ADVA Feels Q3 Squeeze, to Cut 10% of Staff

As the vendor prepares to cut 10% of its headcount following the acquisition of MRV, lower than expected orders hit the vendor's Q3 sales and margin numbers.

August 30, 2017

3 Min Read
ADVA Feels Q3 Squeeze, to Cut 10% of Staff

Transport network equipment specialist ADVA has revamped its revenue and profitability guidance for the third quarter due to "weaker than expected orders," and has announced a post-acquisition headcount reduction that looks set to affect about 200 staff.

The vendor, which completed the US$69 million acquisition of MRV earlier this month, says its third-quarter revenues (including MRV) are set to be between €110 million and $125 million ($131-149 million). Excluding MRV's contribution, revenues will be between €104 million and €114 million ($124-136 million), quite a way short of the €120-130 million ($143-155 million) previously forecast.

That's also a long way from last year's third-quarter revenues, which hit €159.5 million ($190 million).

ADVA Optical Networking had noted previously that the second half of the year was going to be tough, but it wasn't expecting things to be quite so bad. (See ADVA Takes a Haircut as It Warns of Tough H2.)

The company tells Light Reading that weak demand in the ICP (Internet Content Provider) sector, weak demand from "a large telco in the US," and "a push out of a large opportunity in APAC" led to the shortfall in the third quarter.

The lower revenues will be hitting the vendor's profit margins. Its third-quarter operating income margin, including MRV, is set to be between -4% and 2% of revenues, while excluding MRV it is on course to be between -3% and 2% of revenues, worse than the previous guidance of between 2% and 5%.

That operating income guidance excludes one-time charges, which include the cost of headcount reductions related to the MRV deal. The company noted that to "maximize the value of the MRV acquisition and enhance profitability throughout the combined company, ADVA Optical Networking will reduce the combined workforce."

When the acquisition was completed in August, ADVA tells Light Reading, MRV had 220 staff, who were added to the vendor's existing circa 1,800 employees. Now, though, the company plans to reduce its combined headcount by about 10%, so about 200 jobs will be cut.

Those cuts are expected to cost the company €9 million ($10.7 million) but should result in annual operating cost savings of €15 million ($17.9 million).

ADVA's share price tanked following the revenues and profits warning announcement on Tuesday, losing about 27% of its value to end the day at €4.37 on the Frankfurt exchange, but it has recovered slightly on Wednesday, gaining about 6% to €4.62 by the middle of the day.

For more on ADVA, and its acquisition of MRV, see:

— Ray Le Maistre, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, International Group Editor, Light Reading

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