It's been a full year since Avanex acquired the optical components divisions of Alcatel SA (NYSE: ALA; Paris: CGEP:PA) and Corning Inc. (NYSE: GLW), a deal nearly as complex as the one that sent Nomar to the Cubs last weekend (see Avanex to Buy Alcatel, Corning Units, Avanex Deal Reshapes Sector, and Avanex Closes Acquisitions).
Avanex celebrated the anniversary by reporting deep losses, but things are getting much better, CEO Walter Alessandrini told analysts yesterday.
For its fourth quarter ended June 30, Avanex reported losses of $21.6 million, or 15 cents a share, on revenues of $31.9 million. Analysts expected losses of 18 cents per share, according to Reuters Research (see Avanex Revenues Rise in Q4).
For the previous quarter, ended in March, Avanex reported losses of $41 million, or 29 cents a share, on revenues of $30.1 million. For the quarter ended in June 2003, before the acquisitions closed, Avanex reported losses of $6.6 million, or 10 cents a share, on revenues of $5.5 million.
For the first time in a while, Avanex noted that business looks good overall. Previous Avanex calls included good news that came from "sporadic" opportunities, as Alessandrini put it: big projects here and there that didn't add up to a true recovery. This time, he claims, "What we are seeing in the last week is really good news, coming really from across all our customer base."
Alessandrini projects revenues to increase 10 percent this quarter. That would put Avanex's September revenues at around $35.1 million, well above the $32.7 million predicted by analysts. The tone echoed JDS Uniphase Corp.'s (Nasdaq: JDSU; Toronto: JDU) optimistic earnings call last week (see JDSU Scores a Q4 Hit).
Analysts liked what they heard. "We think Avanex is solidly on the way to becoming profitable," writes John Harmon of Needham & Co. in a note issued this morning.
Even so, analysts still expect Avanex to lose money in fiscal 2005 -- 45 cents a share, by Harmon's estimate. In fact, that's larger than his previous estimate of 43 cents a share; the change is due to a reduction in gross-margin estimates.
The losses are still pretty big, and gross margins remain underwater, but Avanex has gone a long way towards cutting costs -- shifting some work to contract manufacturers, for example. It's been trimming employees as well, although its headcount may have stabilized. The company employs "more than 900" now, Alessandrini said; he reported it as "less than 1,000" back in May. The figure was 1,600 a year ago.
Avanex stock traded up 5 percent after hours yesterday, but it was down 8 cents to $2.96 by midday today.
— Craig Matsumoto, Senior Editor, Light Reading
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