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Riverbed Technology slumps as analyst cuts rating

NEW YORK (AP) -- Shares of computer networking equipment maker Riverbed Technology fell Tuesday after a Deutsche Bank analyst downgraded the stock.

THE SPARK: Brian Modoff downgraded shares of Riverbed Technology Inc. to "sell" from "hold," saying growth prospects for some of the company's key products are not very strong.

Riverbed's WAN business helps improve the performance of applications shared over computer networks, such as the networks that connect the computers of multinational corporations to one another. The products help reduce traffic, but Modoff said network congestion isn't as big an issue now as it was in the past. He said the WAN products are expensive to maintain and there are now cost-competitive alternatives.

The analyst cut his price target to $11 per share from $14.

THE BIG PICTURE: In July Riverbed Technology reported disappointing second-quarter revenue and also forecast weaker-than-expected revenue for the third quarter. The company's guidance suggested Riverbed is being hurt reduced U.S. government spending on its products. The San Francisco company said the company was having trouble closing deals with federal agencies, partly because of the automatic "sequestration" spending cuts in March.

In late October, Riverbed said it would buy Opnet Technologies Inc. for $1 billion in cash and stock. Riverbed made the deal to expand into helping customers manage applications and networks and improve its revenue.

SHARE ACTION: Riverbed shares lost 74 cents, or 4.5 percent, to $15.80 in afternoon trading. The stock has lost 30 percent of its value since Oct. 26, just before announcing the Opnet acquisition.