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Net Net: Promoting innovation and managing change

Elliott ‘doubling down’ on bid for Riverbed Technology

Jerry Kennelly, center, chairman and CEO of Riverbed Technology

Elliott Management is getting more aggressive in its bid for Riverbed Technology.

The $23 billion activist hedge fund firm led by Paul Singer offered to buy the enterprise technology company for $19 in January but was rejected. Still owning 10.5 percent of Riverbed's stock, Elliott increased its offer to $21 a share Tuesday.

Elliott portfolio manager Jesse Cohn said in a public letter to the Riverbed board that the new offer "demonstrates our commitment to the value-maximizing potential of Riverbed's high-quality assets and its strategic positioning within its markets."

"It also represents our deep and abiding skepticism that a maturing technology company whose efforts to diversify have resulted in significant lost value and whose stock has underperformed virtually every relevant benchmark over any time period since its (initial public offering) can offer superior value to stockholders on a publicly traded, stand-alone basis," Cohn added.

Representatives for Riverbed, which is led by chairman and CEO Jerry Kennelly, did not immediately respond to a request for comment.

(Read more: Riverbed on Elliott proposal: We'll think about it)

Daniel Ives, an analyst at FBR, views the move as a so-called stalking horse bid, whereby Elliott is attempting to drive up the value of a potential sale without actually buying the company itself.

"This is just Elliott moving the process along," said Ives.

Ives believes that Riverbed will ultimately be bought by a private equity firm at the "fair value" of $24 to $25 a share.

Riverbed Technology, Inc. 1-year

According to the Elliott letter, potential buyers have already expressed interest directly to Riverbed and its advisor Goldman Sachs and "appear to be willing to offer materially more for the company than we are," Cohn wrote.

Riverbed had previously rejected the $19 a share offer on Jan. 15, saying it had been "executing a strategy focused on the creation of sustained growth." Shares also fell 5.5 percent Monday when it became clear that Elliott was not nominating new board members for the company.

Hedge funds changing the way they communicate

Ives said the new offer Tuesday showed Elliott was unmoved. "There was some fear that Elliott was going to back down. But instead they're kind of doubling down. This is them getting more aggressive," he said.

Elliott took a critical approach to the current board of directors in its new letter.

"We believe shareholders, the actual owners of the company, should be outraged by the board's behavior. The Board has been ignoring numerous potential buyers, and the board has also bizarrely concluded that it is not worthwhile to allow these parties, including Elliott, to conduct a few weeks of diligence to put forth our highest and best offers for the company," Cohn wrote.

Elliott also called on the board to "immediately allow for potential buyers, including Elliott, to conduct diligence in order to put our highest offer on the table for all shareholders to review."

Shares rose about 4.6 percent Tuesday following the news.

—By CNBC's Lawrence Delevingne. Follow him on Twitter @ldelevingne.