferred revenue to reflect the estimate of the fair value of Mazu’s service obligations assumed.

Pre-Acquisition Contingencies

We have evaluated and continue to evaluate pre-acquisition contingencies related to Mazu that existed as of the acquisition date. If these pre-acquisition contingencies that existed as of the acquisition date become probable in nature and estimable during the remainder of the measurement period, amounts recorded for such matters will be made in the measurement period and, subsequent to the measurement period, in our results of operations.

Results of Operations

The amount of revenue and operating loss of Mazu included in our consolidated condensed statement of operations from the acquisition date to the period ending March 31, 2009:


(in thousands)
Revenue	$	512
Operating loss	$	(1,189	)

Pro Forma Results for Mazu Acquisition

The following table presents our unaudited pro forma results (including Mazu) for the three months ended March 31, 2009 and 2008 as though the companies had been combined as of the beginning of each of the periods presented. The pro forma information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of each period presented. The unaudited pro forma results presented include amortization charges for acquired intangible assets, eliminations of intercompany transactions, adjustments to interest expense and related tax effects.


	Three months ended March 31,
(in thousands)	2009			2008
Total revenue	$	89,726		$	76,675
Operating loss	$	(3,964	)	$	(2,184	)

3.	NET INCOME PER COMMON SHARE

Basic net income per common share is computed by dividing net income by the weighted average number of vested common shares outstanding during the period. Diluted net income per common share is computed by giving effect to all potential dilutive common shares.

The following table sets forth the computation of income per share:


	Three months ended March 31,
(in thousands, except per share data)	2009		2008
Net income	$	974	$	638

Weighted average common shares outstanding - basic		68,728		70,597
Dilutive effect of employee stock plans		1,313		3,362

Weighted average common shares outstanding - diluted		70,041		73,959

Basic net income per share	$	0.01	$	0.01

Diluted net income per share	$	0.01	$	0.01

The following weighted average outstanding options and RSUs were excluded from the computation of diluted net income per common share for the periods presented because including them would have had an anti-dilutive effect:


	Three months ended March 31,
(in thousands)	2009	2008
Out-of-the-money awards	10,780	6,652

Stock options outstanding with an exercise price higher than our average stock price for the periods presented, (“Out-of-the-money awards”) are excluded from the calculations of the diluted net income per share since the effect would have been anti-dilutive under the treasury stock method.

4.	FAIR VALUE OF ASSETS AND LIABILITIES

As of March 31, 2009, the fair value measurements of our cash, cash equivalents, marketable securities, and acquisition-related contingent consideration consisted of the following:


(in thousands)	Total		Level 1		Level 2		Level 3
Assets
Corporate bonds and notes	$	13,845	$	—	$	13,845	$	—
Money market funds		29,228		29,228		—		—
Cash		7,658

Total Cash and cash equivalents	$	50,731

Corporate bonds and notes	$	29,606	$	—	$	29,606	$	—
U.S. government backed securities		46,746		46,746		—		—
U.S. government-sponsored enterprise obligations		131,150		—		131,150		—

Total Marketable securities	$	207,502

Liabilities
Acquisition-related contingent consideration	$	10,420	$	—	$	—	$	10,420


As of December 31, 2008, the fair value measurements of our cash and cash equivalents, and marketable securities consisted of the following:

(in thousands)	Total		Level 1		Level 2
Corporate bonds and notes	$	16,783	$	—	$	16,783
Money market funds		73,877		73,877		—
Cash		4,718		—		—

Total Cash and cash equivalents	$	95,378

Corporate bonds and notes	$	33,487	$	—	$	33,487
U.S. government backed securities		69,829		69,829		—
U.S. government-sponsored enterprise obligations		69,082		—		69,082

Total Marketable securities	$	172,398

Cash, Cash Equivalents and Marketable Securities

Cash and cash equivalents consist primarily of highly liquid investments in money market mutual funds, government sponsored enterprise obligations, treasury bills, commercial paper and other money market securities with remaining maturities at date of purchase of 90 days or less. The carrying value of cash and cash equivalents at March 31, 2009 and December 31, 2008 was $50.7 million and $95.4 million, respectively, and approximates fair value.

