Light Reading
After five years of ups and downs, the optical switch supplier is mulling its options -- and may turn out the lights

Will Sycamore Call It a Day?

Light Reading
News Analysis
Light Reading
2/11/2005
50%
50%

Optical switch supplier Sycamore Networks Inc. (Nasdaq: SCMR) is known to be looking for an out. But what will the company's fate be when it finally scores a buyer for its customers, support contracts, products, and intellectual property -- or any combination thereof? The question hangs in the air as a source close to the company tells Light Reading that once Sycamore unloads some parts of its business, its plan is to buy its stock back from shareholders and close up shop for good.

Light Reading can't immediately confirm the claim, but, regarding Sycamore's eventual fate, almost nothing would be too far-fetched.

The significance here is that Sycamore is the very definition of a company that has never lived up to its potential. The company continues to frustrate, because it has an asset that every telecom company needs -- cash -- and it doesn't appear to be doing anything with it. The company had cash, cash equivalents, and investments totaling about $958 million as of October 30, 2004. More than $201 million of that was pure cash and cash equivalents. The company has been on a wild ride, to be sure. At the turn of the century the Chelmsford, Mass.-based company was a rising star in a hot optical equipment market. Sycamore's revenues peaked at $149.2 million at the beginning of 2001, with net income of $13.8 million. But roughly 15 months after the company's IPO in 1999, the telecom capex spending slump set in, and Sycamore's revenues fell. Hard. The company never recovered -- by the fourth quarter of 2004 it had lost a cumulative $788.9 million -- and now, just four years later, it could finally be closing time (see What's to Save Sycamore?).

But, as stated, almost no Sycamore exit strategy is beyond the pale.

In fact, another well placed source says that Sycamore chased at least two end-game plans in the past year or so. The first plan: Sycamore would sell its hardware line, acquire an OSS company, and morph into a telecom software supplier. The second plan: Sycamore would acquire a telecom product line in a "growth" segment of the market, with the primary requirement being that it already have an existing revenue stream. Sycamore, which reports earnings on February 22, declined to comment on its strategic options.

What is well known is that Sycamore has hired some eyes and ears. Several months ago, it brought in Morgan Stanley to assist "in the review of strategic and financial alternatives for our company,” according to its SEC filings. Sycamore confirms that the investment bank is still on retainer.

The company reveals in its SEC filings that it would consider selling itself; merging with or acquiring another company; remaining a standalone company; or "recapitalization alternatives, including stock buybacks and cash distributions."

Sycamore has several marquee customers, including Sprint Corp. (NYSE: FON), Vodafone Group plc (NYSE: VOD), and the U.S. Military, but it is still putting up relatively small revenue numbers (see Sycamore Signs Sprint, Seeks Help). And, for the first fiscal quarter of 2005, a large chunk of its revenues -- 37 percent -- were tied to the Defense Information Systems Agency's Global Information Grid Bandwidth Expansion (GIG-BE) project (see GIG-BE Winners Named). "Last quarter their revenues were $14 million, their cost of goods was $8 million, and their operating costs were $17 million -- and that’s in a quarter where they had 78 percent revenue growth -- so you do the math,” notes Argus Research Co. analyst Jim Kelleher. “They are a mile from profitability, and the longer they stick around, the longer they burn cash.”

— Mark Sullivan, Reporter, Light Reading

(63)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View
Page 1 / 7   >   >>
optodoofus
50%
50%
optodoofus,
User Rank: Light Beer
12/5/2012 | 3:26:57 AM
re: Will Sycamore Call It a Day?
Sycamore's sales would probably pick up if they hired some sales people. Last I heard, they had one sales person covering North America, all the rest either having quit or been fired (giving them an impressive ratio of one sales VP per sales person). If Sycamore is not interested in increasing revenues, they should at least fire the remaining sales dregs and cut their burn rate. I'm sure that their sales VP could parlay his performance at Sycamore into any number of choice oportunities elsewhere.
BB
50%
50%
BB,
User Rank: Light Beer
12/5/2012 | 3:26:56 AM
re: Will Sycamore Call It a Day?
for holdings < 1 yr are you taxed at income rate for each transaction (for same stock) or are you taxed at income rate over the total gains

eg.. sell google *3 /yr... taxed on each individual sale.. or taxed one time for total gain?
Theologian
50%
50%
Theologian,
User Rank: Light Beer
12/5/2012 | 3:26:55 AM
re: Will Sycamore Call It a Day?
If they truly have $1B in cash+ or $0.2B in straight cash, aren't they an obvious extra few quarters of life for Bookham (or Avanex)...?

