Sorrento Sees Revenue Slowdown
Sorrento Networks Corp.'s (Nasdaq: FIBR) shares dropped 0.59 (12%) to 4.22 in early afternoon trading Tuesday on news that the company is expecting a revenue slowdown for its second fiscal quarter of 2002.
Sorrento's stock has lost 32 percent of its value in the past four weeks, despite the recent news that it's secured $32 million in additional funding (see Sorrento Fuels Up).
The metropolitan DWDM equipment maker, citing, of course, a challenging economy, says it now expects revenues for the period ended July 31, 2001, to be $8 million. That's 50 percent better than the year-ago period, but 45 percent worse than its results for its previous fiscal quarter.
The company also notes that it anticipates shipping about $2.4 million worth of gear in the second quarter, revenues that will be recognized later in the year.
Last quarter, Sorrento reported revenues of $13.1 million, the highest in its history. Then it seemed that, though the equipment spending slowdown was hitting its larger competitors hard, Sorrento would skate by without many scratches thanks to its smaller size and tighter product focus.
Indeed, investors perked up when Sorrento received its most recent funding infusion. This funding was seen as paving the way for Sorrento to land some big carrier contracts that it is said to be working on.
Sorrento, however, hasn't been able to subsequently impress those that had been bullish about its prospects. For a company that boasts great technology and more than 20 large and diverse customers -- including incumbents such as Deutsche Telekom AG (NYSE: DT), cable operators such as Cox Communications Inc. (NYSE: COX), and utility giants such as El Paso Global Networks -- Sorrento's revenues and market share lag well behind its peers.
In 2000, Sorrento held 5 percent of the $331 million market for metro DWDM gear, as measured by revenues coming from service providers, according to IDC's optical networking analyst Sterling Perrin. Sorrento competitors such as Nortel Networks Corp. (NYSE/Toronto: NT), Ciena Corp. (Nasdaq: CIEN), and ONI Systems Inc. (Nasdaq: ONIS) towered over it with 47 percent, 20 percent, and 18 percent of the market, respectively, he says.
Sorrento booked $44.64 million in revenues for the year ended January 31, 2001, which was a more comfortable economic period than the current fiscal year. So far this year, Sorrento has required almost as much money in new funding -- $42 million -- to keep its business afloat. Given that Sorrento is worth about $60.4 million, the pressure on its managers to perform is growing as its revenues are slowing.
The company will report its complete second-quarter results on September 5.
- Phil Harvey, Senior Editor, Light Reading