Earnings reports

ADVA Earnings: Few Surprises

Metro DWDM maker ADVA AG Optical Networking (Frankfurt: ADV) says its third-quarter revenues have dropped about 5.5 percent from a year ago, thanks to a slowing economy. Overall, though, its revenues are relatively stable, considering that the size of the market is shrinking.

The company was within analysts' expectations with US$21.6 million for its quarter ended September 30, compared to $22.8 million during the year-ago quarter. For the first nine months of 2002, ADVA reported revenues of $64.6 million, up slightly from $64.5 million during the year-ago period.

Meanwhile, the market ADVA competes in has shrunk 35 percent since the fourth quarter of 2001 -- from $165.5 million to $108.4 million, according to Dell'Oro Group.

Highlights during the quarter included last week's announcement of three new customers, thanks to resellers and OEMs (see ADVA Holds Its Own).

Including one-time charges, ADVA reported an operating loss of $100,000 for the third quarter, compared to a loss of $92.4 million during the third quarter of 2001 -- a loss that came from ADVA closing its Cambridge, U.K., facility.

For the nine-month period ending September 30, ADVA posted an actual net loss of about $5.3 million, compared to $104.7 million during the year-ago period.

One noteworthy item is that ADVA improved gross margins to 47 percent from 40.8 percent in a single quarter. ADVA management attributed the change to better operating efficiencies, but the swing still caught some off guard.

"That was a real surprise," says Marcus Hall, an analyst with Morgan Stanley Dean Witter & Co. in London. "We're still scratching our heads over that one. Given the segment they're in, I'd expect that number to come down in the future."

ADVA expects its fourth-quarter revenues to be stable as well, though it gave a wider range of $20 million to $25 million.

ADVA's stock climbed €0.18 (9%) to €2.10 in late afternoon trading on the Frankfurt Stock Exchange Tuesday.

— Phil Harvey, Senior Editor, Light Reading
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