Riverstone Networks Reports Record First Quarter Results; Revenues Grow 26 Percent Sequentially to $44.2 Million; Company Reports Pro Forma Net Loss of $0.03 Per Share.

Business Editors and High Tech Writers

SANTA CLARA, Calif.--(BUSINESS WIRE)--June 20, 2001

Riverstone Networks Inc., (Nasdaq: RSTN) today reported for the quarter ended June 2, 2001, revenues of $44.2 million, a 180 percent increase compared with revenues of $15.8 million for the same period last year, and a 26 percent increase compared with revenues of $35.1 million for the prior quarter.

Pro forma net loss for the quarter, which excludes stock-based compensation and amortization of goodwill, was $3.6 million or $0.03 per share, compared with pro forma net loss of $11.7 million, or $0.13 per share for the first quarter of fiscal 2001, and pro forma net loss of $5.5 million, or $0.06 per share for the prior quarter. Including these items, net loss for the first quarter was $4.7 million, or $0.04 per share. This compares with a net loss of $12.5 million, or $0.14 per share for the first quarter of fiscal 2001.

"Our strong first quarter results demonstrate our success in continuing to design, build and deliver best in class, service-enabling routers for the rapidly growing Metropolitan Area Network market worldwide," said Romulus Pereira, president and chief executive officer of Riverstone Networks. "Testament to the strength of our technology is the growing list of carriers using Riverstone's equipment to enable the delivery of profitable services. Our customers include major global carriers such as British Telecommunications, Japan Telecom, Qwest Communications, Retevision, Saritel, Telia, Time Warner Telecom and UUNet."

"While many segments of the global communications market have softened, we continue to see healthy demand from carriers for equipment that allows them to fully leverage their already substantial network investments and increase returns. Riverstone's ability to help carriers convert raw bandwidth into profitable services over next-generation and existing networks positions us well both for today's environment and for the future," added Pereira.

First Quarter Highlights

-- Demand for intelligent bandwidth continues in Metro markets worldwide.
Carriers and service providers worldwide continue to select Riverstone for
their Metro deployments. During the first quarter Riverstone's service-enabling
network solutions were chosen by British Telecommunications, Cox
Communications, Qwest Communicaitons, Retevision, Telia and Videotron, among
others.

-- New partnership accelerates penetration of Chinese Metro market. In the
first quarter, Riverstone formed a strategic partnership with ZTE Corporation,
one of the leading telecommunications equipment manufacturers in China, to
better meet the demand in China for intelligent bandwidth services. This OEM
relationship accelerates Riverstone's penetration of the Chinese Metro market,
which is among the fastest-growing Metropolitan opportunities in the world.

-- Product line expands to include high-density Gigabit Ethernet aggregation
router. In response to, and designed specifically for the needs of the
fast-growing Gigabit Ethernet and 10 Gigabit Ethernet markets, Riverstone
introduced the RS 16000, a high density Metro aggregation router with the
ability to deliver 540-Gigabit Ethernet ports, nearly twice the density of any
other competitor.

-- Lead in technology strengthens with the introduction of MPLS. Riverstone in
the first quarter established itself as a leader in Metro optimized Multi
Protocol Label Switching (MPLS) by shipping a new programmable hardware
architecture designed to deliver flexible wire-speed MPLS services.
Riverstone's customers are using MPLS to create value-added services such as
transparent LAN services, leased line services and nationwide Layer-2 VPNs.

Conference Call Scheduled for June 20

Riverstone Networks will be holding a conference call to discuss its first quarter results and its business outlook at 5:00 p.m. EDT on June 20, 2001. Investors can listen to the conference call on the Internet at http://ir.riverstonenet.com. To listen to the live call, go to the Web site at least fifteen minutes prior to the start time to download and install necessary audio software. For those unable to listen to the live broadcast, 48-hour replay will be available one hour after the conclusion of the call at http://ir.riverstonenet.com and at [phone], reservation number 19052624.

About Riverstone Networks

Riverstone Networks, Inc., (Nasdaq:RSTN) builds routers that convert raw bandwidth into profitable services for Metropolitan Area Networks. Riverstone's products enable the creation of profitable services and the delivery of these services over next-generation and legacy networks, including SONET/SDH, Gigabit Ethernet, T1/E1, T3/E3, ATM and Dense Wavelength Division Multiplexing (DWDM). Riverstone products bring together fourth-generation Application Specific Integrated Circuits (ASICs), battle-tested routing software, and unparalleled media versatility to deliver comprehensive solutions for Metropolitan Area Networks. Riverstone's products are deployed in more than 40 countries and in some of the world's largest networks, including British Telecommunications, Genuity, MCI WorldCom, MAE West Ames, EarthLink, NTT, and Telefonica. For more information, please visit the company's Web site at www.riverstonenet.com.

