Sycamore Shares Slip on Q2 Profit

After two consecutive quarters of shockingly good financials, a third in a row from Sycamore Networks Inc. (Nasdaq: SCMR) was just too much to ask. (See Sycamore Surprises With Profit and Sycamore Ticker Shock II.)

But while news of its second-quarter performance was less ground-shaking, the optical equipment vendor -- once so sleepy that it fell off the radar of many a telecom industry watcher -- still just managed to outdo expectations, with net income of $5 million for an EPS of 2 cents from revenues of $20.8 million. That also gave it three profitable quarters in a row. (See Sycamore Reports Q2 and Sycamore: The Great Nothing.)

That wasn't enough, though, to satisfy investors who had pumped its share price by about 30 percent from its late November price of $3.80 to $5.09 yesterday. Following this morning's conference call, the stock slipped by 32 cents, more than 6 percent, to $4.77.

That could be because Sycamore is currently riding the wave of demand for optical equipment, bolstered by increasing broadband data traffic volumes, but isn't managing to capitalize on that growth by adding significantly to its customer base. (See Optical Market Holds and Dell'Oro Reports on Optical.)

It does have Korea's KT Corp. as a recent win (August 2005) with partner Siemens Communications Group , and has opened offices in the Asia/Pacific region to support its customers and partners there. (See Sycamore Expands in Asia and Siemens and Sycamore Team up.)

But in the three months to January 28 Sycamore didn't add any new customers, deriving about 90 percent of its revenues from its four main carrier accounts, including Sprint Corp. (NYSE: S) and Vodafone Group plc (NYSE: VOD).

It is, though, still sitting on a cash mountain. At the end of the second quarter, the company had $966 million in cash and cash equivalents.

— Ray Le Maistre, International News Editor, Light Reading

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