Avanex Concerns Continue
"The Company’s recurring losses and negative cash flows from operations raise substantial doubt about the Company’s ability to continue as a going concern," auditors Deloitte & Touche USA LLP write in a note accompanying Avanex's 10-K filing, submitted to the SEC on Sept. 28. (See Avanex Files 10-K.)
A press release issued late Friday called attention to the statement. That might be what sent Avanex's stock reeling today, down $0.19 (20%) at $0.78 in late afternoon trading. As if on the other end of a pulley, shares for competitor Bookham shot up $0.53 (11%) to $5.41 late in the day.
Reeling from a continued slump in photonics, both companies are shifting some manufacturing efforts to Asia in an effort to lower costs. Along those lines, Avanex made strides in April by announcing cutbacks at its French facilities. (See Avanex Does a French Trim and Components Competition Is Killing.)
But they're racing against the clock, as persistent losses are eating into each company's cash reserves. Both companies admit they have to raise more money to keep rolling.
Avanex's 10-K lays out some of the numbers. For the three years ended June 30, Avanex's net losses totaled $335.4 million. Its cash flow from operations for the year ended June 30 was negative $82.9 million.
As of June 30, Avanex reported cash and equivalents of roughly $74 million.
Avanex recently saw its CFO depart after just five months on the job, and its sub-$1 stock price attracted a warning from Nasdaq. On the plus side, Corning Inc. (NYSE: GLW) appears ready to sell off the Avanex shares it acquired when Avanex purchased Corning's components business; analysts believe this could lighten up the doom cloud hovering over Avanex. (See Avanex CFO Leaves , Nasdaq Warns Avanex , and Corning May Sell Avanex Stake.)
Bookham has shown some signs of hope recently. But the company has to continue a feverish financial dance to stay upright. One recent deal involved a long-awaited sale of land in the U.K.; another particularly complicated exchange involved an aircraft-leasing operation acquired for tax benefits. (See Bookham Shows Signs of Recovery, Bookham Sells Land , and Bookham Bags $11.9M.)
— Craig Matsumoto, Senior Editor, Light Reading
I'm no accounting expert but some of these sound kind of important ... for example, there was insufficient control over tracking inventory at one facility. Deloitte notes that this could lead to misstated financials. (They are NOT saying this happened; in fact, they've signed off on AVNX's 2005 financials. They're just pointing out that improper inventory control can be, well, bad.)
That might be a clue why the new CFO left so quickly.