Sorrento Reports Earnings, Financing

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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