Optical/IP Networks

Riverstone Sets IPO Pricing Date

Morgan Stanley Dean Witter is expected to set final pricing for Riverstone Networks’ initial public offering on February 15, 2001. Only a week and a half after it began its investor road show, the company will sell 10 million shares at between $11 and $13 a share, raising a total of $120 million (see Riverstone Readies Its IPO ).

Riverstone, which is one of three companies spun out of Cabletron Systems Inc. (Nasdaq: CS) last summer, makes routers and switches for the metropolitan area network (see Cabletron Floats Riverstone ). This is the first communications equipment company to go public this year and only the second IPO that Morgan Stanley has led in 2001.

Many people in the industry are looking to Riverstone to test the IPO waters, which have been rather chilly over the last several months. Specifically, investors will be looking closely at the company’s reception in the wake of disappointing earnings announcements from some of its key competitors like Cisco Systems Inc. (Nasdaq: CSCO), Extreme Networks Inc. (Nasdaq: EXTR), and Foundry Networks Inc. (Nasdaq: FDRY)(see Cisco Misscos!).

It’s difficult to think that Riverstone won't be affected by a reduction in service provider spending, as well. In fact, some of its top ten customers listed in the amended S-1 filed with the Securities and Exchange Commission on January 29 have already fallen on hard times.

Vitts Networks, a data CLEC (competitive local exchange carrier) based in New Hampshire, which accounted for 11 percent of Riverstone’s sales from December 1, 1999, to December 2, 2000, filed for bankruptcy earlier this week. And British Telecom (BT) (NYSE: BTY), the company’s marquee customer, which brought in 15 percent of revenues last fiscal year, reported a 71 percent drop in third-quarter profits, news that could hurt Riverstone in the coming quarters if the carrier reduces spending to compensate for its loss.

-- Marguerite Reardon, senior editor, Light Reading http://www.lightreading.com

Marguerite Reardon 12/4/2012 | 8:55:30 PM
re: Riverstone Sets IPO Pricing Date What's the outlook for Riverstone? Some of its customers are getting hit pretty hard. It seems that large and small service providers are having problems. Do you think this will hurt its IPO?
x1797 12/4/2012 | 8:55:30 PM
re: Riverstone Sets IPO Pricing Date Finally ... someone with the balls to test the waters!

mu-law 12/4/2012 | 8:55:12 PM
re: Riverstone Sets IPO Pricing Date "It seems that large and small service providers are having problems. Do you think this will hurt its IPO?"

Enterprise is the wrong market for "Alternative" products to get their start... SP's are induced to innovate because they have to, and are more likely to evaluate technology exclusively on its merits. Enterprise operators aren't generally so cavalier.

Arguably, for a company with solid fundamentals and little imbalance toward future value, now might be a good time to go out... with the hopes that a gradual, progressive buildup driven by market recovery would lead to a higher ultimate valuation come expiry time.
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