Riverstone Makes its Numbers

MAN, what a good quarter it was for Riverstone Networks (Nasdaq: RSTN), considering the gloomy state of the market. A provider of switches and routers in the still hot metropolitan area network (MAN) segment, Riverstone topped growth estimates and reached profitability ahead of expectations -- at least on a pro-forma basis.

The consensus of analysts predicted a pro forma loss of 2 cents per share, or $2.2 million, on $55 million revenues for the second fiscal quarter ending Sept. 1. Riverstone equaled the revenue projection but topped the earnings outlook with a penny profit, or $1.6 million. The pro forma figures don't include goodwill amortization and stock-based compensation.

How well business will be in the near term, however, is anyone's guess.

"Our crystal ball has all but blown up," says CEO Romulus Pereira regarding uncertainly caused by the Sept. 11 terrorist attacks, "but our long-term guidance is minimally impacted by the New York events." On a positive note, he points out that no one has yet canceled orders following the tragedy. But he plans to hold another conference call with analysts in late October, hoping it will be easier to predict the future then.

Based on generally accepted accounting principles, which include deductions for amortization and stock compensation, Riverstone came out of the latest quarter having done much better than most vendors in the depressed telecom and network equipment market. The company earned $64,000 for a break-even quarter on a per-share basis. That's a big improvement over the first quarter when Riverstone lost $4.7 million, or 4 cents a share. Revenues grew by 25 percent from the first quarter's $44 million. This was Riverstone's eighth consecutive quarter of revenue growth.

Results are all the more impressive when compared with figures from a year ago, when Riverstone lost $12 million on $21 million revenues. Last year's per-share loss cannot be compared with current figures, though, because the company had not yet spun off from parent Cabletron, which has since morphed into Enterasys Networks Inc. (NYSE: ETS).

Not all the latest news was great, however. Gross margins of 57 percent remain equal to the first quarter. Company officials point out that the number is gradually improving from 54 percent a year ago and they predict the long-term figure will be 58 to 60 percent. The company's newest product, the RS 16000, just began shipping in the second quarter and Pereira expects the RS 16000 to become a best seller with high margins.

"Days sales outstanding," the average number of days it takes customers to pay their bills, increased from 55 days to 61 days in the second quarter. Officials blamed the increase on the company's rise in international sales to 49 percent of total revenues for the quarter over a first quarter figure of 39 percent. Some analysts see stronger growth overseas and international diversification as a good sign because many large telecom companies in the United States are burdened by large investments in legacy infrastructure, which won't be retired very quickly. In the current environment, companies that are not picking up more overseas business are generally doing poorly.

But over the long term, Pereira expects the United States to overseas sales to return to a ratio of about 70 to 30.

Demand for Riverstone's products remains high. Inventory turnover, or inventory divided into annual sales, improved to 6.1 from 5.9 in the first quarter. Company officials say the book-to-bill ratio is more than 1:1, which means Riverstone is receiving more orders than it can currently deliver.

— Tom Davey, special to Light Reading, http://www.lightreading.com

Page 1 / 2   >   >>
mr. man 12/4/2012 | 7:49:47 PM
re: Riverstone Makes its Numbers Short term gains are easy when you deal in unethical business practices:


However, like the pre-September 11th airline short sellers, the truth shall be revealed soon enough, and the "secret" of Riverstone's success will be plain to all.

GJ 12/4/2012 | 7:49:45 PM
re: Riverstone Makes its Numbers Gotta love this. We get one little piece of good news and someone has to trash the company.

In case we all forget, Tellabs has a long history of breaking agreements. In 1998 there was the broken agreement to merge with Ascend, and later a similar deal fell through with another vendor.

People should congratulate Riverstone and run from Tellabs.
metroman 12/4/2012 | 7:49:45 PM
re: Riverstone Makes its Numbers So what are you exactly trying to say? Or are you a competitor of Riverstone that likes to throw a little mud in case it sticks.

The Tellabs law suit was discussed by analysts at a conf call 2 weeks ago where they said it would not negatively impact upon RSTN business.

