Riverstone's Sinking Shares

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
BobbyMax 12/4/2012 | 10:17:38 PM
re: Riverstone's Sinking Shares It was known to a lot of people that Riverstone would face difficulties in the market place. None of its are brand new and are essentially based on the Cabletron products. The company moved to California and impersonated itself as a start-up company. This was very attractive to Qwest as it wanted to grab headlines.Qwest started junk products from all companies. The company shareholders have been robbed of their wealth by the management of QWEST.

The company cannot make by selling its products in countries like China and Korea where the demand is very weak.
Ethel Merman Fan Club 12/4/2012 | 10:17:02 PM
re: Riverstone's Sinking Shares Hi - does anyone know much about:

1. Huawei
2. ZTE
3. Putian

Where are they competitive? Which one has the best home-grown technology? Have they won any big contracts in China, or will they win any soon?

Big Thanks for any help.
laksa 12/4/2012 | 10:15:20 PM
re: Riverstone's Sinking Shares 1. Huawei has major products that rivals the western equipment. They are not given credits for the incredible stuff they make. For example, their long-haul optics span the whole of China.

Huawei has won important contracts in Europe and South America. As always, the news were not announced on telecom tabloids.

2. ZTE is probably second to Huawei and is well known for its PHS gear in China. They are definitely not as strong as Huawei.

3. UTStarCom is also well-known for its PHS success in China and Taiwan.

4. Harbour Networks - Chinese Metro gear. The CEO is the ex-R&D director of Huawei. Well known for it's Riverstone-replacement products in the metro arena in China.

5. Putian - No information.

For chinese vendors 1-4, they produce standard stuff such as switches, xDSL, etc. Some good, some cheap, some need a bit more polishing.

Bottom line is: Kill the notion that chinese products are not worth the effort. In my opinion, as long as it works the way it should, there is no reason not to buy it.
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