Riverstone's Got a New Chief
Today, the metro Ethernet vendor named former Nortel Networks Corp. (NYSE/Toronto: NT) executive Oscar Rodriguez as its new chief executive officer (see Riverstone Names President/CEO). It also announced that a Nasdaq committee has decided to continue listing the company’s ticker symbol on its exchange -- at least for the time being.
Riverstone has hit some rough road over the last few months, including an investigation by the Securities and Exchange Commission (SEC) and the restatement of financials for the last seven quarters, including all of fiscal 2002 and the first three quarters of 2003 (see Riverstone Readies Restatement and SEC Calls on Riverstone). Analysts say it’s still too early to bet on Riverstone’s turnaround.
“I think we need to take a wait-and-see approach,” says Erik Suppiger, an analyst with Pacific Growth Equities Inc. “The situation is still very difficult for Riverstone. We’ll have to give the new CEO some time to see if he can turn things around.”
Rodriguez joined Nortel in 1997 as general manager for the signaling solutions group. He became head of the company’s enterprise division when Nortel was reorganized last year (see Plastina Out in Nortel Reshuffle). Rodriguez also served as president and COO of Arris Interactive, a Nortel joint venture focused on the cable MSO market.
Rodriguez replaces chairman Romulus Pereira, who has been interim CEO since April (see Riverstone Names Chairman, Acting CEO).
“He looks like he is well qualified for the position,” says Suppiger. “But it’s a little surprising that someone would leave a pretty senior position at a big company like Nortel to join Riverstone.”
One thing is certain, Rodriguez will have his work cut out for him.
In addition to its financial restatements, which are still not complete, the company is also struggling to bring in new revenues. For the first fiscal quarter of 2004, which ended May 31, 2003, the company reported $12.7 million in revenues, with net losses of about $19.1 million (see Riverstone Posts Loss, Faces Delisting).
What’s more, the company is still quickly burning through its cash. In the first fiscal quarter of 2004 it reduced its cash by about $25.6 million -- $10 million of which was consumed by repurchasing outstanding debt. This left the company with about $196 million in cash or about $1.50 per share at the end of the quarter.
“The first thing the new CEO has to do is get the cost structure under control,” says Suppiger.
The company also announced today that the Nasdaq Listing Qualifications Panel will continue listing Riverstone's securities on The Nasdaq National Market. But the company is not totally free and clear. The panel indicated that listing will only continue on the condition that Riverstone file its 10-K for the year ended March 1, 2003, and its 10-Q for the quarter ended May 31, 2003, as well as any restatements for prior periods, by September 8, 2003.
The panel also said that Riverstone must file all of its other reports for periods ending on or before August 31, 2004, in a timely manner or it will face delisting again. The scarlet letter "E" will continue to dangle on the end of its ticker symbol until Nasdaq determines that Riverstone has come clean and is in compliance with all requirements for continued listing (see Riverstone Branded 'E' by Nasdaq).
Today, shares of the company were trading up $0.04 (2.96%) to $1.39.
— Marguerite Reardon, Senior Editor, Light Reading