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Optical/IP

Riverstone Wins in Korea -- Again

Shares of Riverstone Networks Inc. (Nasdaq: RSTN) got a boost today on news that the router vendor has won a contract with Korea's largest incumbent carrier (see Korea Telecom Chooses Riverstone).

Riverstone says it blew past rival Cisco Systems Inc. (Nasdaq: CSCO) to win a contract with KT Corp. (formerly Korea Telecom). This is Riverstone's second contract with KT; the first came last November and was estimated by analysts to be worth about $4 million to $6 million (see Riverstone Wins Big in Asia).

Terms of this deal weren't disclosed, but Riverstone says it includes an order for "more than 100" RS 38000 routers to be installed at aggregation points in KT's metro networks nationwide. The routers range in price from $70,000 to $500,000, depending on configuration.

Shares of Riverstone shot up $0.37 (10.48%) and were trading at $3.90 on the news by this afternoon.

Analysts say the deal is good news for Riverstone, validating its routers' mix of MPLS, Ethernet, and Sonet features (see MPLS VPNs: The Talk of Supercomm).

But this deal also points directly at Riverstone's growing dependence on the Asian market, and in particular on business in Korea. For the quarter ended March 26, analysts say Riverstone made roughly 10 percent of its $51.3 million in revenues in Korea.

Riverstone set this pattern last year, with a series of Korean wins:

Table 1: Riverstone in Korea
Date Korean Carrier Deployment Related stories in Light Reading
November 01 Dacom RS 38000 and RS 3000 for nationwide metro IP Riverstone Boasts MPLSuccess
June 01 and May 02 Korea Telecom RS 8000, RS 8600, and RS 3000 for last-mile Ethernet; also, RS 38000 for metro core aggregation and VPNs Riverstone Wins Big in Asia
January 02 PowerComm 1,000 routers (RS 38000, RS 1000, RS 3000) in Seoul area for Ethernet metro service Riverstone Scores Big in Asia
May 02 Hanaro Telecom N/A N/A


The Korean connection has its pros and cons, analysts say. "This extends Riverstone's Ethernet strength in large metro deployments," says Mark Sue of Frost Securities Inc. But he's concerned that Riverstone needs to push for growth in Europe and the U.S.

Earlier this year, Riverstone suffered setbacks due to drooping business in both these regions (see Riverstone Savaged on Warning). Sue says some of this damage may be offset in Europe by a reseller arrangement with Alcatel SA (NYSE: ALA; Paris: CGEP:PA), which had tongues wagging worldwide earlier this year (see Deal Talk Boosts Riverstone, LR Index).

Still, there are some peculiarities of the Korean market that could work against Riverstone. Korean carriers are on a campaign to buy from Korean vendors, Sue says, which could threaten Riverstone's future position. What's more, he warns that price competition reigns supreme in the Korean market. For this reason, his firm recently trimmed gross margin estimates for all companies with dependence in Korea, including Cisco, Riverstone, and Redback Networks Inc. (Nasdaq: RBAK).

Riverstone isn't turning away from the siren song of Seoul. Indeed, it seems irresistibly drawn to the Asian market, where it earns more than 50 percent of its revenues. Another deal, with Korea's Hanaro Telecom, is expected to be announced within the next few weeks.

Riverstone will be showing its routers at Supercomm 2002, where company sources say it also plans a product announcement.

— Mary Jander, Senior Editor, Light Reading
http://www.lightreading.com For more information on Supercomm 2002, please visit: Supercomm Special
stuartb 12/4/2012 | 10:20:49 PM
re: Riverstone Wins in Korea -- Again These guys are as popular in Korea as David Hasselhoff is in Germany.
layer3 12/4/2012 | 10:20:48 PM
re: Riverstone Wins in Korea -- Again Or Jerry Lewis in France.

Few will take RSTN seriously until they break into one of the big 7 left in the US.

L3
metroman 12/4/2012 | 10:20:46 PM
re: Riverstone Wins in Korea -- Again L3

Why?

The big 7 are not buying anything. So why would you base your decision on taking RSTN seriously this? If the people who are buying are buying Riverstone then surely that is a good thing.

If the big 7 start buying non-RSTN products to fill the RSTN niche then you will have a point, until then, it is a weak position to take.

I think as an American you would feel slightly ashamed at the progress the likes of Korea are making in next gen network deployment as against the sluggish approach of the big 7.

Big in size maybe, big in delivery??????

Metroman
lightflash 12/4/2012 | 10:20:46 PM
re: Riverstone Wins in Korea -- Again Pardon my ignorance. Who are the big 7 in the US
layer3 12/4/2012 | 10:20:43 PM
re: Riverstone Wins in Korea -- Again Point well taken Metroman. There aren't too many new deals for metro ethernet out there period.

I'm simply stating that news of another win in Korea, though good for RSTN, does not have the same effect as an ILEC announcing a RSTN contract. But hey, in this climate, a deal's a deal. If Korea's buying, and they're sending money to RSTN, then good for RSTN.

Cheers, L3
metroman 12/4/2012 | 10:20:35 PM
re: Riverstone Wins in Korea -- Again L3

I agree! My RSTN shares might be worth having if an ILEC spent some money!

Metroman
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