Riverstone Networks financials discussed

Riverstone Networks, rstn.pk, financials discussed. It's a pinksheet company. No recommendation on the stock. A friend suggested the company. Take a look at their recent filings.

http://ir.riverstonenet.com/phoenix.zhtml?c=123844&p=irol-sec

Summary:

6 months earnings until Feb 2005 is 34.1 Mil up 22% from the previous 6 month period. Revenue split up is 19.6 (nov 2004 quarter end) and 14.5 (feb 2005 quarter end).

Aug 2004: Cash position: 256.4 Mil

Feb 2005: Cash position: 223.3 Mil. Changes include one time insurance reimbursement and so +14.1 Mil and a one time Class action loss: -18.5 Mil - 2 Mil Interasys lawsuit. So actual operating losses for the 6 months = 26.5 Mil approximately. Convertible Debt = 131.8 Mil May 2005: Riverstone: Redeems half of outstanding notes. Meaning removes 65.875 Mil debt. Debt remaining 65.875 Mil.

No reports of earnings after Feb 26, 2005. Bottomline is that company made an operating loss of 26.5 Mil in the 6 months prior to Feb 26. If we assume that company did not lose more in the next 6 months in operations (big assumption but considering company is getting back on track, it's a fair assumption to make). Current cash position = 223.3 Mil - 27 Mil = 195 Mil. Subtract from this one time charges which we are not yet aware of such as Toshiba lawsuit, which as per their statements "not materially impacted", should hopefully not be much. Also, subtract entire debt. Therefore 195 Mil - 131.8 Mil = 63.2 Mil. Not looking that hot any more :-) We need to know what are their revenues now, any lawsuits remaining and what are their losses to make any judgement.

What we haven't considered here is any long term assets which really have value. Long term asset value is usually quite inflated by companies. The other important piece is what do you think of the future of the business. They might be in a hot area but the networking guys on this list need to confirm that if possible. Profile on the 8K says:
"Riverstone Networks, Inc. (RSTN.PK) is a leading provider of carrier Ethernet infrastructure solutions for business and residential communications services. Riverstone’s Ethernet router portfolio uniquely delivers the reliability that allows carriers to meet the triple play - voice, video and data - service requirements of their customers in a cost-effective and scalable way. Riverstone allows carriers to offer new services over existing revenue-generating networks permitting them to evolve to a next generation Ethernet infrastructure."

I think the company has disclosed very little. If management knows of a rebound, it will take place almost only after company gives management some options and so there is dilution.
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