Optical/IP Networks

Digital Lightwave Dims

Digital Lightwave Inc. (Nasdaq: DIGL), a maker of fiber optic networking test gear, late yesterday afternoon announced financial results for the third quarter ended September 30, 2001 (see Digital Lightwave Reports on Q3).

Third-quarter revenues fell sharply to $8.4 million from $34.5 million in the previous quarter. The pro forma net loss (excluding charges) was $3.0 million, or ($0.10) per share, compared to net income of $9.3 million, or $0.28 per share, in the prior quarter and net income of $5.0 million, or $0.15 per share, in the year-ago period. Actual net loss (as opposed to pro forma) included charges of $1.0 million for inventory provisions and a $700,000 charge for doubtful accounts allowance (an accounts receivable reserve).

The management had warned of the drastic revenue shortfall two weeks ago (see Digital Lightwave Lowers Its Sights). Citing a severe decline in business conditions, management says it will not provide financial guidance until visibility begins to improve.

Digital Lightwave also announced that CFO Steven Grant has left the company to pursue other opportunities.

Management predictably blamed some of the shortfall on the damaging effects of September 11, in conjunction with a previously tight capital spending environment. With roughly 80 percent of quarterly revenues booked and shipped in a short time horizon (e.g., within a month or so), the company was vulnerable to a slowdown late in a quarter. This latter scenario appears to be at work here, according to CEO Gerry Chastelet. Chastelet claimed that customers became especially conservative after August 31, which caused a large number of orders to be deferred.

— Chris Bulkey, research analyst, Light Reading
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