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Optical/IP

Sycamore Slouches After Earnings

Is Wall Street trying just a little too much to get the goods on Sycamore Networks Inc.'s (Nasdaq: SCMR) potential deal to help build a federal government network?

It looks that way. One analyst, in the Q&A portion of last night's quarterly conference call, actually asked executives, "How penetrated are you to that opportunity?"

Unfortunate analyst diction aside, investors today reacted with disappointment to the company's fiscal fourth-quarter 2003 earnings report, issued last night. Shares dropped $0.32 (7%) to $4.07 in midday trading today.

The lack of news about the federal project referred to as GIG-BE certainly played a part in the disappointment. Speculation that Sycamore was a leading candidate to get a piece of the project had helped fuel a recent run-up in shares (see Analysts Narrow RFP Odds).

The call itself was a bit of a snoozer, with Sycamore executives spending a lot of time on arcane financial details about cutting losses and preserving cash (there was no word on whether employees had shunned furniture to work on Yoga mats).

The company still lost money, burning some $9 million in cash in the quarter. It reported $10.9 million in revenues, compared with $8.5 million for the fourth quarter of fiscal 2002. Net loss for the fourth quarter, on a generally accepted accounting principles (GAAP) basis, was $9.7 million or $0.04 per share, compared with a net loss of $73.5 million, or $0.28 per share, a year ago.

During the conference call, analysts vainly tried to glean details of the GIG-BE project.

Sycamore executives were mum on its prospects, downplaying hopes. “I wouldn’t read into it one way or another,” said Sycamore CEO Dan Smith, when asked if Sycamore’s relatively flat R&D spending meant it wasn't preparing to land the deal.

Smith said that Sycamore built products that were ready to use for any customer, and that it could sell its existing products for any such project.

Overall, executives gave the impression of a company continuing to buckle down for a rough ride. It continues to shed jobs, ending the quarter with roughly 330 heads, down about 30 from the prior quarter. It still has a bucket of cash and investments -- $995 million, according to the last tally -- and seems intent on keeping as much of that change as possible. ”Sycamore made progress in improving its financial performance and preserving its cash,” said Smith.

Preserving cash, at least for now, seems to be a major theme at the company. And if something is going on with GIG-BE, it's not ready to talk about it.

— R. Scott Raynovich, US Editor, Light Reading
http://www.lightreading.com
wilecoyote 12/4/2012 | 11:32:52 PM
re: Sycamore Slouches After Earnings So what is this guy doing to justify his pay check every month? They have as much money as Ciena for Christ's sake, and they're not making investments, signing partners, building new products, doing anything at all to re-tool for any kind of recovery. They are in no way competitive as a company and there's no excuse.

Dude, why don't you just retire? I hate seeing guys just coast when there are shareholders and employees counting on him to go to work and figure out how to enrich the shareholders and keep the employees employed.

He may be "sick of Mory" but at least Mory's working to make Zhone count. Sycamore doesn't count right now, balance sheet or no. Pisses me off.
ragnar 12/4/2012 | 11:32:50 PM
re: Sycamore Slouches After Earnings SCMR has had a relationship in various forms with Siemens for over 3 years......and not a nickel of revenue.

Yet, Siemens was able to secure a top market share position for Unisphere in Europe in a market space where they were basically clueless.

Why then has this relationship resulted in nothing more than additional R&D expense...not even a penny for eval and demo gear...in a space that is Siemens bread and butter.

How the hell can they not have SOMETHING going with DT at the very least. DT would buy a bag of s#%%#%t from Siemens as long as it had the Siemens label on it

Sitting in chelmsford and wondering what went wrong isn't going to get them out of the mess they're in.

If you have no legitimate direct sales force (team pasta doesn't count as legitimate)and your channels can't sell jack......what do you expect to happen...someone show up with a mercy PO cause you're nice folks?

Sell some boxes or sell the company....but someone sell something. Before long the "macroeconomic condition" excuse is going to go away, and SCMR will be exposed for having no addressable market.

Bottom line is they got their asses kicked a long time ago by Ciena and Lu (about the only ass Lu can kick)and the game's over!

Wake up, please and at least go beat up your channel partner for a PO and make it look like you have a chance.

