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Ethernet equipment

Riverstone Claims Progress

Riverstone Networks Inc.'s (OTC: RSTN.PK) cost-cutting is yielding some results, according to a preliminary earnings summary the company gave out yesterday, but revenue growth is proving elusive.

The good news is that Riverstone's breakeven point has dropped to less than $30 million in revenues per quarter from a previous estimate of $40 million. Roll out the streamers and strike up the band!

The bad news is that revenue continues to erode, which means the company can't hit the moving breakeven target. For its second quarter, which ended Aug. 27, Riverstone estimates it shipped $16.1 million in hardware, down from $18.2 million the previous quarter. For its second quarter last year, Riverstone estimated its revenues at $16.6 million. (See Riverstone Reports Q2.)

Those aren't official figures yet. Riverstone continues to offer preliminary numbers rather than full earnings statements, as the company is still awaiting audit results related to the fiscal year that ended March 2004. (See Riverstone Updates on Audit.)

On a conference call yesterday, some investors seemed frustrated with the situation, with one pointing out that CEO Oscar Rodriguez has had two years to turn things around. (See Riverstone's Got a New Chief and Riverstone Begins New Chapter.)

Rodriguez admitted the company's performance had been disappointing but contended that Riverstone is improving, adjusting its efforts to follow the likely growth sectors of the market.

"Two years ago, you didn't hear me say anything about wireless infrastructure. Two years ago, you didn't hear me say anything about the infrastructure for IMS [IP Multimedia Subsystem, technology that might enable new telecom services]. Two years ago, you didn't hear me say we need to go get an OEM deal in Russia so that we can penetrate that market more effectively. Those are things we have learned along the way," he said. (See Kazakhtelecom Picks Lucent, Riverstone and Datatel OEMs Riverstone Routers.)

As for the lower breakeven figure, that's partly due to a shift of R&D to Bangalore, India, which now houses more than 50 percent of Riverstone's engineering team. During the next six months, Riverstone plans to increase staff to more than 200 engineers from 140 today.

— Craig Matsumoto, Senior Editor, Light Reading

Johncop 12/5/2012 | 2:55:17 AM
re: Riverstone Claims Progress I found the CC to be very disappointing. It is obvious now that this company is in trouble, they just can't sell product. The inability to get by the financial mess in a timely manner has impacted the companies ability to sell product, attract top talent, and it also took there financial leverage away by getting the bonds called in. I found Overby to be unprepared, nervous and down right silly. Didn't you love this gaff, "the 65.8 mil is due in Dec of 2005" "oh yeah, I mean 2006, 2005, that would be bad". Oscar seemed to be a bit perturbed about the entire feel of the Q & A period. The few analysts that did attend were all from hedge funds, not one institution.

As far as Barnes is concerned, wouldn't it be beneficial to the company to just rid itself of his salary? Can't Oscar and Overby concentrate on finding new financing options? We all know this is what Barnes is supposed to be doing.

Also, Oscar just about came out and said LU was the company that is using us in their 3g offering, why not just say it. I also agree with one of the analysts, if we have all of these new partners, all of this new business, etc etc etc, where is the revenue? Where is the revenue? I'm sure they will be losing there best sales people soon as well, if they can't sell boxes, a good sales person will go somewhere where they can sell something.

I would have skipped the CC again and stayed silent if that was all I had to say, now we can all watch the stock go down to zero together. If Oscar wants to raise some money with a new offering, he should have kept his mouth shut and tried to retain what is left of the share price. Usually when a company, who hasn't spoken public in a year, chooses to speak, there is something good to say, a significant new customer, a new product, etc. All he said was that the company can't grow revenue and they have to significantly cut costs to stay alive.

Very disappointing. Is there anything ggod here that I'm missing?

What are everyones thoughts?
mtrehearne 12/5/2012 | 2:55:14 AM
re: Riverstone Claims Progress The good news is with a < 30m breakeven for GAAP earnings now - that should translate into about a 22m revenue level required for cash flow breakeven (assuming a 50% GM, when you consider and subtract the non-cash expenses like depreciation, amortization, stock based comp - and then add back capital expenditures - this was about a 4m net figure from my extrapolations of prior period data. A 22m revenue level is not that far away from 16m hardware only level - definitely achievable! But a 16.7 cash burn in this recent Q is very disturbing and bordering reckless.
Johncop 12/5/2012 | 2:55:14 AM
re: Riverstone Claims Progress i'm with you with the burn rate, what could they possibly be spending the cash on? Do they have to pay the engineers 2x the rate on the street? Are they wooing with benefits? The management is suspect at best. What is your take on near term and long term prospects? I smell a new line of credit.
mtrehearne 12/5/2012 | 2:55:11 AM
re: Riverstone Claims Progress I would certainly hope that they have ramped up inventory (both raw mat'ls, WIP, and finished goods) considerably and "parked" a lot of that cash burn there - this inventory will ultimately turn into positive cash flow upon sales and collection in a subsequent quarter.

Maybe equipment "consigned" at potential customer sites in "customer trials" has increased significantly as well and this would also be a consumer of cash flow, again until sold and collected.(I am not sure how they account for equipment in trials/labs at customer sites)

I can't see much cash usage related to any increase in receivables due to their decreasing sales in that quarter.

They might have had an increase in prepaid expenses which would benefit later quarters' cash flow.

So bottom line is that I hope the high burn rate is due to Balance Sheet activities related to growing the business and not spent primarily operating expenses and therefore gone forever.
light-headed 12/5/2012 | 2:55:10 AM
re: Riverstone Claims Progress This company is done, it is over. The only person dumber than a customer that would buy this gear is the investor that would lend them money or buy their worthless stock.
mtrehearne 12/5/2012 | 2:55:04 AM
re: Riverstone Claims Progress http://ir.riverstonenet.com/ph...

Established strategic alliances with two new industry-branded equipment vendors. Riverstone believes that these new alliances should enable it to extend its geographic reach in Europe, the Middle East and Asia.


What ever happened to these 2 new alliances?

Any thoughs on who they might be?

Ericsson?
Nokia?
Samsung?
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