Today: San Francisco networking company Riverbed Technology receives unsolicited bid from investor that could spark an offer it can't refuse. Also: Facebook focuses on developing world, Twitter stock downgraded again.
The Lead: Hedge fund offers more than $3 billion for Riverbed Technology
Riverbed Technology received a purchase offer Wednesday that valued the San Francisco company at more than $3 billion, but the major investor that made the bid seems to be pushing for competition that could drive the price high enough that Riverbed's board would accept.
New York hedge fund Elliott Management officially offered $19 a share for Riverbed in a publicly released letter that it points out is a 29 percent premium from the price when the Paul Singer-helmed firm began purchasing Riverbed shares. However, the $3.08 billion offer is only 6 percent higher than the market capitalization Riverbed had at Tuesday's market close, and shares rose as high as $20.29 Wednesday before closing with a 9.4 percent gain at $19.53.
"We have become concerned that Riverbed has not indicated a desire to explore the significant acquisition interest of numerous potential bidders, including us," Elliott portfolio manager Jesse Cohn wrote in the letter.
Elliott typically invests in a company and then agitates for a higher return to investors; the fund's investment in Riverbed has grown to 10.5 percent of the company since it first began targeting the networking company in September.
Riverbed is an 11-year-old enterprise-focused networking firm that was the 58th largest technology company in Silicon Valley by revenues on the 2013 SV150, clocking sales of $836.9 million. Its terse public response to Elliott did not sound friendly to an acquisition, noting the unsolicited nature of the bid and promising only that directors would look into it just as the board "regularly reviews all options for generating and delivering value."
Elliott's bid is highly unlikely to be accepted, instead likely hoping that its gambit "represents the first step in this 'game of high stakes poker,' " as FBR analyst Daniel Ives wrote in a note; in other words, a bidding war for Riverbed's prominent foothold in the wide-area networking market. Reuters quoted analysts as saying that Silicon Valley firms such as Cisco (CSCO), Hewlett-Packard (HPQ), Oracle (ORCL), Juniper Networks and F5 Networks could consider a bid for Riverbed, and seeming reticence on the board's part could lead to an offer it can't refuse.
"I don't think Riverbed's management currently wants to sell, and this could push the deal higher in my opinion," FBN Securities analyst Shebly Seyrafi told Reuters.
Ives predicts that another financial entity, such as a private equity firm, would have the best shot at an acquisition, but notes that, no matter the outcome, "ultimately Elliott's activism will lead to higher shareholder value for investors."
SV150 market report: Facebook eyes India, Twitter falls after downgrade
The Dow Jones and Standard & Poor's 500 indexes dipped Wednesday, but tech stocks, including Facebook, Salesforce and SanDisk, pushed the Nasdaq and SV150 to gains.
Facebook advanced 0.5 percent to $58.23 after confirming its first acquisition in India, a company called Little Eye Labs that specializes in Android apps, continuing a brisk merger pace in early 2014. According to Quartz, the acquisition is likely aimed at monitoring and monetizing the Menlo Park social network's Indian audience, as Facebook looks to grow revenues outside the United States. SanDisk jumped 6 percent to $73.45 after while showing off flash drives aimed at mobile devices and home networks at the Consumer Electronics Show, and Salesforce gained 3.6 percent to $56.94 after announcing strong initial acceptance of its new mobile platform. Yelp leapt 7.9 percent to $78.42 after an upgrade JPMorgan analyst raised his price target on the San Francisco company's stock, and SolarCity gained 3.9 percent to $66.18 while SunPower (SPWRA) increased 0.9 percent amid optimism for the solar industry.
Google (GOOG) gained 0.2 percent to $1,141.23 while taking to the sea to avoid S.F. protesters and facing a French fine, and Apple (AAPL) gained 0.6 percent to $543.46 while attempting to sever ties with its antitrust monitor. Yahoo (YHOO) gained 0.2 percent to $41.02 as investment Alibaba angled for the Chinese gaming market after the Sunnyvale Internet company's big CES appearance Tuesday.
Twitter CEO Dick Costolo was a big-name speaker at CES on Wednesday, but his appearance at an uneventful panel discussion was upstaged by a second consecutive steep drop in the company's young stock. Twitter shares slid 3.5 percent to $59.29, completing a two-day decline of 10.6 percent, after another analyst said that the steep run-up in Twitter's valuation at the end of 2013 made little sense. "We find Twitter's valuation to be excessive and currently see materially more downside than upside," Cantor Fitzgerald analyst Youssef Squali wrote in downgrading the stock Wednesday morning, though he noted that it was because of the price and not any structural defects within the company.
The SV150 index of Silicon Valley's largest tech companies: Up 4.68, or 0.31 percent, to 1500.54
The tech-heavy Nasdaq composite index: Up 12.43, or 0.3 percent, to 4,165.61
The blue chip Dow Jones industrial average: Down 68.2, or 0.41 percent, to 16,462.74
And the widely watched Standard & Poor's 500 index: Down 0.39, or 0.02 percent, to 1,837.49
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/jowens510.