Maybe Araldo can go figure that out while he's on his 3 week vacation.....

realdeal 12/4/2012 | 11:32:46 PM
re: Sycamore Slouches After Earnings Did the revenue come from the interest on the $900mil cash kitty or did it come from customers?

If the answer is customers, then who?

If the answer is interest, then how much revenue did they get from customers this quarter?
VolTrdr 12/4/2012 | 11:32:46 PM
re: Sycamore Slouches After Earnings Let's not be too hard on these guys. To this company's credit, they have made some hard decisions the last 2 1/2 years ever since 360 Networks, their bread & butter, led the charge of competitive carriers into bankruptcy. One by one, their other customers fell by the waste side (Storm Communications, Williams, Core Express, etc...). By mid 2001 the tone at this company changed from greenfield carriers armed with Sycamore technology were going to rule the marketplace to we need to focus our marketing efforts on incumbent carriers. The made the tough call to exit the transport business at the risk of pissing off the installed base and focused exclusively on switching. They made substantial progress with their switching line up over the last two years: integrated optics, OSMINE compliance, support for BLSR, integration with Siemens transport, and OIF UNI support (not sure how much of a factor this last one is going to be).

My impression of this company is that it's a good company with best-of-breed products and hard-working (albeit shell-shocked) employees that's just caught between a rock and a hard place. As far as investing in this company, I gave up when the stock rebounded to $3.75 and dumped all my shares (given I had owned these shares since early 2001, you can imagine how much money I lost, but, what the hell, might as well add to that tax loss carryforward). At least this company isn't guilty of the egregious self-dealing and maniupulation shown by management at TELM and CORV.

As far as GIGBE, I would take Dan Smith's comments on the call to mean that SCMR is in the runnnig but we're not counting our chickens before they hatch. I've been interested in an SN 16000 - CoreDirector bake off for some time, so it will be interesting to see who's going to win that portion of the contract and what the criteria for selection ulitimately is going to be.

As far as their cash hoarding, I don't blame them, though it's been speculated on LR that they were bidding for the ATM business of LU but couldn't come to terms on the price. As far as turning down and outright merger with Siemens, who could blame them at the price their stock would have fetched (net of cash) in a deal at that time. It's funny but the bulk of that cash hoard comes from a well-timed secondary offering in 2000 at the hefty price of $150 a share. As for opportunities at DT, I think LU announced that DT was the flagship customer for LambdaUnite when they introduced the product last year. Not sure if Sycamore can get in there as well as the other OEO vendor.

Last fall there was speculation that Telefonica, France Telecomm, and BT were dipping their toes into the optical switching market. The only one that came to fruition was the BT contract that Ciena won. Now I read that Sprint and MCI are looking to migrate their backbones to a mesh topology. I doubt if anything will come of that given the financial position of those two. My feeling is that when the smoke clears, the remaining service providers are going to be looking to partner with vendors with more than just a best-of-breed optical switching portfolio. Who knows?
lightblender 12/4/2012 | 11:32:40 PM
re: Sycamore Slouches After Earnings So these new improved sales guys have been around for a good part of a year and they have done jack s***.

Reason clear if you look at araldo's bio. No success anywhere except cisco. Well a rising tide raises all boats, even ones with holes in them.
optiplayer 12/4/2012 | 11:32:39 PM
re: Sycamore Slouches After Earnings Interest and/or capital gains (losses) do not show up on an Income Statement (i.e. they do not count as revenue). They would only show up on a Cash Flow statement and would also be reflected on the Balance Sheet as part of the change in cash, or short and long term investments.

Revenue comes only from product or service sales.
ThurstonHowell3rd 12/4/2012 | 11:32:24 PM
re: Sycamore Slouches After Earnings LR writes - "Smith said that Sycamore built products that were ready to use for any customer, and that it could sell its existing products for any such project."

Reminds me of Bill Murray in Ghostbuster..."No job is too big.... No Fee is too big!!!"

Jeeeeeeeezzzzz - Everytime I think these yamheads are the shallowest butch of doorknobs in the industry Team "A"roldo drains just a little bit more out of the pool...
optodoofus 12/4/2012 | 11:31:55 PM
re: Sycamore Slouches After Earnings Any chance that Sycamore shareholders can recall Dan? I think that Gary Coleman would make a fine CEO for the company. He couldn't do any worse than the current management team (Whatchew you talkin' 'bout, Araldo?)
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