Riverstone Ailing in Asia

Yesterday, Riverstone Networks Inc. (Nasdaq: RSTN) warned investors of disappointing revenues and widening net losses, due to weakness in the Asian market, particularly China.

Revenues for its first fiscal quarter of 2003, ended in May, will be about $12 million to $13 million, compared with $30.1 million a year earlier, Riverstone said. This is also down from the $15.1 million in revenue the company reported for its previous quarter (see Riverstone Disappoints the Street). Revenues for the fourth fiscal quarter had increased 9.7 percent. Analysts had expected sales for the first quarter in a range of $15.3 million to $16.5 million, according to First Call.

The company also said it expects a net loss for the quarter of about $18.6 million to $20.7 million, or $0.15 to $0.17 per share. A year ago for the same quarter, it reported a net loss of $15.9 million, or $0.13 per share.

The company, which sells Gigabit Ethernet and edge routing gear, says that sales increased during the quarter in Europe, the Middle East, and Africa. North American sales remained flat with respect to the previous quarter. But it was sales in Asia that really hurt the company. China was particularly disappointing to Riverstone.

Asia has been an important region for Riverstone over the past several quarters. The company has generated as much as 50 percent of its quarterly sales from Asia, with China playing a key role. The company released statements back in January of this year touting the market as one of the hottest in the world (see Riverstone Bullish on China).

Company officials are blaming part of the shortfall on “regional disruption of business activity” stemming from the outbreak of SARS, Severe Acute Respiratory Syndrome.

A company spokesperson said that health officials’ response to the upper respiratory disease, particularly travel restrictions imposed by the Chinese government within China, pushed out some deals that were expected to close during the first quarter.

On the brighter side, the company said its gross margins have improved and are expected to be in the mid to high 30 percent range. Gross margins in the fourth quarter were around 28.5 percent, compared to about 36 percent in the third. The company’s CFO, Robert Stanton, had said on that company’s fourth-quarter conference call that he expected gross margins to return to the 30 percent range in the following period.

Riverstone shares closed down $0.24 (13.8%) to $1.50 yesterday. Today shares are up $0.03 (2%) to $1.53.

The company will officially report its first-quarter earnings on June 19, 2003.

— Marguerite Reardon, Senior Editor, Light Reading

BobbyMax 12/4/2012 | 11:57:02 PM
re: Riverstone Ailing in Asia Riverstone has ben ailing ever since it was born. Although is very old but it was reincarnatedas start-up company. It was flying too high althogh there was no legitimate reason feel that way. Recently a job swap/promotion occured within the company and the former President and CEO elevated himself to the chairmanship.

One of the biggest problem that Riverstone faces is its seriously flawed approach to the market. Riverstone has now played all its cards.
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