Not that either company would buy acquire someone else just for their cash.

Theo.
OptixCal
50%
50%
OptixCal,
User Rank: Light Beer
12/5/2012 | 3:26:55 AM
re: Will Sycamore Call It a Day?
Wow,
As an early supporter of Sycamore, from visits while they were in their VC offices, to their different moves to larger and bigger campusses, I'm saddened to see this happen. I was with them on their wild ride, and know some of the founders. I guess nothing lasts forever, but this one is particularly painful.
DZED
50%
50%
DZED,
User Rank: Light Beer
12/5/2012 | 3:26:53 AM
re: Will Sycamore Call It a Day?
Not sure how Bookham could get its hands on Sycamore's money, I guess Sycamore could acquire Bookham though. The Bookham execs are desparate to get out and get their payoffs so maybe they'll go for it.

However, if one mismanaged loss making company were to merge with another mismanaged loss making company it would just be a bigger loss making mismanaged company.

I've been wondering, is there a team of execs anywhere in opto who know what they are doing?
And where are the company directors in all of these dodgy outfits? don't they have some responsibility to shareholders?
ATMRules
50%
50%
ATMRules,
User Rank: Light Beer
12/5/2012 | 3:26:52 AM
re: Will Sycamore Call It a Day?
Was one of the original 100 sycamore employees, then again I would probably have left after I dumped enough of my shares at pennies when it was trading for $150 + / - 6 months after IPO...wonder how many of the original 100 are still there......

Just Do it already......
dogmeat
50%
50%
dogmeat,
User Rank: Light Beer
12/5/2012 | 3:26:52 AM
re: Will Sycamore Call It a Day?
Cosine and Copper Mountain shareholders agree that Tut is the solution for Tech Zombies with cash in the bank...
ThurstonHowell3rd
50%
50%
ThurstonHowell3rd,
User Rank: Light Beer
12/5/2012 | 3:26:52 AM
re: Will Sycamore Call It a Day?
You Wrote - "I'm sure that their sales VP could parlay his performance at Sycamore into any number of choice opportunities elsewhere."

Ohhh how true Gilligan my boy! I understand his track record is truly littered with just endless numbers of achievements... with that head of hair - all he needs is a cravat and a dickey and he'll be all set.

Now go fetch me a drink my boy and DON'T forget the umbrella !!!
gzkom
50%
50%
gzkom,
User Rank: Light Beer
12/5/2012 | 3:26:52 AM
re: Will Sycamore Call It a Day?
Broadwing has 18,000 mile OOO networks, Focal, and 120,000 customers in 23 markets with near $100million net cash in the bank, and some IP and a few patents (really).

Sycamore can buy Broadwing (market cap $327 million) twice and over with their cash.

ThurstonHowell3rd
50%
50%
ThurstonHowell3rd,
User Rank: Light Beer
12/5/2012 | 3:26:51 AM
re: Will Sycamore Call It a Day?
And do what with it?
Page 1 / 7   >   >>
Flash Poll
From The Founder
It's clear to me that the communications industry is divided into two types of people, and only one is living in the real world.
LRTV Custom TV
Using Service Quality to Drive WiFi Monetization

10|22|14   |   6:51   |   (0) comments


Live from the SCTE conference: Heavy Reading's Alan Breznick explores the forces shaping the WiFi opportunity in an interview with CableLabs' Justin Colwell and Amdocs' Ken Roulier.
LRTV Custom TV
Distributed Access Architectures – 2

10|21|14   |   8:51:00 AM   |   (0) comments


ARRIS CTO Network Solutions Tom Cloonan discusses why many if not most MSOs will continue with integrated CCAP, while addressing why some are also looking at two futuristic, distributed access architectures: Remote PHY and Remote CCAP.
LRTV Custom TV
Distributed Access Architectures – 1

10|21|14   |   9:01   |   (0) comments


SCTE Sr. Director of Engineering Dean Stoneback discusses the pros and cons of distributed access architecture (DAA) and its various forms, which range from basic Remote PHY to full CMTS functionality in the node.
LRTV Custom TV
The WiFi Road to Riches – 2