Marketable securities, which are classified as available for sale at March 31, 2009, are carried at fair value, with the unrealized gains and losses reported as a separate component of stockholders’ equity. Marketable securities consist of government sponsored enterprise obligations, treasury bills and corporate bonds and notes. The fair value of our marketable securities is determined in accordance with SFAS No. 157, which defines fair value as the exit price in the principal market in which we would transact. Under SFAS No. 157, Level 1 instruments are valued based on quoted market prices in active markets and include treasury bills and money market funds. Level 2

instruments are valued based on quoted prices in markets that are not active, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency and include corporate bonds and notes and government sponsored enterprise obligations. Level 3 instruments are valued based on unobservable inputs that are supported by little or no market activity and reflect our own assumptions in measuring fair value. We have no marketable securities valued as Level 3 instruments.

Restricted Cash

Pursuant to certain lease agreements and as security for our merchant services agreement with our financial institution, we are required to maintain cash reserves, classified as restricted cash. Current restricted cash totaled $0.1 million at March 31, 2009 and December 31, 2008, and long-term restricted cash totaled $3.5 million at March 31, 2009 and December 31, 2008. Long-term restricted cash is included in other assets in the condensed consolidated balance sheets and consists primarily of funds held as collateral for letters of credit for the security deposit on the leases of our corporate headquarters. The long-term restricted cash is restricted until the end of the lease terms on August 30, 2010 and July 31, 2014.

Acquisition-Related Contingent Consideration

The fair value measurement of the acquisition-related contingent consideration is based on significant inputs not observed in the market and thus represents a Level 3 measurement as defined in accordance with SFAS No. 157. The estimated fair value, as of the acquisition date, of acquisition-related contingent consideration of $9.9 million includes amounts to be distributed directly to shareholders, discounted at 13%, but excludes a fair value estimate of $3.8 million to be paid to former employees of Mazu. As of March 31, 2009, the fair value of the acquisition-related contingent consideration was $10.4 million, which includes a fair value adjustment to the acquisition-related contingent consideration amounts to be distributed directly to shareholders due to the passage of time and the portion of the contingent consideration to be paid to former employees of Mazu that was recognized during the period.

5.	INVENTORY

Inventory consists primarily of hardware and related component parts and is stated at the lower of cost (on a first-in, first-out basis) or market. Inventory is comprised of the following:


(in thousands)	March 31, 2009		December 31, 2008
Raw materials	$	394	$	544
Finished goods		5,738		7,545
Evaluation units		2,605		2,548

Total inventory	$	8,737	$	10,637

6.	GOODWILL AND INTANGIBLE ASSETS

Goodwill

Goodwill allocated to our one business unit represents the excess of the purchase price of an acquired business over the fair value of the underlying net assets acquired. During the three months ended March 31, 2009, we recorded goodwill in the amount of $11.7 million.

Intangible Assets

Intangible assets consisted of the following:


		Three months ended March 31, 2009
(in thousands)	Useful life	Gross		Accumulated Amortization			Net
Existing technology	5 years	$	12,100	$	(267	)	$	11,833
Patents	5 years		2,700		(59	)		2,641
Maintenance agreements	5 years		6,100		(134	)		5,966
Customer contracts	5 years		2,000		(44	)		1,956
Trademarks	3 years		600		(22	)		578

Total intangible assets		$	23,500	$	(526	)	$	22,974

Estimated future amortization expense related to the above intangible assets at March 31, 2009 is as follows:


Fiscal Year	In thousands
2009 (the nine months ending December 31)	$	3,585
2010		4,780
2011		4,780
2012		4,608
2013 and thereafter		5,221

Total	$	22,974

7.	OTHER ACCRUED LIABILITIES

Other accrued liabilities consisted of the following:


(in thousands)	March 31, 2009		December 31, 2008
Deferred rent liability	$	4,880	$	4,783
Other accrued liabilities		8,298		8,559

Total other accrued liabilities	$	13,178	$	13,342

8.	DEFERRED REVENUE

Deferred revenue consisted of the following:


