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Xtera Slashes Headcount as Liquidity Crunch Intensifies, Say Sources

Dan Jones
9/29/2016

Less than a year after its IPO, optical technology vendor Xtera Communications is believed to have made major cuts to its headcount as it struggles with a liquidity crisis and seeks fresh investment or an acquisition.

The Allen, Texas-based optical networking stalwart, which became a public company in November 2015, has slashed its staff, according to sources familiar with the company: One person close to developments suggests that its headcount may have been cut from around 100 to just 20. (See Xtera Prices Its IPO.)

An Xtera Communications Inc. (Nasdaq: XCOM) representative told Light Reading last week that the company wouldn't comment on staffing levels because it is in a quiet period before the company's next quarterly earnings report, though that is not due to be published until November or December.

The layoffs follow a decline in fortunes for the company during 2016 that has led to what Xtera describes as its "liquidity challenges."

On August 22, Xtera reported in an SEC filing that Foxconn Electronics Inc. had terminated its manufacturing agreement with the optical equipment firm, due to Xtera's "non-payment of the outstanding accounts receivable."

That disastrous news followed its fiscal third-quarter earnings report on August 11, when the vendor reported an almost 70% year-on-year decline in revenues to just $5.3 million and a net loss of $23.6 million, much worse than the loss of $4.6 million for the same period in 2015.

Its cash situation has also forced it to appeal to its debtors for extension on its loans -- it announced a limited loan waiver to the tune of $1.5 million on August 31 -- and for it to seek "strategic alternatives" that include new funding or a potential sale of the company.

All of this has decimated Xtera's share price. It was at highs of $5.65 in late November 2015. Today it trades at $0.58, although even that is up a little from the lows of $0.35 it hit when the Foxconn termination was announced.

Not surprisingly, some C-Level staff have departed. Chief Strategy Officer Herve Fevrier has left Xtera to join the Global Optical Architecture group at Facebook , according to his LinkedIn profile.

— Dan Jones, Mobile Editor, Light Reading

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Gnut
Gnut
2/16/2017 | 12:52:35 PM
Update
http://higcapital.com/news/release/974
DanJones
DanJones
11/28/2016 | 3:02:36 PM
Re: Xtera is in bankruptcy protection
Interesting, thanks.
brooks7
brooks7
11/28/2016 | 11:17:55 AM
Re: Xtera is in bankruptcy protection
 

That $10M probably is bigger than you think because at some point it will include paying some amount of the debt.  A look at the balance sheet from the last reported quarter shows that they had somewhere around $30M of real stuff (AR, Inventory, Fixed Assets).  At $10M and no debt payment, the creditors would be better off in a liquidation.  Chapter 11 also implies that there is a plan to turn the company around and make it profitable so that the debt can be repaid.  The problem here is that the debt is not causing the problem.  The operating business hasn't made money in a long time, if ever (I didn't go back before 2013).  Chapter 7 seems a LOT more likely.

seven

 
Ray@LR
[email protected]
11/28/2016 | 10:12:04 AM
Xtera is in bankruptcy protection
Xtera has unfortunately filed for bankruptcy protection in order to find a way out of its current troubles. 

Curently it seems the best it can hope for is a sale at a very low price - there is a stalking horse bid with a suggested value of $10 million.

It doesn't look good... the United States Bankruptcy Court for the District of Delaware will deal with the bankruptcy proceedings (Case No: 16-12577)
Sterling Perrin
Sterling Perrin
9/30/2016 | 10:35:56 AM
Re: Optical Vets!!!!
Dan, this company is the accumulation of failed start-ups in the Dallas area from 2000 on. I'm not sure that there ever was a bottom to fall out and I never understood how this combination of companies kept going for so long. It may have been propped up by washout rounds of investments from VCs.

It does mark the end of an era from the telecom-bubble days of VC investment. I don't think there are many of those systems companies left at this point.

Sterling
DanJones
DanJones
9/29/2016 | 3:55:45 PM
Optical Vets!!!!
This company has been AROUND. Seems like the bottom fell out over the last year.
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