Riverstone Networks Inc. (Nasdaq: RSTN) shares stabilized a bit Friday after being battered following the company's revenue and earnings warning earlier in the week.

The company’s stock took a beating on Thursday, closing down $0.69 cents (20.9%) to $2.61. This came after the company pre-announced its earnings on Wednesday, telling investors that it now anticipates sales between $30 million and $31 million for the quarter. The consensus estimate had been around $47.5 million. Riverstone also said it expects losses between $0.11 and $0.13 per share. Analysts had expected a penny per share loss.

At least six investment banks downgraded the stock yesterday, including A.G. Edwards, Lehman Brothers, Merrill Lynch & Co. Inc., Morgan Stanley Dean Witter & Co., Pacific Crest Securities Inc., and Salomon Smith Barney.

Analysts say the only bright spot may be that Riverstone's cash position could help provide some support for the stock.

“The company has over $3.00 a share in cash total,” says Sam Wilson, an analyst with Merrill Lynch. “I think what we’re seeing is value players, who think they can get a deal, getting in. But I wouldn’t claim that the stock has hit bottom.”

On the conference call on Wednesday, management indicated softness was greatest in the U.S. and Europe. Demand was strong from cable operators, but the company still felt lingering effects from continued capital spending cuts from emerging service providers and carriers like Qwest Communications International Inc. (NYSE: Q). The company said that the total number of customers will remain roughly the same, but the average revenue per customer will be down tremendously.

The company also noted weakness in Asia, which last quarter made up about 50 percent of its sales. The company said restructuring at China Telecom slowed sales in China, while the establishment of fiscal-year budgets in April hurt sales in Japan. The company says it expects these markets to return next quarter. Ethernet deployments in Korea continued to be strong.

— Marguerite Reardon, Senior Editor, Light Reading
http://www.lightreading.com