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Strategies & Market Trends : Technical analysis for shorts & longs -- Ignore unavailable to you. Want to Upgrade?

To: Logain Ablar who wrote (36273)	2/28/2002 11:58:14 AM
From: Johnny Canuck	Read Replies (1) \| Respond to of 69835

-------------------------------------------------------------------------------- Riverstone Dunked -- 11:00 AM EST by Seth Martin IDEAadvisor.com is offering IDEAtrader content FREE through our website for a limited time! It's technical and fundamental analysis you won't find anywhere else. Riverstone Networks [RSTN:Nasdaq] is being stoned by the market today for a Q4 shortfall -- it's lost about half its value early in the session. The metropolitan area network builder is looking for breakeven results to a slight loss, on sales of $50m-$54m. This compares to expectations for EPS of $0.04 on sales of $65m. At these levels we're comfortable initiating the stock with an eye on short-term appreciation, and hence a short-term Buy rating. The fundamental outlook remains Neutral, given the higher exposure to telecom carriers, the weakest sector in terms of technology purchasing. Charges in the quarter will total $26m-$30m, to cut some of its approximately 470 employees and in total to cut costs by 10%. Q1 sales will be flat to slightly down, the company said. The weakness in the last month among RBOCs and other carriers, in both Europe and North America, has been a huge drag, but the company said it's seen "no change in its win rate" among customers. Manufacturing is completely outsourced to Flextronics [FLEX:Nasdaq], and on signs of any upturn the company said it will be ready to up production very quickly, despite the cost-cutting efforts. But the selling in Riverstone is characteristic of these times of paranoid investing. It has essentially wrapped up all its major sales to Qwest [Q:NYSE] prior to that company revising lower its capital spending plans (last quarter Qwest sales were under 10% of the total), and so it's very unlikely that Riverstone would factor into guidance any contributions from this company. And the SEC probe into fellow Cabletron [CS:NYSE] spin-off Enterasys [ETS:NYSE] has also impacted the stock; but Enterasys has said its Aprisma Management Technologies unit (network management software) is at the center of the probe, which suggests the problems are completely unrelated to Riverstone. As of 12/01, Riverstone had $298m in cash and short-term investments, versus $175m in long-term debt. In the conference call Thursday the company claimed over $400m in cash, so we believe the financial position is stable. Given the company's comments on its continued strength in selling to cable providers who are building out their metropolitan high-speed networks, its strength in Asia and particularly Korea, and the fact that it has not outright lost any major customers, we believe the second half of the year will see an improvement for Riverstone, which at these stock levels would be reason to rebound. Market Timing From the Technical Desk On Dec. 6, we said: "Riverstone Networks [RSTN: Nasdaq] is in an intermediate uptrend. It is currently consolidating in a rectangle with resistance at $18.75. A breakout here will take shares up to $20.25 in one to two months." Riverstone Networks hit our upside target of $20.25, but then crashed lower. On Feb 28, it gapped lower to a new all-time low intra-day. If it shows some sign of a recovery over the next few days, then we can expect a move up to $4.87 in two to four weeks. As of now though, the outlook remains negative. Shares are at $4.00. Risk Tolerance ****( Low risk, *****High risk)