Copper Mountain Runs Dry

Copper Mountain Networks Inc. (Nasdaq: CMTN) announced late Friday it will lay off nearly all employees by March 22, an attempt to save "stockholder value" while pursuing options such as a sale of the company (see Copper Mountain Cuts Staff).

The news sent shares of the broadband remote access server (B-RAS) vendor tumbling 73 cents (37.8%) to $1.20 in after-hours trading Friday. Company officials could not be reached during the weekend for comment, but judging from the press release, they wouldn't say much anyway. "Copper Mountain does not intend to make any additional comments regarding such exploration [of strategic alternatives] unless and until developments warrant further disclosure," the release reads.

The company is following the lead of CoSine Communications Inc. (Nasdaq: COSN), which announced in September a plan to cut substantially all staff while trying to negotiate a sale of the company. Earlier this month, Tut Systems Inc. (Nasdaq: TUTS) agreed to acquire CoSine, with executives admitting they were mainly after CoSine's $22.75 million in cash (see CoSine Cuts to the Bone and Tut Takes On CoSine).

Copper Mountain won't provide as rich a haul. SEC submissions show the company had $9.1 million in cash and another $8 million in short-term investments in September, down from $11.1 million cash and $16.5 million in short-term investments a year ago.

Table 1: Copper Mountain's Cash and Short-Term Investments ($M)
Sept. 2004 June 2004 Mar. 2004 Dec. 2003 Sept. 2003
17.1 22.0 17.3 23.0 27.6
Source: SEC documents

At $1.20 a share, Copper Mountain's market capitalization would be around $9.6 million.

In September, Copper Mountain announced it had hired Raymond James & Associates Inc. to pursue a possible sale of the company or similar strategic alternatives. The company's struggles, including the delay of a carrier's broadband upgrade project, drove Copper Mountain's stock down in the last half of 2004, resulting in a 74 percent drop for the year (see Struggling B-RAS Vendor for Sale and 2004 Top Ten: Stock Gains & Pains).

For its third quarter, which ended Sept. 30, Copper Mountain reported losses of $3.6 million, or 51 cents per share, on revenues of $1.8 million, compared with losses of $5.7 million, 88 cents per share, on revenues of $2.1 million for the previous quarter (see Copper Mountain Reports Q3). For its third quarter a year ago, Copper Mountain reported losses of $2.3 million, 40 cents per share, on revenues of $3.7 million.

Copper Mountain's last profitable year was 2000, when it reported revenues of $282 million and profits of $1.7 million, or 33 cents per share.

— Craig Matsumoto, Senior Editor, Light Reading

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