(in thousands)	March 31, 2009		December 31, 2008
Product	$	4,204	$	4,987
Support and services		60,337		53,174

Total deferred revenue	$	64,541	$	58,161

Reported as:
Deferred revenue, current	$	49,650	$	45,194
Deferred revenue, non-current		14,891		12,967

Total deferred revenue	$	64,541	$	58,161

Deferred product revenue relates to arrangements where not all revenue recognition criteria have been met. Deferred support revenue represents customer payments made in advance for annual support contracts. Support contracts are typically billed on a per annum basis in advance and revenue is recognized ratably over the support period. Deferred revenue, non-current consists of customer payments made in advance for support contracts with terms of more than 12 months.

9.	GUARANTEES

Our agreements with customers, as well as our reseller agreements, generally include certain provisions for indemnifying customers and resellers and their affiliated parties against liabilities if our products infringe a third-party’s intellectual property rights. To date, we have not incurred any material costs as a result of such indemnifications and have not accrued any liabilities related to such obligations in our condensed consolidated financial statements.

As permitted or required under Delaware law and to the maximum extent allowable under that law, we have certain obligations to indemnify our officers, directors and certain key employees for certain events or occurrences while the officer, director or employee is or was serving at our request in such capacity. These indemnification obligations are valid as long as the director, officer or employee acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal proceeding, had no reasonable cause to believe his or her conduct was unlawful. The maximum potential amount of future payments we could be required to make under these indemnification obligations is unlimited; however, we have a director and officer insurance policy that mitigates our exposure and enables us to recover a portion of any future amounts paid.

10.

LEASE COMMITMENTS

We lease our facilities under non-cancelable operating lease agreements. Future minimum commitments for these operating leases in place as of March 31, 2009 with a remaining non-cancelable lease term in excess of one year are as follows:


(in thousands)	March 31, 2009
2009 (the nine months ending December 31)	$	4,606
2010		5,945
2011		6,846
2012		5,763
2013 and thereafter		7,104

Total	$	30,264

The terms of certain lease agreements provide for rental payments on a graduated basis. We recognize rent expense on the straight-line basis over the lease period and have accrued for rent expense incurred but not paid. Rent expense under operating leases was $1.9 million and $1.8 million for the three months ended March 31, 2009 and 2008, respectively.

On September 26, 2006, we entered into an Agreement of Sublease (Sublease) for new corporate headquarters, and on March 21, 2007 entered into another lease agreement to expand our corporate headquarters as well as extend the term of the existing Sublease. The terms of the leases are from February 1, 2007 and March 31, 2007, respectively, to July 31, 2014, with two five year renewal options. The aggregate minimum lease commitment for the combined leases is $18.6 million and is included in the table above. We have entered into two letters of credit totaling $3.0 million to serve as the security deposit for the leases, which is included in other assets in the condensed consolidated balance sheet.

On February 29, 2009, we entered into a lease agreement for office space in Boston, Massachusetts. The term of the lease is for five years, with one five year renewal option, commencing on March 1, 2009. The aggregate minimum lease commitment is $2.1 million and is reflected in the table above.

11.

COMMON STOCK

In July 2002, our Board of Directors adopted the 2002 Stock Plan (the “2002 Plan”). In April and May 2006, our Board of Directors approved the 2006 Equity Incentive Plan (the “2006 Plan”), the Purchase Plan and the 2006 Director Stock Option Plan (the “2006 Director Plan’), which became effective upon our IPO. In September 2006, all shares of common stock available for grant under the 2002 Plan transferred to the 2006 Plan.

In February 2009, our Board of Directors adopted the 2009 Inducement Equity Incentive Plan (the “2009 Plan”). The objective of the 2009 Plan is to provide incentives to attract, retain, and motivate eligible persons whose potential contributions are important to promote our long-term success and the creation of stockholder value. The 2009 Plan is intended to comply with NASDAQ Rule 4350(i)(1)(A)(iv), which governs granting certain awards as a material inducement to an individual entering into employment with us. The 2009 Plan may be used for new hire equity grants should the Board of Directors determine to do so in the future.

