Riverstone Q1 in line, company faces delisting

Riverstone Networks last week posted first-quarter fiscal 2004 results in line with lowered guidance.

For the period ended May 31, the company recorded revenue of $12.7 million, compared with revenue of $15.1 million in the prior quarter and $30.1 million for the same period last year.

Net loss for the quarter, according to generally accepted accounting principles (GAAP), was $19.1 million, or 15 cents per share. This compares with a GAAP net loss of $40.6 million, or 33 cents per share, for the fourth quarter of fiscal 2003 and a GAAP net loss of $15.9 million, or 13 cents per share, for the first quarter of fiscal 2003.

Riverstone also said it has received notice from NASDAQ that its common stock is subject to delisting due to delayed 10-K filing. Riverstone previously announced that the filing would be delayed due to the company’s decision to conduct an internal review of its accounting practices and defer the 10-K until the review is complete.

Riverstone said it will appeal the NASDAQ determination.

Commenting on the quarter, Riverstone acting CEO Romulus Pereira says worldwide Tier 1 service providers are increasing their investments in metro area equipment to handle growing broadband access traffic. He also says Riverstone’s partnership with packet telephony equipment vendor Sonus is generating some interest with carriers looking to support metro VoIP applications.

“We’re starting to see a recovery in the metro driven by Tier 1 carriers worldwide” which will lead to sustainable growth for Riverstone as those carriers increase spending, Pereira says.

Sales to service providers accounted for 80% of Riverstone’s first-quarter revenue, compared to 65% in the fourth quarter of fiscal 2003. Enterprise sales accounted for the remaining 20%.

Telefonica contributed 10% or more to Riverstone’s first-quarter sales, Pereira says.

Riverstone provided no guidance for the second quarter but advised analysts listening in on the first-quarter earnings conference call to expect the same stability the company says it’s been demonstrating the last couple of quarters.

Riverstone says its search for a new CEO is “on track,” and that it hopes to make a decision in the second or third quarter. The company is also building a pipeline for its 10G bit/sec XGS Ethernet switch, and says the product is in early first customer shipment with some early adopters who are helping Riverstone “solidify” the product, Pereira says.

The company says it is also enacting further cost-cutting measures this quarter to attain profitability.