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Sorrento Reports Earnings, Financing

Light Reading
News Analysis
Light Reading
3/23/2001

Sorrento Networks Corp. (Nasdaq: FIBR) met and slightly exceeded earnings expectations for its final quarter of fiscal 2001. The company also said it had achieved some much-needed financing, though details weren't yet available (see Sorrento Reports Q4 Results).

For those not tracking the recent financial engineering behind the company: Sorrento now comprises a combination of former parent company Osicom Technologies Inc. and its former subsidiary Sorrento Networks (see Osicom Prepares for Transformation and Sorrento Rides a Gilded Wave).

Sorrento's revenues for its last quarter were $11.1 million, 56 percent higher than the preceding quarter, and 172 percent higher than this time last year. For overall fiscal 2001, revenues were $26.5 million, up 111 percent over 2000's figure. Gross margins were up to 32.1 percent, compared to 30.8 percent the previous quarter.

Sorrento Networks also gained ten customers this quarter. When pressed for details, executives described Sorrento Networks' customers as "a CLEC, a power utility, two cable companies, two telcos, a SAN company, and a broadband network services provider." (Two turtledoves were left unaccounted for.)

"We see strong order flow and sales growth, in spite of the environment around us," said Sorrento's president and COO, Jim Dixon in a conference call Thursday. He said the addition of OC192 and 10-Gbit/s Ethernet transponders across the product line could bring the company $16 million in revenues for the first quarter of the fiscal year. "It's a stretch, but it's very possible," Dixon said.

Dixon also confirmed late in the call that the entire company will be announcing a round of financing "within one day." Earlier in the call, Dixon had specifically refused to give details about financing, saying, "We are active in pursuing... financing, and when it's a fact we'll make an effort to describe it and perhaps explain it." Later, a note apparently passed among executives on the call caused him to acknowledge that a deal has been done. Still, specifics weren't available at press time.

Sorrento Networks' parent company reported a net loss of 74 cents per share for the quarter and $3.71 per share for the year. Revenues for the year were $44.6 million, compared to the previous year's revenues of $68.4 million. The reduction in revenues is accounted for in part by the divestiture of Sorrento's Entrada and NetSilicon subsidiaries, which contributed to revenues in fiscal 2000 but not 2001.

Most new sales for Sorrento Networks are for the vendor's GigaMux DWDM (dense wavelength-division multiplexing) products. The company's newer TeraMatrix optical routing switch is slated to begin shipping by the end of the year. The vendor's accompanying management system, TeraMAN, is set for shipment next year. Dixon said that both products are on track as planned.

Indeed, Dixon seemed upbeat in spite of the overall market downturn. "These are rough seas for all of us," he said. "We have a steady ship carrying us forward in tough times."

As has become customary on Sorrento earnings calls, the audience didn't hold back when it came to giving advice. Dixon and Xin Cheng were urged not to worry too much about stock price. "Let the market take care of itself. Don't let the stock price determine what you do. Xin's doing a great job, just let him do it," one analyst said.

The execs were also encouraged to sell another subsidiary, Netsilicon, and "monetize it so folks will view it as a cash asset." Dixon said he planned to do that, but the company hadn't found the right buyer.

-- Mary Jander, senior editor, Light Reading http://www.lightreading.com

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MetroOptician
MetroOptician
12/4/2012 | 8:41:22 PM
re: Sorrento Reports Earnings, Financing
bc, nice reply. after reading the light reading assessment of the conf. call, I was wondering if they were listening to the same call I was.

and the "disconcerting" part. my gosh. do these guys do any research before they post an article? those two products are not even FOR SALE yet. And, they weren't even expected to contribute to revenues.

I thought the CC was very informative. the company did very well. huge growth. more huge growth expected. new products on the horizon. existing products gaining greater acceptance. more customers. more trials.

I guess LR had to come up with something negative to say, so they just made something up. Come on LR. Please check the facts BEFORE you post an article.
bcbothun
bcbothun
12/4/2012 | 8:41:22 PM
re: Sorrento Reports Earnings, Financing
"Sorrento Networks also gained three new customers this quarter, making a total of 10 so far."

Actually, said they have 21 customers total, 10 of whom took shipments last Q.

When pressed for details, executives described Sorrento Networks' customers as "a CLEC, a power utility, two cable companies, two telcos, a SAN company, and a broadband network services provider." (Two turtledoves were left unaccounted for.)

OK, That's cute.

Dixon also confirmed late in the call that the entire company will be announcing a round of financing "within one day." Earlier in the call, Dixon had specifically refused to give details about financing, saying, "We are active in pursuing... financing, and when it's a fact we'll make an effort to describe it and perhaps explain it." Later, a note apparently passed among executives on the call caused him to acknowledge that a deal has been done. "

This makes it sound as if he was avoiding the truth at first and then forced to "fess up" by the note passers. The impression of everyone I have talked to that was listening in is that the deal was actually being finalized during the call and he was informed of its completion by the note.

