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ADVA Details Restructuring Plans

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Light Reading

ADVA Optical Networking (Frankfurt: ADV) said today that its recently announced restructuring will include layoffs of 7 percent, or nearly 75 employees, and the shutting down of two development sites.

The news, part of a plan announced in December, came as ADVA reported revenues in line with reduced estimates. (See ADVA Reports Q4 and ADVA Lowers Q4 Forecast.)

ADVA will take a charge of €3 million ($4.7 million) that includes factors like severance payments.

On the company's earnings call this morning, ADVA CEO Brian Protiva justified the cuts by saying, "We believe that these changes will help our cost structure, making us more flexible for uncertain economic times."

Some cuts will come in R&D, but ADVA will continue investing in its sales and marketing staff, especially in emerging markets, Protiva says.

For its fourth quarter, the ADVA reported a loss of €27.7 million ($43.5 million), or €0.60 (94 cents) per share, on revenues of €53.8 million ($84.4 million). This compares with a net loss of €10.4 million ($16.3 million), or €0.23 (36 cents) per share, on sales of €61.3 million ($96.1 million) in the previous year's fourth quarter.

ADVA had told analysts to expect revenues of €50 million to €55 million.

Some of ADVA's weakness comes from the company's shift to a direct-sales business model.

"We are still challenged by the fact that we are making a transition from a company which did over 53 percent of its sales through OEM partners in Q1 2007 to a company that will have close to 75 percent of its business go through direct relationships or VARs in Q1 2008," Protiva says.

While that is driving the ADVA's OEM business to fall by 60 percent in 12 months, Protiva says the 25 percent annual growth of its other business will make the company successful "sooner rather than later."

ADVA forecasts first-quarter 2008 revenues to range between €51 million and €55 million. The company plans to publish its first quarter results on May 8.

— Ryan Lawler, Reporter, Light Reading

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12/5/2012 | 3:45:22 PM
re: ADVA Details Restructuring Plans
... hmmm. Any ideas based on these two parameters as to which two locations will be shut down?

12/5/2012 | 3:45:12 PM
re: ADVA Details Restructuring Plans
Who knows why ADVA is shifting its business model from channel sales to direct sales? Do they expect advantages e.g. higher margins by going to direct sales or are their channel partners moving away from ADVA to somebody else?
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