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All Eyes on Riverstone IPO

Light Reading
News Analysis
Light Reading

The networking industry is awaiting the outcome of Riverstone Networks's IPO, scheduled for Friday, with something akin to breathless anticipation.

Riverstone (proposed Nasdaq symbol: RSTN) is the first outfit to essay an entry into the public market since Nasdaq rolled and burned last year (see Riverstone Readies Its IPO and Riverstone Sets IPO Pricing Date). A strong performance by the Cabletron spinoff could open the path for other optical networking companies to follow suit. An srticle in the Wall Street Journal today predicted that Unisphere would go public in late March.

Conversely, a weak performance might damage those companies' IPO prospects yet further. That would spell big problems for a slew of optical startups that had anticipated taking their companies public last year and are now stuck at the gate, running short of funds.

What do Riverstone's prospects look like? "Riverstone is the right company to show some leadership. They should do fairly well," says Thomas Alexander, president and CEO of LuxN Inc., a metro optical networking startup. "They're not a regular startup. They have experienced leadership, a customer base, real products, and substantial revenues. They could open the gate for others," he adds.

Alexander predicts that if Riverstone rips one to right field, Zhone Technologies Inc. could follow it (see Zhone Files for IPO). And after that? "Quantum Bridge, maybe." (See Quantum Bridge Aims for IPO.)

Another company gearing up to brave the market is the "Son of Siemens" outfit, Unisphere Networks Inc. (Nasdaq: UNSP). Like Riverstone, it's not a regular-Joe startup. Siemens will own more than 80 percent of the company once it goes public. The German parent's deep pockets have enabled Unisphere to keep plodding towards its public market goal, despite the fact that it initially registered for an IPO way back in August (see Unisphere Registers For IPO). An article in the Wall Street Journal today, Thursday, predicted that Unisphere would hit the Street next month.

LuxN's own IPO plans have been put on hold by Nasdaq nihilism, Alexander says. "To go public now you need a $10 million quarter and to show that you will be profitable within two quarters of the IPO date."

LuxN's chances of meeting those milestones in this quarter, or the one after, depend on the fortunes of its potential customers, he says. "On the one hand you have all these [service providers] having trouble -- FiberStreet, Allied Riser [Nasdaq: ARCC], Urban Media, and so on. But on the other hand, you have Cogent, Yipes, Telseon, GiantLoop, and IntelliSpace, who have lots of money still." LuxN says it will close a $52 million E round in March, to keep it going until its IPO. Unusually, it managed to negotiate a "flat round" -- one where it managed to retain the same valuation as its previous round. Other companies are having to settle for "down rounds" -- where the company takes money at a lower valuation than at its previous round. And some are ending up with "doh!" rounds -- where they can't get any money at all.

Newly formed optical networking companies -- ones that are nowhere near an IPO -- face an even harsher reality. Already several of them have tripped, fallen, and seem unlikely to regain their feet (see Shutdowns Send Dark Message). -- Stephen Saunders, US editor, Light Reading http://www.lightreading.com

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12/4/2012 | 8:53:51 PM
re: All Eyes on Riverstone IPO
just heard that siemens will try to float their US group in early march.
what chances do they have? Didn't they buy mostly DSL gear a year ago?
Peter Heywood
Peter Heywood
12/4/2012 | 8:53:47 PM
re: All Eyes on Riverstone IPO
Think you're probably refering to Unisphere, which file an S1 for an IPO last summer and filed an amendment late last week, setting the number of shares at 9,775,000 and price at $17.
12/4/2012 | 8:53:46 PM
re: All Eyes on Riverstone IPO
Sure, unisphere.
I guess it's public knowledge now. Siemens told the WSJ that early march was probable. Here's the article from today's paper.

What to you think, Peter? I haven't heard too much about them. Are all their revenues coming from overseas? Have they won any big deals in North America? (Just searched LR and found that they've had layoffs and acquired some real lemons.)

Have things changed for them since LR wrote those stories?



The Wall Street Journal

Unisphere Expected To Trade on Nasdaq In Early March IPO

MUNICH, Germany -- Shares in Unisphere Networks Inc., the U.S.-based networking-equipment maker owned by Germany's Siemens AG, are expected to begin trading on the Nasdaq Stock Market in early March, a few days before Siemens's own shares are to be listed on the New York Stock Exchange, according to people familiar with the listings.

A prospectus filed by Unisphere last week set the price range for the Unisphere initial public offering between $15 and $17, valuing the company at as much as $1.7 billion. Until recently, Siemens hoped to get between $20 and $22 a share for Unisphere. Siemens declined to comment on the specific date of the Unisphere listing.

Siemens created the Internet-networking-equipment maker, based in Chelmsford, Mass., by combining several U.S. acquisitions as it moved to catch up with rivals in building Internet networks. Siemens bought Argon Networks in March 1999 and a month later it acquired Castle Networks and Redstone Communications. Siemens also added a research and development team from its Boca Raton, Fla., operations.

According to the prospectus filed Feb. 9, Unisphere achieved net revenue of $49.6 million and gross income of $5.5 million in its first full business year to Sept. 30, 2000.

Under the terms of its listing, Unisphere will issue 8.5 million new shares that will be listed on Nasdaq. The underwriting banks -- J.P. Morgan, UBS's UBS Warburg and Credit Suisse's Credit Suisse First Boston -- will have an option to purchase an additional 1.3 million shares.

After the offering is completed, Siemens will hold about 87.4% of Unisphere.

(Copyright (c) 2001, Dow Jones & Company, Inc.)
12/4/2012 | 8:53:44 PM
re: All Eyes on Riverstone IPO
Cross your fingers, throw salt over your shoulder, maybe even say a prayer. It doesn't matter if you like em or hate em, Go IPO Go!!!
12/4/2012 | 8:53:41 PM
re: All Eyes on Riverstone IPO
Steve - tell me now!!!

How much for an equity stake in LR? How much?!!!

Your other VC investors will not help me out here...

How much?!!!!
12/4/2012 | 8:53:38 PM
re: All Eyes on Riverstone IPO
Anyone heard anything on a product launch or IPO on Seattle based TeraBeam (laser-using air instead of fiber)?
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