"Now for the bad news: The parent company isn't doing as well as its subsidiary. Indeed, it's reporting a net loss of 74 cents per share for the quarter and $3.71 per share for the year. Revenues for the year were $44.6 million, compared to the previous year's revenues of $68.4 million. "

There really isn't anything left of the parent except the Sorrento sub. The $68 number from included $48 million from NSIL, and ESAN. Those subs have been spun off into seperate companies that both increased their revenues also. This years $44 only included $11 from ESAN. ALL of the business units that were a part of that $68 number have shown increased revenues, they just don't all belong on FIBR's income statement anymore.

"It's also a bit disconcerting that for the overall company most new sales, including those for the Sorrento Networks subsidiary, are for the vendor's GigaMux DWDM (dense wavelength-division multiplexing) products, not its newer TeraMatrix optical routing switch and accompanying management system, TeraMAN."

I don't this is that disconcerning since the management syatem won't be ready for purchase until April (at least a month ahead of schedule) and the switch won't be ready until Q3 (one Q ahead of plans.)

"The execs were also encouraged to sell another subsidiary, Netsilicon, and "monetize it so folks will view it as a cash asset." Dixon said he planned to do that, but the company hadn't found the right buyer."

I heard that quite differently. They have said before that they thought the price was too low to sell now. Only when the price is right will the nature of the buyer start to matter.
soothaandi
soothaandi
12/4/2012 | 8:41:21 PM
re: Sorrento Reports Earnings, Financing
(Now for the bad news: The parent company isn't doing as well as its subsidiary. Indeed, it's reporting a net loss of 74 cents per share for the quarter and $3.71 per share for the year. Revenues for the year were $44.6 million, compared to the previous year's revenues of $68.4 million.)

Another distortion of facts here.

In the previous year, the Entrada Networks subsidiary (Network Access) and the Netsilicon subsidiary both contributed to the revenues for the parent company. Now they have been spun off and their revenues do not count. Here is what their Press Release says:

"For the year ended Jan. 31, 2001, the company's net loss was $41.9 million, or $3.71 per share, compared with a net loss of $21.6 million, or $2.12 per share in the year ended Jan. 31, 2000. Fiscal year 2000 earnings include results from NetSilicon and Entrada, which have now been divested."

Did you even read it?

Here is another quote from the Press Release about Teraman and Teramatrix:

"The company is in final stages of development and test of its carrier class management platform (TeraMAN) and optical routing switch platform (TeraMatrix). "

It is not uncommon for "journalists" to have their own agendas, but to distort something so openly and clearly stated by the company is disgraceful!!!
soothaandi
soothaandi
12/4/2012 | 8:41:21 PM
re: Sorrento Reports Earnings, Financing
(It's also a bit disconcerting that for the overall company most new sales, including those for the Sorrento Networks subsidiary, are for the vendor's GigaMux DWDM (dense wavelength-division multiplexing) products, not its newer TeraMatrix optical routing switch and accompanying management system, TeraMAN.)

Shame! Shame!! Sorrento has CLEARLY stated at every opportunity that the Teramatrix is in development stages and won't be available for commercial release until late CY 2001, and will not realize significant revenues until CY 2002. Note: Sorrento's Fiscal year ends Jan 31st, so Feb 1, 2001 - Jan 31, 2002 = FY 2002, but it is mostly CY 2001.

Similarly, the Teraman is scheduled for commercial release in April 2001, and the quarter reported ended on January 31, 2001. So we obviously cannot expect any revenue from that.

So your paragraph above is nothing but biased (in this case negative) rubbish. This is a grave injustice to the company and to Truth. You should be ashamed of your total lack of objectivity and professionalism, and the editors need to check their facts and (a) correct the article, (b) have the honor to apologize for the improper spin.

You guys are in the right place at the right time, and the sophomoric humor like "turtledoves", etc... can be taken with a pinch of salt. But the distortions and condescending are really over the top. That is a pity.
Techhead
Techhead
12/4/2012 | 8:41:12 PM
re: Sorrento Reports Earnings, Financing
Will you correct your story? Did you see the demo of the switch? Your chance will come with the news of the financing. I'm sure you realize they need the money to produce product that has been ordered, what you make of it will be another matter. What is your comment on the type and number of customers? Who has more and as well diversified?
dayniteshadow
dayniteshadow
12/4/2012 | 8:40:50 PM
re: Sorrento Reports Earnings, Financing
It would be informative if LR would reconcile list and article!
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