Sycamore Shrinks in Q4
In the three months to July 31, Sycamore generated $15.1 million in revenues, some way off the $25 million that analysts, on average, had expected and even further away from the $38 million it managed during the same period a year earlier.
After one-time items, the vendor's net loss was $7.8 million, or 3 cents per share. On average, analysts had expected the company to break even.
The company's CEO, Dan Smith, admits the company had "a disappointing fourth quarter and lower than expected annual revenue results," but said the company is investing in new areas that "will be effective in positioning Sycamore for long-term success as market demand for more intelligent, packet-capable optical networking equipment evolves in the coming years."
The company is marketing its capabilities in the video transport, Ethernet services, and software-based service management sectors in a bid to win new business. "We have a lot of the assets to address the [future] needs" of Tier 1 carriers, noted the CEO. (See Sycamore Touts Service Mgmt, Sycamore Wins Deal, Sycamore Intros Metro Switch, and Sycamore Demos Ethernet.)
If the "packet/optical demand" story sounds familiar, that's because another Smith, Gary at Ciena Corp. (NYSE: CIEN), said pretty much the same thing yesterday as he talked up his company's long-term potential in the next generation optical market following a fourth quarter profits warning. (See Ciena Slumps on Q4 Outlook and Ciena CEO: Slowdown Looks Shortlived.)
Another thing Ciena and Sycamore have in common is that their market valuations are fast approaching the value of their existing cash and short-term financial assets. Ciena's current market capitalization is about $1.17 billion, while its cash and short-term investments are worth nearly $1.03 billion in total.
Sycamore, meanwhile, has a market value of $951 million, while its cash and short-term investments are worth $821 million. The company's share price currently stands at $3.37, having recovered from an early morning dip to $3.23.
So is Sycamore still considering what to do with that cash? It is, Dan Smith told analysts on today's earnings conference call, though he wouldn't be drawn on whether it might be returned to shareholders in some way, left in the bank, or used for acquisitions. "We're fortunate to have the capital to be able to, er, capitalize on any [M&A] opportunities," noted the CEO.
The vendor wouldn't be drawn on how it thinks it might do in the new financial year, with CFO Paul Brauneis saying that a "few large core network opportunities" were in the pipeline, and that revenues could be impacted significantly if those opportunities, along with a number of potential but smaller access network deals, resulted in purchase orders.
Despite the sales uncertainty, Sycamore will continue to increase its R&D investments, and will be expanding its Shanghai development center. (See Sycamore Opens in China.)
— Ray Le Maistre, International News Editor, Light Reading