The board of directors of Riverbed Technology, Inc. (NASDAQ:RVBD) unanimously rejected the unsolicited proposal of Elliot Management Corporation to acquire the company for $19 per share or $3.2 billion after reviewing it with help of independent and legal advisors.

Riverbed Technology

Not in the best interest of shareholders

The leadership of Riverbed Technology, Inc. (NASDAQ:RVBD) believed that the proposed acquisition price “undervalues the company and it is not in the best interest of its shareholders.”

The stock price of the company increased more than 9% when Elliot submitted its takeover bid last week. As of this writing, around noon in New York, the stock is trading at about $19.95 a share, higher than the hedge fund’s proposal.

Jerry M. Kennelly, chairman and CEO of Riverbed Technology, Inc. (NASDAQ:RVBD) said, “Riverbed has been executing a strategy focused on the creation of sustained growth for our business and increasing value for all of our shareholders”

He added that the company’s fourth quarter 2013 preliminary results are favorable as well as its guidance for the first quarter this year. Kennelly said that the results are “indicative of the strong early traction we have achieved against our strategy.”

Furthermore, Kennelly said any credible offer to acquire Riverbed Technology, Inc. (NASDAQ:RVBD) must deliver value to its shareholders above and beyond what the board believe will be created upon implementing its growth strategies and capitalizing on its significant investments.

Moreover, the board expect to increase the presence of Riverbed Technology, Inc. (NASDAQ:RVBD) in the $11 billion application performance infrastructure market as it continues to adopt the full breadth of its Application Performance Platform.

Elliot’s offer to Riverbed could increase

In its proposal, Elliot indicated the possibility that its acquisition could increase. The hedge fund explained that the existing offer was only based on publicly disclosed information. Elliot said, “With access to private diligence materials, we believe there is a further opportunity to increase our current offer.”

Elliot’s proposal also contains a “go shop” provision to allow the company to seek higher offer from interested parties.

Elliot is one of the largest shareholders of Riverbed Technology, Inc. (NASDAQ:RVBD) with 10.5% stake in the company. The hedge fund believed that the company was undervalued and first acquired its stake in the company in September. Elliot believes that the company is capable of creating significant value to shareholders by implementing several strategies.

Preliminary 4Q13 results and 1Q14 guidance

Riverbed Technology, Inc. (NASDAQ:RVBD) announced that its 2013 fourth quarter results exceeded its previous guidance, and now expects to deliver non-GAAP revenues in the range of $284 to $285 million from its previous estimate of around $270 to $276 million. Its non-GAAP EPS is expected to be in the range of $0.30 to $0.31 per diluted share compared with its previous forecast of $0.26 to $0.27 per share.

For the first quarter of 2014, Riverbed Technology, Inc. (NASDAQ:RVBD) expects to achieve revenues in the range of $262 to $268 million and EPS of around $0.21 to $0.23 per share.

Tim Long, analyst at BMO Capital Markets, opined that the fourth quarter beat seems a broad based and gross margins were likely slightly higher that their estimate at around 78.7%. The analysts also think that the company’s op margins appear to be above 25% compared with their estimate at 23.7%.

With regard to the first quarter outlook, Long said the figures imply double-digit sequential decline in product revenue, higher-than-expected opex, and lower-than-expected op margins. The analyst maintained his Market Perform rating for the shares of Riverbed Technology, Inc. (NASDAQ:RVBD) and raised the price target to $20 per share.