Riverstone Restates, Stock Falls

Riverstone Networks Inc. (Nasdaq: RSTN) announced preliminary results of its ongoing accounting review of the past seven quarters (see Riverstone Reveals Restatement). This will result in restated revenues for fiscal year 2002 and fiscal year 2003 but the company said it expects no changes to revenues for the first fiscal quarter of 2004.

Nasdaq resumed trading of the company’s stock at 12:15 PM today. The exchange had halted trading yesterday morning after Riverstone announced it would restate earnings (see Nasdaq Halts Riverstone Trading). When it reopened, the stock was trading down $0.10 (7.87%) to $1.17.

Riverstone said it had overstated previously reported net revenues of $210.8 million for fiscal 2002 by as much as $47.3 million, according to the release (see Riverstone Reports Fiscal 2002 Results). It also said that previously reported net revenues for fiscal year 2003 of $69.6 million were overstated by as much as $4.2 million (see Riverstone Reports Q4 and Riverstone Disappoints the Street).

The company said it doesn’t anticipate changes to its previously announced net revenues of $12.7 million for the first fiscal quarter of 2004, which ended May 31, 2003 (see Riverstone Posts Loss, Faces Delisting).

Yesterday, Riverstone announced that it would have to restate earnings after it discovered that, in some cases, sales to customers were subject to rights of return and other contingencies that were not accounted for at the time the transactions were originally recorded (see Riverstone Readies Restatement).

A special committee of the board of directors is continuing to review the company’s accounting practices. Riverstone said that additional items may be restated as the review continues, but it would not give a specific timeline for completion.

— Marguerite Reardon, Senior Editor, Light Reading

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