Cautionary Note Regarding Forward-looking Statements 

Except for the historical information contained herein, the matters set forth in this press release, including statements as to execution in the metropolitan area network, the demand for Riverstone equipment, the ability for Riverstone to deliver service-enabling solutions and Riverstone's position for future success, are forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements speak only as of the date hereof and are subject to risks and uncertainties that may cause actual results to differ materially. These risks and uncertainties include risks associated with the market for network equipment; risks associated with rapid technological change; lack of acceptance of products; introduction of new products by competitors; declines in the average selling price of Riverstone Networks' products; and adverse economic conditions in any of the major countries in which Riverstone Networks does business. Further information on potential risk factors that could affect the financial results of Riverstone Networks are included in its annual report on Form 10-K dated March 3, 2001, filed with the Securities and Exchange Commission. Riverstone Networks disclaims any intent or obligation to update or revise these forward-looking statements.

Note to Editors: Riverstone Networks is a trademark of Riverstone Networks, Inc. All other trademarks, service marks, and trade names belong to their respective owners.

                       RIVERSTONE NETWORKS, INC.
            PROFORMA CONSOLIDATED STATEMENTS OF OPERATIONS
    Excluding amortization of goodwill and stock-based compensation
     (In thousands, except share and per-share amounts, unaudited)

                                               Three months ended
                                           June 2,             June 3,
                                            2001                2000

NET REVENUES                               44,167              15,778
Cost of revenues                           19,071               7,271
GROSS PROFIT                               25,096               8,507
Operating expenses:
Research and development                   13,286              10,177
Sales and marketing                        13,097               7,295
General and administrative                  4,649               2,766
Total operating expenses                   31,032              20,238
OPERATING LOSS                             (5,936)            (11,731)
Interest expense/(income), net             (2,300)                  4
NET LOSS                                   (3,636)            (11,735)
Net loss per share--basic and diluted       (0.03)           (117,350)
Shares used in per-share calculation
 --basic and diluted                  107,490,000                 100
Pro forma net loss per share
 --basic and diluted                        (0.03)              (0.13)
Pro forma weighted number of shares
 used in per-share calculation
 --basic and diluted                  107,490,000          92,088,000

      The above pro forma amounts have been adjusted to exclude the
following items:
Amortization of goodwill                      388                 515
Stock-based compensation                      685                 263


                       RIVERSTONE NETWORKS, INC.
                 CONSOLIDATED STATEMENTS OF OPERATIONS
     (In thousands, except share and per-share amounts, unaudited)

                                               Three months ended
                                          June 2,             June 3,
                                            2001                2000

NET REVENUES                               44,167              15,778
Cost of revenues                           19,071               7,271
Stock-based compensation                       93                   -
Total cost of revenues                     19,164               7,271
GROSS PROFIT                               25,003               8,507
Operating expenses:
Research and development                   13,286              10,177
Sales and marketing                        13,097               7,295
General and administrative                  5,037               3,281
Stock-based compensation                      592                 263
Total operating expenses                   32,012              21,016
OPERATING LOSS                             (7,009)            (12,509)
Interest expense/(income), net             (2,300)                  4
NET LOSS                                   (4,709)            (12,513)
Net loss per share--basic and diluted       (0.04)           (125,130)
Shares used in per-share calculation
 --basic and diluted                  107,490,000                 100
Pro forma net loss per share
 --basic and diluted                        (0.04)              (0.14)
Pro forma weighted number of shares used
 in per-share calculation
 --basic and diluted                  107,490,000          92,088,000


                       RIVERSTONE NETWORKS, INC.
                 CONDENSED CONSOLIDATED BALANCE SHEET
                       (In thousands, unaudited)

                                           June 2,            March 3,
                                            2001                2001
ASSETS
Current Assets:
Cash and cash equivalents                  70,296             167,949
Short-term investments                    105,824              21,540
Accounts receivable, net                   28,039              29,891
Accounts receivable, related parties           95               1,241
Inventories, net                           13,575              11,169
Prepaid expenses and other
 current assets                            12,918               9,758
Total current assets                      230,747             241,548
Property and equipment, net                17,728              14,020
Goodwill and other
 long term assets, net                      8,487               8,475
TOTAL ASSETS                              256,962             264,043

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable                           17,543              19,931
Accounts payable, related parties               -               4,583
Deferred revenue                            6,790              10,550
Accrued Expenses                           13,255              10,197
TOTAL LIABILITIES                          37,588              45,261
Stockholders' equity                      219,374             218,782

LIABILITIES AND STOCKHOLDERS' EQUITY      256,962             264,043