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Optium's Q4 Veers South

Craig Matsumoto
7/31/2007

Optium Corp. (Nasdaq: OPTM) shares took a beating last night as the company announced it's going to miss fourth-quarter earnings expectations and record a loss instead of a profit.

For the three months ended July 28, Optium says its revenues were between $26 million and $26.5 million, way below the $35.9 million that analysts polled by Reuters Research had been expecting, and worse than any quarter since Optium went public in October. (See Optium Alters Q4 Forecast.)

That shortfall means Optium will report a net loss for the final quarter of fiscal 2007, but the extent of those losses aren't yet known. Analysts had been expecting profits of around $2.6 million, or 10 cents per share, excluding special items.

In initial after-hours trading Monday, Optium's stock fell $3.29 (25.2%) to $9.76, significantly below the company's all-time low of $10.90.

One key factor in the miss was a "larger than expected decline in sales of high-end 300-pin products to Optium's historical two largest telecommunications customers," yesterday's press release states. The 300-pin, 10-Gbit/s optical transceiver was Optium's original bread-and-butter product. Sales of those parts fell during Optium's third quarter, thanks to a reduced demand that the company now says was "more pronounced than expected" in the fourth quarter.

Optium also saw some delays from a new and "previously announced" customer in the cable TV area, the company adds.

Optium named no names. But candidates for those "two largest telecommunications customers" would seem to be Scientific Atlanta , now part of Cisco Systems Inc. (Nasdaq: CSCO), and Ericsson AB (Nasdaq: ERIC), through its acquisition of Marconi. Optium listed them as its two largest telecom customers for fiscal 2006.

Table 1: Optium's Biggest Fish

Customer % of Optium revenues,
Year ended July 2006
% of Optium revenues,
Year ended July 2005
Cisco/Scientific Atlanta 19.8% (Less than 10%)
Ericsson/Marconi 17.3% (Less than 10%)
Celestica 12.7% 22.3%
Sanmina 11.9% 34.2%
Source: Optium




The press release notes that Optium's top four customers in fiscal 2007, each representing more than 10 percent of revenues, were Cisco/Scientific Atlanta, Ericsson/Marconi, Alcatel-Lucent (NYSE: ALU), and Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA).

Optium probably won't provide more details until announcing earnings in mid-September.

For now, the company is characterizing its fourth-quarter miss as a matter of "timing issues" with its customers' businesses, a factor that is "abating," as the press release put it.

— Craig Matsumoto, West Coast Editor, Light Reading

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Pete Baldwin
Pete Baldwin
12/5/2012 | 3:04:49 PM
re: Optium's Q4 Veers South
Not sure any of the companies you mentioned are in line with Enron -- losing money isn't illegal. But yeah, stability hasn't been a hallmark of some of the recent IPOs (I'm thinking mainly of Vonage).

John Harmon at Needham is maintaining a "buy" rating, saying this really does look like a one-time "air pocket." But given what's happend with the share price, he's cut his target price in half.
twill009
twill009
12/5/2012 | 3:04:49 PM
re: Optium's Q4 Veers South
The number of worthless or deceptive or hollow companies that have been foisted upon an unsuspecting public in the last 12-months or so has been amazing: OPTM, VG, AIRV, BBND, APKT, OPXT, INFN, LLNW, FIRE -- where is the new Elliot Spitzer?

No question, buyer beware.
sbeni33
sbeni33
12/5/2012 | 3:04:48 PM
re: Optium's Q4 Veers South
I hear they might be loosing market share...anyone hearing this?
opticalwatcher
opticalwatcher
12/5/2012 | 3:04:48 PM
re: Optium's Q4 Veers South
Two of the 'customers' listed in the table are Celestica and Sanmina. These are production houses--they build products for other companies.

These companies could even include Cisco and Ericsson, which would really change the table percentages.

The 10 Gig XFP could become a commodity item. Can they make them profitably? If not, are their specialized products profitable enough? Who buys their 40 gig product? Just wondering.
deer_in_the_light
deer_in_the_light
12/5/2012 | 3:04:34 PM
re: Optium's Q4 Veers South
Craig, today's results from Opnext confirm that Optium is losing significant share in a growing market. This is a serious blow to the Optium strategy and the ROADM is still not showing meaningful traction. This is very concerning for a company that is now trading 50% below IPO pricing.
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