Optical/IP Networks

Riverstone IPO Toughs It Out

NEW YORK -- Talk about a spot of bad luck.

Riverstone Networks (Nasdaq: RSTN) made its first public trade on the Nasdaq exchange today (see All Eyes on Riverstone IPO ).

Unfortunately, the day it picked to debut was the one after Nortel Networks Corp. (NYSE/Toronto: NT) held an earnings announcement reminiscent of Greek tragedy (see Nortel's Nasty Surprise), causing Nortel's stock to crater and dragging the rest of the tech market down with it.

Considering the market conditions, Riverstone's IPO performed quite admirably. After being priced at $12, the stock started trading shortly after noon and quickly traded up $2 (17%) to $14. But the stock took a dip in the afternoon. At the close it was only up $1.06 (8.85%) to finish at $13.06 a share.

Bankers had priced the 10 million shares offered by Riverstone at $12 per share, raising $120 million for the company. The underwriters have an option to purchase up to 1.5 million additional shares to cover any over-allotments. The lead underwriter is Morgan Stanley Dean Witter. Earlier in the morning, the nasty opening on the Nasdaq caused some consternation at Riverstone's official coming-out ceremony. As Romulus Pereira, president & CEO of Riverstone, pushed the button to commence trading at the Nasdaq headquarters in New York City, the stock screen behind him lit up in a blaze of red.

Audience reaction was muted, though a couple of quiet cries of "Oh crap!" and "God, look at Cisco!" were discernible. Riverstone execs had on their game face. “How were we to know that Nortel was going to barf last night?” said Andrew Feldman, VP of marketing for Riverstone. “But we’ll do fine. We’re in this for the long term, and the next 18 months are looking good for us.”

The company, which makes IP switches and routers for the metropolitan area network, is the first communications startup to take the plunge into the chilly IPO market this year (see Riverstone Readies Its IPO ).

Riverstone executives are confident that their strategy will put them ahead of the rest of the pack.

“All-optical players won’t survive in this market,” says Pereira. “It’s not that interesting, but IP and optical together -- that’s a very interesting prospect.”

In morning trading, Nortel’s stock was trading at about $20 a share -- down 30 percent for the day -- dragging down the entire tech sector. Competitors Extreme Networks Inc. (Nasdaq: EXTR) and Foundry Networks Inc. (Nasdaq: FDRY) were down 15 percent and 10 percent respectively. And Cisco Systems Inc. (Nasdaq: CSCO) is trading down about 7 percent. None of this news bodes well for Riverstone. On the whole, Nasdaq is down about 4.5 percent.

Piyush Patel, the president and CEO of Cabletron Systems Inc. (NYSE: CS), Riverstone’s parent company, had a few words of caution for Nortel: “If they don’t watch out, within a year they could be another Lucent [NYSE: LU].”

-- Marguerite Reardon, senior editor, and Stephen Saunders, US editor, Light Reading http://www.lightreading.com

scsurfer 12/4/2012 | 8:53:04 PM
re: Riverstone IPO Toughs It Out Can RS overcome sector negativity and thrive on their merits?
lightsource 12/4/2012 | 8:53:02 PM
re: Riverstone IPO Toughs It Out right now, the market is going through phase where any news is exaggerated and have nothing to do with fundamentals. hopefully we'll see some respite later this year when economic situation is more clear paving way for right trend.
Pilen 12/4/2012 | 8:52:57 PM
re: Riverstone IPO Toughs It Out A serious competitor to Riverstone will be the promising Dynarc with there approach in MAN
IP-networks with full QoS, reserved provisioned bandwith - you name it. All that needs for the NGN-network.


metroman 12/4/2012 | 8:52:46 PM
re: Riverstone IPO Toughs It Out All over it like a rash, check out the parent company Cabletron and it's investment strategy. In the last week they have invested in Telseon, Yipes (Extreme's only reference in this space) Intellispace and Giant Loop. They have friends with deep pockets and don't have the need to risk vendor financing.
metroman 12/4/2012 | 8:52:46 PM
re: Riverstone IPO Toughs It Out I guess you are a Dynarc employee then.

Any real products coming or are you still relying on powerpoint?
props 12/4/2012 | 8:52:27 PM
re: Riverstone IPO Toughs It Out Dynarc does RPR. They also do RPR. Did I mention they do RPR?
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