Stock Options

Options issued under our stock option plans are generally for periods not to exceed 10 years and are issued with an exercise price equal to the market value of our common stock on the date of grant, as determined by the last sale price of such stock on the Nasdaq Global Select Market. Options typically vest either 25% of the shares one year after the options’ vesting commencement date and the remainder ratably on a monthly basis over the following three years, or ratably on a monthly basis over four years. Options granted under the 2002 Plan prior to May 31, 2006 have a maximum term of ten years, and beginning May 31, 2006 have a maximum term of seven years. Options granted under the 2006 Plan have a maximum term of seven years. Options granted under the 2006 Director Plan prior to March 4, 2008 have a maximum term of ten years, and options granted beginning March 4, 2008 have a maximum term of seven years.

We granted options under the 2009 Plan to purchase 0.4 million of common stock to Mazu employees that joined us following the closing of the merger.

The fair value of options granted was estimated at the date of grant using the following assumptions:


	Three months ended March 31,
	2009		2008
Employee Stock Options
Expected life in years		4.5		4.5
Risk-free interest rate		1.5%		2.6%
Volatility		50%		51%
Weighted average fair value of grants	$	4.33	$	9.53

The expected term represents the period that stock-based awards are expected to be outstanding. For the three months ended March 31, 2009 and 2008, we have elected to use the simplified method of determining the expected term of stock options as permitted by SEC Staff Accounting Bulletin 110 due to our insufficient historical exercise data. The computation of expected volatility for the three months ended March 31, 2009 and 2008 is based on the historical volatility of comparable companies from a representative peer group selected based on industry, financial and market capitalization data. As required by SFAS No. 123(R), management estimated expected forfeitures and is recognizing compensation costs only for those equity awards expected to vest.

As of March 31, 2009, total compensation cost related to stock options granted under SFAS No. 123(R) to employees and directors but not yet recognized was $82.6 million, net of estimated forfeitures of $16.0 million. This cost will be recognized on a straight-line basis over the remaining weighted-average service period. Amortization in the three months ended March 31, 2009 and 2008 was $9.8 million and $7.8 million, respectively.

Restricted Stock Units

In the first quarter of 2009, we granted RSUs covering 2.1 million shares of common stock to our employees under the 2006 Plan, which included performance-based RSUs to eligible executives covering 1.8 million shares of common stock and 0.3 million time-based RSUs. We expense the cost of RSUs, which is determined to be the fair market value of the shares of our common stock at the date of grant, ratably over the service period.

The number of performance-based RSUs that vest is variable based upon meeting certain annual performance targets, and require the eligible executives to be employed by us for up to three years from the date of grant. We estimated stock compensation expense for our performance share awards based on the probability-weighted estimate of achieving the annual performance target and only recognized expense for the portions of such awards estimated to be earned and vested. We accrued stock compensation expense of $0.2 million in operating expenses in the first quarter of 2009 in connection with the performance-based RSUs. Any change in the estimate of the number of performance-based RSUs to be earned will result in an adjustment to the cumulative compensation expense in the period of the change in estimate.

RSUs generally vest over a period of three to four years from the date of grant. Until vested, RSUs do not have the voting rights of common stock and the shares underlying the awards are not considered issued and outstanding. As of March 31, 2009, total unrecognized compensation cost related to non-vested RSUs granted under SFAS No. 123(R) to employees and directors but not yet recognized was $17.8 million, net of estimated forfeitures of $3.9 million. This cost will be recognized over the remaining weighted-average service period. Amortization in the three months ended March 31, 2009 and 2008 was $1.0 million and zero, respectively.

As of March 31, 2009, 2,789,461 shares were available for grant under the 2006 Plan and the 2006 Director Plan. As of March 31, 2009, 1,123,975 shares were available for grant under the 2009 Plan.