Tellabs signed up for $60million and placed orders for $5million.

Riverstone does not have an exclusive agreement with Tellabs not to sell into account where they are present, only on the CMTS product.

RSTN products are NEBS complient, as stated on Tellabs own web site when advertising their re-badged version of the product.

The other claims seem to be baseless legal posturing, typical in these cases.

As none of the new customers that have been announced are Tellabs customers in any case, I still don't understand your point. What are they doing that is unethical?

What is it that you are refering to when you say the "secret"? Are riverstone's products really made of chocolate, or they are in league with the devil? Or are you a bitter trader who lost all his cash and has no money to spend on RSTN?
lightmaster 12/4/2012 | 7:49:44 PM
re: Riverstone Makes its Numbers Don't tell anybody that I let this out as it is a huge secret:

Riverstone has been successful because of... sales and profits. Here's another secret: If they continue to make sales and profits, they will be more successful. If they fail to make sales and profits, they will ultimately go out of business.

Once again, keep this secret, especially from the industry analysts :)
Confucius 12/4/2012 | 7:49:44 PM
re: Riverstone Makes its Numbers Gotta love this. We get one little piece of good news and someone has to trash the company.

It's fairly typical behavior, especially in such a tight market. Nobody wants anyone else's company to be perceived as being ahead or even making a move relative to one's own company. It seems highly likely that the company bashing is coming from people with some sort of axe to grind, be they competitors or bitter ex-employees.

I see quite the same thing between startups. It is de rigueur for ignoramuses to claim "they have no customers," "they have no revenue," or "their box doesn't work; they got kicked outta Qwest!" regardless of the underlying factual nature of the accusations. Before too long, many of the naysayers will discover they were fooling only themselves with their trash talk as the fundamentally sound companies are going to make it regardless of the slagging. The customers know what the competitors don't.
GJ 12/4/2012 | 7:49:42 PM
re: Riverstone Makes its Numbers Good thoughts, confu! More and more, this place is resembling the F***edCompany slander boards.
metroshark 12/4/2012 | 7:49:40 PM
re: Riverstone Makes its Numbers If I remember correctly, Tellabs had a dispute
with Ciena a few years ago. If you look at what
happened afterwards, Ciena seems to have done
much better in the long term.
jggveth 12/4/2012 | 7:49:39 PM
re: Riverstone Makes its Numbers "If I remember correctly, Tellabs had a dispute
with Ciena a few years ago. If you look at what
happened afterwards, Ciena seems to have done
much better in the long term."

Yes, and now Tellabs is acquiring Sycamore so it can compete with CIENA.

Harley 12/4/2012 | 7:49:39 PM
re: Riverstone Makes its Numbers I hope that was a sarcastic remark - Tellabs isn't in any position to acquire anyone...
rahulak 12/4/2012 | 7:49:26 PM
re: Riverstone Makes its Numbers I am really in love with Riverstone! It is such a small company, YET it delivered 8 successive quarters of SEQUENTIAL revenue growth! And yes, that all elusive break even AHEAD of the expected quarter!!

For the Riverstone bashers and Tellabs sympathizers, remember this is America, where successful entities are ADMIRED and if possible, emulated. and certainly not cribbed about or hated. Tellabs, for such a lousy company it is, is just not adapt in the tricks of business. It messed up its merger with Ciena. Its spurned suiter is now sure to drive it out of business with its mighty CoreDirector. It can't sell even $6 million of Riverstone products, when it promised to sell $60 million! the arguement that RSTN products don't work is hogwash. Remember RSTN itself is delivering rising revenues? and Tellabs is mired in such a hopeless loser's mindset that it fails to see the ridiculous contradiction in its own arguements like 'RSTN products don't work' and 'RSTN is encroaching upon TLAB customers'. If the later is true, then what are TLAB's 'stolen' customers buying from RSTN? products that don't work or plain chocolates and candies?

Wake up Tellabs! Free yourselves from this self defeating negative attitude. Now the Verve and enthusiasm is needed more than ever to SURVIVE! let alone succeed.
Page 1 / 2   >   >>
Sign In