Riverstone reboots

* Metro router company looks to rebound from accounting crisis

Riverstone Networks last week re-emerged from its solitary confinement to say it was OK, open for business and working through the accounting mess that forced the departure of the previous regime.

Riverstone said it has also re-committed to being a leader in metro Ethernet routers and in Ethernet Virtual Private LAN Service/Multi-protocol Label Switching (VPLS/MPLS) definition and innovation. Over the past quarter, Riverstone says it added several new customers, including Time Warner Cable in North America and a large private sector infrastructure project through Marconi.

The company also entered metro Ethernet trials with three “major” European service providers, including the previously announced trial with France Telecom. Riverstone also said its strategic alliances are healthy and fruitful, including those with Marconi, Sonus and HP, with which it developed a metro Ethernet OSS for provisioning and scale.

That’s not to say that everything is hunky-dory, though. The company is still distracted by an ongoing earnings restatement and accounting practices review. Last year, Riverstone had to restate results for fiscal years 2002 and 2003, which prompted an investigation by the SEC. The company was also de-listed from NASDAQ, and top executives Rom Pereira and Piyush Patel were flushed, as was virtually all of Riverstone’s management team.

With a new executive staff headed by President and CEO Oscar Rodriguez, a former Nortel executive in charge of enterprise operations, Riverstone is recharged. It’s jettisoned the enterprise market foray previous leaders ventured into when things went south with sales to service providers and is now focused squarely on Tier 1 carriers.

Riverstone has also changed its accounting method to “sell-through,” which means it only recognizes revenue when resellers ship products to their end customers. Previously, the company recorded revenue when products were first shipped to distributors and resellers.

Riverstone last week also offered a preliminary glimpse into its financial results. The company expects to report total revenue for the third quarter of fiscal 2004, ended Nov. 29, 2003, of between $9 million and $10 million. But the ongoing restatement activity could result in a revision of this estimate, company officials said on a conference call.

Riverstone is also applying for re-enlistment on NASDAQ.

With that, Executive Vice President and Chief Financial Officer Roger Barnes declared: “Riverstone is alive and well and open for business.” Rodriguez said the company is seeing positive customer reaction in the marketplace, and new marketing and product management Vice President Dave Ginsburg says no customers abandoned the company during its NASDAQ delisting and SEC investigation last year.

Still, “One of the challenges for this company, among many, will be to restore confidence and credibility with the investment community,” said Andy Schopick, an analyst with Nutmeg Securities, during the conference call.

Riverstone officials would not comment when asked if the company was pursuing any litigation against prior management.

Learn more about this topic

Riverstone restates earnings

The Edge, 07/22/03

Riverstone changes guard

The Edge, 04/22/03

SEC eyes Riverstone

The Edge, 04/25/03

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