10|21|14   |   3:58   |   (0) comments


ARRIS Senior Solution Architect Eli Baruch talks about how MSOs can enable public and community WiFi through 1) outdoor access points, 2) businesses seeking to offer WiFi to customers, and 3) residential WiFi gateway extensions.
LRTV Custom TV
The WiFi Road to Riches – 1

10|21|14   |   10:15   |   (0) comments


SCTE Director of Advanced Technologies Steve Harris discusses WiFi deployments, drivers, challenges and advances, including 802.11ac, carrier-grade WiFi, community WiFi, Hotspot 2.0, Passpoint, WiFi-First and voice-over-WiFi.
LRTV Custom TV
Advantech Accelerates 100G Traffic Handling

10|17|14   |   7:56   |   (0) comments


Paul Stevens from Advantech explains why handling 100GbE needs a whole new platform design approach and how Advantech is addressing the needs of equipment providers and carriers to give them the flexibility and performance they will need for SDN and NFV deployment.
LRTV Huawei Video Resource Center
Holland's Imtech Traffic & Infra Discusses Huawei's ICT Solution and Services

10|16|14   |   4:49   |   (0) comments


Dimitry Theebe is from the business unit at Imtech Traffic & Infra which delivers communications solutions for transportations. His partnershp with Huawei began about a years ago. In this video, Theebe speaks more about this partnership and what he hopes to accomplish with Huawei.
LRTV Huawei Video Resource Center
Huawei's Comprehensive Storage Solutions Vital for SVR

10|16|14   |   6:16   |   (0) comments


SVR Information Technology provides cloud services for academic and special sectors. With Huawei's support, SVR and Yildiz Technical University has established Turkey's largest and most advanced High Performance Computing system. CSO Ismail Cem Aslan talks about what he hopes Huawei's OceanStor storage system will bring for him.
LRTV Huawei Video Resource Center
Mexico's Servitron's Impression of Huawei at CCW 2014

10|16|14   |   6:35   |   (0) comments


Servitron is a network operator in Mexico that has been in the trunking industry for the past 20 years. Its COO, Ing. Ragnar Trillo O., explains at Critical Communications World 2014 that his company has been interested in the long-term evolution of LTE technology and its adoption for TETRA.
LRTV Huawei Video Resource Center
Building a Better Dubai

10|16|14   |   2:06   |   (0) comments


Abdulla Ahmed Al Falasi is the director of commercial affairs, a telecommunications coordinator for the government of Dubai. Their areas of service span across multiple industries, including police, safety, shopping malls and more. In this video, Abdulla talks about his department's work with Huawei.
LRTV Huawei Video Resource Center
Huawei Lights Up Malaysia Partner Maju Nusa

10|16|14   |   1:59   |   (0) comments


Malaysia's Maju Nusa is an enterprise partner to Huawei in networking, route switches and telco equipment. At this year's Critical Communications World in Singapore, CTO Pushpender Singh talks about what Huawei's eLTE solutions mean to his company and for Malaysia.
LRTV Custom TV
Evolving From HFC to FTTH Networks

10|15|14   |   2:19   |   (0) comments


Cisco's Todd McCrum delves into the future of cable's HFC plant, examining how DOCSIS 3.1 and advanced video compression will extend its life and how the IP video transition will usher in GPON and EPON over FTTH.
Upcoming Live Events
October 29, 2014, New York City
November 6, 2014, Santa Clara
November 11, 2014, Atlanta, GA
December 2, 2014, New York City
December 3, 2014, New York City
December 9-10, 2014, Reykjavik, Iceland
February 10, 2015, Atlanta, GA
June 9-10, 2015, Chicago, IL
Infographics
WhoIsHostingThis.com presents six of the world's most extreme WiFi hotspots, enabling the most epic selfies you can imagine.
Hot Topics
Analysts Warn of Major NFV Gaps
Carol Wilson, Editor-at-large, 10/22/2014
Is Health the Killer App for the IoT?
Jason Meyers, Senior Editor, Gigabit Cities/IoT, 10/22/2014
Drones Hover Over the IoT Sector
Jason Meyers, Senior Editor, Gigabit Cities/IoT, 10/23/2014
The Human Gain of the Smart Home
Robin Mersh, 10/20/2014
Zayo Zooms Out of the IPO Gate
Dan O'Shea, Managing Editor, 10/17/2014
Like Us on Facebook
Twitter Feed