Avanex Slips on Cautious Outlook

Vendor lands Nortel as a 10 percent customer and meets estimates, but management expresses caution

January 24, 2001

2 Min Read
Avanex Slips on Cautious Outlook

In mid-day trading, shares of Avanex Corp. (Nasdaq: AVNX) fell 11.75 (14.35%) to 70.12 following the company's earnings conference call, held Wednesday night. The company announced it had met expectations for the quarter but would not be increasing its earnings and revenue guidance for its fiscal year 2001.

For the second fiscal quarter ending December 31, 2000,the company reported revenues of $47.9 million, an increase of $13.1 million over the company’s revenues of $34.8 million for the first quarter of fiscal 2001. Pro forma net income for the quarter was $4.1 million, or 0.06 per share excluding special charges. This compared with a pro forma net income of $2.3 million in the first quarter ending September 30, 2000.

These numbers met the marks of most analysts covering the company. However, Avanex executives, including CEO Walter Alessandrini, were cautious in comments about 2001, saying they preferred to be "conservative" by sticking with the revenue and earnings estimates they have issued in the past.

Company officials said they expect $52 million in revenue in the third fiscal quarter, a total of $195 million for fiscal year 2001, and $270 million to $275 million in revenue for 2002.

They expect earnings per share (EPS) of 7 cents for the third fiscal quarter and EPS of 25 to 27 cents for the fiscal year 2001.

"Typically, in telecommunications, the first quarter tends to be a little softer," said Alessandrini. Investors and the Wall Street community may have been expecting the company to boost estimates, which may explain the letdown in the stock price following the call.

"The quarter was very good. But when you beat the numbers like they did, you expect the numbers to go up,” says Conrad Leifur, an analyst with U.S. Bancorp Piper Jaffray.Leifur noted that Nortel Networks Corp. (NYSE/Toronto: NT), a major Avanex customer, recently revised guidance to the lower end of its projected growth range. Such caution is present throughout the industry. "Everyone trimmed their guidance, so it’s keeping with the scene of a tough March quarter," said Leifur. In other developments, Avanex officials said that Nortel had become one of the company's 10 percent customers (customers accounting for 10 percent of more of revenue) and that it expects to ship its highly anticipated PowerShaper product by June of this year.

-- R. Scott Raynovich, excecutive editor,Light Reading http://www.lightreading.com

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