Dude, Where's My Revenues?

Did they miss a decimal point?

Tellium Inc.'s (Nasdaq: TELM) shares dropped 40 percent on Monday after the company warned late on Friday that it expects to report revenues of only $3 million for the second quarter of 2002 (see Tellium Preannounces Q2 Results), a small fraction of the $20 million to $30 million in anticipated revenue that Wall Street analysts had in their spreadsheets.

The company brought in $54.1 million in the first quarter of this year, ended March 31.

The announcement was made quietly after the market closed on Friday. The news came just a week after Tellium laid off 37 percent of its staff, an event from which CEO Harry Carr was absent (see Tellium Wields the Axe and Dude, Where's My Carr?).

In midday trading the stock was down $0.34 (36.56%) to $0.59. This is a far cry from the company’s closing price of $20.93 the day it went public on May 17, 2001 (see Market Gives Tellium a High Five).

The shortfall in the company’s revenues was anticipated -- yet the scale of the miss almost certainly was not. Light Reading reported last week that revenues were expected to be significantly less than first predicted by Wall Street (see Dude, Where's My Carr?). Rick Schafer of CIBC World Markets and Nikos Theodosopoulos of UBS Warburg had both previously stated that they expected revenues to be about $30 million for the quarter. Other analysts like Hasan Imam of Thomas Weisel Partners had anticipated revenues of $15 million. First Call consensus was about $21.58 million.

Tellium also said in its release that it expects loss per share on a pro forma cash basis to be $0.38 to $0.42, after two prior quarters of positive pro forma cash earnings per share. This is a much larger loss than First Call’s estimated loss of $0.12 per share.

In Friday's statement, the company attributed the massive shortfall to the “continued deteriorating conditions in the telecommunications industry." The company has been unable to win new customers, and its existing customers are cutting back. For example, Qwest Communications International Inc. (NYSE: Q) and Dynegy Inc. (NYSE: DYN), which accounted for most of the company’s revenues in the past few quarters, came in extremely weak in this quarter. Qwest has delayed many of its projects while Dynegy has finished its U.S. network deployment.

While analysts covering the company have all reduced their estimates as a result of Friday’s announcement, most of them still seem optimistic about the company’s eventual recovery. This shouldn’t be too surprising, given the fact that five of the eight research analyst firms covering the company also helped underwrite its IPO last year. Morgan Stanley Dean Witter & Co. and Thomas Weisel Partners were both lead underwriters, while UBS Warburg, CIBC, and Wit Soundview all took part.

In a research note published this morning, Schafer of CIBC lowered 2002 estimates to $63 million from $129 million. He also dropped 2003 estimates to $30 million from $160 million.

Theodosopoulos of UBS Warburg lowered his estimate for Tellium's revenue to $67 million from $138 million for 2002 and to $44 million from $123 million for 2003. He also widened estimates for Tellium's cash loss per share to $0.65 from $0.30 for 2002 and to $0.63 from $0.20 for 2003.

Despite the bleak outlook, both of these analysts maintained their “Hold” rating on the stock, pointing to the company’s recent job cuts as a positive step forward.

“We applaud TELM's pro-active approach to rationalizing expenses to match market realities. Despite trading at 30 percent-plus discount to cash ($205 million), however, we expect the shares should continue to languish -- along with carrier capex -- over the next several quarters,” writes Schafer.

Tellium reports that it expects to have $205 million in cash at the end of the second quarter. The company will officially report earnings on July 24th and expects to give third-quarter guidance at that time.

— Marguerite Reardon, Senior Editor, Light Reading
no_light 12/4/2012 | 10:10:44 PM
re: Dude, Where's My Revenues? Just 2 months ago, at the quarterly conference,
Mr. Carr reaffirmed the guidance ($50 mil),
now what, 3 mil!!! Is Carr a cheater ?
Titanic Optics 12/4/2012 | 10:10:43 PM
re: Dude, Where's My Revenues? A list of companies trading below the value of their cash:
New Focus

Trading near their cash levels (capitalization within 10% of cash amounts)

lightdimming 12/4/2012 | 10:10:37 PM
re: Dude, Where's My Revenues? Anyone know the burn rate and cash amount of these companies? Just want to estimate if these companies can last until 2005.
BobbyMax 12/4/2012 | 10:10:36 PM
re: Dude, Where's My Revenues? Tellium is so much in trouble that it would be hard for them to survive. It will be hard for them to raise any money in the open market. There is not enough value in the company's product. so any chaces of it being acquired by any is almost zero.

The management would be able to draw salaries for a few months. May they can drum up severance pay package for themselves. The workers were fired so that the management can pay itself.

May God help America.
twistedcopper 12/4/2012 | 10:10:32 PM
re: Dude, Where's My Revenues? TELM still has almost a $billion in backorders... down quarters happen. this is one company worth a little patience.... c&w hasn't even started buying switches yet. aren't they closing a deal with DT soon also? harry carr will pull TELM through this chaos. we're in for a serious recovery after this quarter. have a little faith!
ivehadit 12/4/2012 | 10:10:32 PM
re: Dude, Where's My Revenues? a billion $ in back orders for a market thats sized around 500M this year (including sts-1 grooming switches) is quite an overstatement.

i guess optimism still runs rampant in optical networking.
billy_fold 12/4/2012 | 10:10:31 PM
re: Dude, Where's My Revenues? How's Harry going to pull 'em through if he's not around?

sigint 12/4/2012 | 10:10:30 PM
re: Dude, Where's My Revenues? twistedcopper:
harry carr will pull TELM through this chaos.

Once he has done that, will he re-employ the folks laid off last week ?
???? 12/4/2012 | 10:10:28 PM
re: Dude, Where's My Revenues? Harry pulled Yurie through and that was a sham too!
softsell 12/4/2012 | 10:10:20 PM
re: Dude, Where's My Revenues? Naive account executives (sales people) make mistakes regarding forecasting that is of the same magnitude as what Harry did. Harry is supposed to be a significantly more seasoned professional. How could he not have factored in risks associated with the pipeline of sales activities. So in sales lingo, you report the "factored" or risk adjusted sales opportunities. With a miss that big, looks like he just reported the total activities. That's a sales 101 mistake. I have NO confidence in Harry. If he's still at the helm, this company doomed.
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