Riverstone targeting November IPO

Riverstone Networks CEO Romulus Pereira said Monday that his company is still on target to become the first of the Cabletron spinoffs to go public, with the goal of a November initial public offering. In late June, Cabletron first publicly stated its plan to take its Santa Clara company public.

Pereira, a self-described Cabletron mouthpiece over the past couple of years, says the traditional pre-IPO "quiet period" will be especially tough for him, but the prospects of a big payday will likely provide him with all the incentive he needs to lay low. That quiet period could start as soon as a week or so from now, says Pereira, who is making the rounds with analysts and the press this week to spread the Riverstone word.

Pereira was one of three founders of YAGO Systems, a maker of switch routers that Cabletron snapped up about 2½ years ago. Not only did Cabletron obtain advanced technologies and Pereira through that acquisition, but it also got Piyush Patel, one of YAGO's founders and now Cabletron's CEO.

Riverstone essentially is YAGO, though it has grown quite a bit since YAGO became part of Cabletron. For instance, YAGO had 45 employees when it was purchased, but now has more than 400 workers (about half of them engineers) and will have close to 500 by the time it goes public, Pereira says.

The other big difference with Riverstone now is that the company is focused entirely on selling its equipment to service providers, whereas YAGO originally had the enterprise in mind. Pereira says the number and kinds of service providers around today just didn't exist when YAGO first emerged.

Riverstone sells two basic types of products: switch routers designed to run in metropolitan service provider, ISP, application service provider (ASP) and content service provider nets; and Web switches, largely aimed at Web hosting and content provider nets. Both types of products can be exploited by companies to not only handle big traffic loads, but also deliver a variety of services that can help differentiate their businesses, Pereira claims.

The company's plan is not only to continue enhancing those products, but also to expand into the higher-end switch router market as the metropolitan network expands further into the optical and Internet backbones. "We could be on a collision course with the Junipers of the world," Pereira says, referring to the maker of giant Internet backbone routers.

Pereira says observers also shouldn't be surprised to see Riverstone snap up a maker of Layer 2 optical switch technology. While the price tags are too lofty for most of the optical network firms that have already emerged, Riverstone is keeping its eyes peeled for the next breed of optical network firms, dozens of which already have venture funding.

Pereira has big plans for Riverstone. He says the company has the potential to reach $1 billion in revenue someday. The company has a long way to go, though, having scored $15.8 million in revenue for the first quarter, a 24% increase from the previous quarter. More of Riverstone's financial story will become public soon when the company makes its S-1 filing with the Securities & Exchange Commission as part of the IPO plan.

Among the ways that Riverstone plans to generate revenue is by wheeling and dealing with its partners and customers much in the way Cisco does. For instance, Pereira says there is plenty of opportunity for Riverstone to encourage companies it buys services from, say an ASP, to buy services from a metropolitan network company that bases its infrastructure on Riverstone equipment.

Riverstone is also staying in touch with its fellow Cabletron spinoffs. Riverstone works most closely with Cabletron's Global Network Technology Services (GNTS) professional services group, which helps some of Riverstone's customers build out their networks. After Riverstone, GNTS is up next among the Cabletron spinoffs to go public.

One reason Pereira is optimistic about Riverstone's chances is because he really believes in ASPs and other providers of outsourced services that will need the kind of gear Riverstone makes. In fact, he says his company is currently outsourcing many of its applications, including customer relationship management and enterprise resource planning.

"We're living proof that this ASP concept is real," he says.