Stock Purchase Plan

The Purchase Plan became effective on the effective date of the registration statement relating to our IPO. Under the Purchase Plan, employees may purchase shares of common stock through payroll deductions at a price per share that is 85% of the lesser of the fair market value of our common stock as of the beginning of an applicable offering period or the applicable purchase date, with purchases generally every six months. Employees’ payroll deductions may not exceed 15% of their compensation. Employees may purchase up to 2,000 shares per purchase period provided that the value of the shares purchased in any calendar year does not exceed IRS limitations.

There was no new offering period under the Purchase Plan in the three months ended March 31, 2009 or 2008.

As of March 31, 2009, there was $8.5 million, net of estimated forfeitures, left to be amortized under our Purchase Plan, which will be amortized over the remaining Purchase Plan offering period, which is 19 months. Amortization in the three months ended March 31, 2009 and 2008 was $1.6 million and $2.9 million, respectively.

As of March 31, 2009, 1,922,303 shares were available under the Purchase Plan.

Share Repurchase Program

On April 21, 2008, our Board of Directors authorized a Share Repurchase Program (the “Program”), which authorizes us to repurchase and retire up to $100.0 million of our outstanding common stock during a period not to exceed 24 months from the Board authorization date. The Program does not require us to purchase a minimum number of shares, and may be suspended, modified or discontinued at any time. For the three months ended March 31, 2009, we repurchased 952,105 shares of common stock under this Program on the open market for an aggregate purchase price of $10.0 million, or an average of $10.52 per share. The maximum dollar value of shares that are available for purchase under the Program is $40.0 million. The timing and amounts of these purchases were based on market conditions and other factors including price, regulatory requirements and capital availability. The share repurchases were financed by available cash balances and cash from operations.

12.

INCOME TAXES

Our effective tax rate was (169.5%) and 44.4% for the three months ended March 31, 2009 and 2008, respectively. Our income tax provision (benefit) consists of federal, foreign, and state income taxes.

Our effective tax rate differs from the federal statutory rate due to state taxes and significant permanent differences. Significant permanent differences arise primarily from the portion of stock-based compensation expense that is not expected to generate a tax deduction, such as stock compensation expense on grants to foreign employees, our purchase plan and incentive stock options, offset by the actual tax benefits in the current periods from disqualifying dispositions of our purchase plan shares and incentive stock options.

As of March 31, 2009, our tax benefit includes a $0.6 million deferred tax expense for a write-down of certain state deferred tax assets due to a recently enacted California income tax law that is expected to reduce our California effective tax rate beginning in 2011.

As part of our accounting for the acquisition of Mazu, we established deferred tax assets for federal net operating loss carryforwards and research and development (R&D) credit carryforwards that are subject to limitation under Section 382 of the Internal Revenue Code. Accordingly, we recorded a valuation allowance of $9.2 million related to a portion of the federal net operating loss carryforwards and R&D credit carryforwards that we do not expect to be realized. Any subsequent reduction of the valuation allowance and the recognition of the associated tax benefits will be recorded to our provision for income taxes.

For the three months ended March 31, 2009, the liability for unrecognized income tax benefits increased by $1.0 million, principally related to tax attributes recorded as part of our accounting for the acquisition of Mazu.

13.

SEGMENT INFORMATION

SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. Our chief operating decision maker is our Chief Executive Officer. Our Chief Executive Officer reviews financial information presented on a consolidated basis, accompanied by information about revenue by geographic region for purposes of allocating resources and evaluating financial performance. We have one business activity and there are no segment managers who are held accountable for operations, operating results and plans for levels or components below the consolidated unit level. Accordingly, we are considered to be in a single reporting segment and operating unit structure.

Revenue by geography is based on the billing address of the customer. The following table sets forth revenue by geographic area.

Revenue


	Three months ended March 31,
(in thousands)	2009		2008
United States	$	48,304	$	40,502
Europe, Middle East and Africa		24,338		19,623
Rest of the World		15,569		12,857

Total revenue	$	88,211	$	72,982

14.

LEGAL MATTERS

From time to time, we are involved in various legal proceedings, claims and litigation arising in the ordinary course of business. There are no currently pending legal proceedings at March 31, 2009 that, in the opinion of management, might have a material adverse effect on our financial position, results of operations or cash flows.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: May 5, 2009


RIVERBED TECHNOLOGY, INC.

By:		/s/ Jerry M. Kennelly
		Jerry M. Kennelly
		President and Chief Executive Officer

Dated: May 5, 2009


RIVERBED TECHNOLOGY, INC.

By:		/s/ Randy S. Gottfried
		Randy S. Gottfried
		Chief Financial Officer

EXHIBIT INDEX


Exhibit No.		Description

2.1		Agreement of Merger, dated as of January 20, 2009, among Riverbed Technology, Inc., a Delaware corporation, Maple Acquisition Sub, Inc., a Delaware corporation, Mazu Networks, Inc., a Delaware corporation and Donald A. Sullivan as the Stockholders’ Agent. (1)

3.1		Restated Certificate of Incorporation. (2)

3.2		Amended and Restated Bylaws. (3)

4.1		Form of Common Stock Certificate. (2)

10.1		Riverbed Technology, Inc. Long-Term Incentive Plan. (4)

10.2		Riverbed Technology, Inc. 2009 Inducement Equity Incentive Plan and forms of agreement thereunder. (1)

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

The certification attached as Exhibit 32 that accompanies this Quarterly Report on Form 10-Q/A is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Riverbed Technology, Inc. under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date of this Quarterly Report on Form 10-Q/A, irrespective of any general incorporation language contained in such filing.

(1)	Incorporated by reference to Registrant’s Current Report on Form 8-K (No. 001-33023) filed with the SEC on February 20, 2009.

(2)	Incorporated by reference to Registrant’s Registration Statement on Form S-1 (No. 333-133437) filed with the SEC on April 20, 2006, as amended.

(3)	Incorporated by reference to Registrant’s Current Report on Form 8-K (No. 001-33023) filed with the SEC on December 18, 2008.

(4)	Incorporated by reference to Registrant’s Current Report on Form 8-K (No. 001-33023) filed with the SEC on February 19, 2009.

EX-31.1 2 dex311.htm CERTIFICATION OF CEO Certification of CEO

EXHIBIT 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Jerry M. Kennelly, certify that:

1.	I have reviewed this quarterly report on Form 10-Q/A of Riverbed Technology, Inc.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; and

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.


Date: May 5, 2009				/s/ Jerry M. Kennelly
				Jerry M. Kennelly
				President and Chief Executive Officer
				(Principal Executive Officer)

EX-31.2 3 dex312.htm CERTIFICATION OF CFO Certification of CFO

EXHIBIT 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Randy S. Gottfried, certify that:

1.	I have reviewed this quarterly report on Form 10-Q/A of Riverbed Technology, Inc.;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.


Date: May 5, 2009				/s/ Randy S. Gottfried
				Randy S. Gottfried
				Chief Financial Officer
				(Principal Financial Officer)

EX-32.1 4 dex321.htm CERTIFICATION OF CEO AND CFO Certification of CEO and CFO

EXHIBIT 32.1

Certification of Chief Executive Officer and Chief Financial Officer

Pursuant to 18 U.S.C. Section 1350,

as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, Jerry M. Kennelly, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Riverbed Technology, Inc. on Form 10-Q/A for the quarterly period ended March 31, 2009 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in such Form 10-Q/A fairly presents, in all material respects, the financial condition and results of operations of Riverbed Technology, Inc.


Date: May 5, 2009				/s/ Jerry M. Kennelly
				Jerry M. Kennelly
				President and Chief Executive Officer
				(Principal Executive Officer)

I, Randy S. Gottfried, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Riverbed Technology, Inc. on Form 10-Q/A for the quarterly period ended March 31, 2009 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in such Form 10-Q/A fairly presents, in all material respects, the financial condition and results of operations of Riverbed Technology, Inc.


Date: May 5, 2009				/s/ Randy S. Gottfried
				Randy S. Gottfried
				Chief Financial Officer
				(Principal Financial and Accounting Officer)

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to Riverbed Technology, Inc. and will be retained by Riverbed Technology, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. This certification “accompanies” the Form 10-Q/A to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q/A), irrespective of any general incorporation language contained in such filing.

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