Tellium Finds Some Revenue
Revenues were $10.1 million during the first quarter of 2003, compared with $2.9 million in the fourth quarter of 2002. The company also reduced its losses. On a U.S. GAAP basis, it reported a net loss of $37.4 million, or a loss of $0.38 per diluted share. Last quarter the company reported a net loss of $56.5 million, or a loss of $0.57 per diluted share.
The company burned through about $13.8 million during the quarter, ending with about $157.2 million in cash. This was $1.2 million less than the $15.0 million cash burn that the company had projected in its earnings call on January 29, 2003.
During the company’s conference call, chairman and CEO Harry Carr was positive about the company’s future.
“It looks like we have turned the corner in terms of revenues,” he told investors and analysts.
Michael Losch, the company’s CFO, says he expects to see similar results in the coming quarter.
On the surface, the news looks okay. But digging deeper, Tellium’s good fortune could be fleeting. Carr revealed during the conference call that Cable & Wireless (NYSE: CWP) had been the company’s only 10 percent customer for the quarter. The revenue came in as part of the amended purchase contract with the carrier that was renegotiated at the end of last year. Instead of buying $350 million worth of gear, the company is now only required to purchase a fraction of that in the first two quarters of 2003 (see C&W, Tellium Rework Contract).
While Carr says the company hopes to do more business with Cable & Wireless beyond its required purchase contract, no guidance was given for the third and fourth quarters. Carr also wouldn’t state exactly how much Cable & Wireless spent with the company, citing the carrier’s request to keep that information under wraps for competitive reasons. But he did admit that Cable & Wireless had contributed a “significant portion” of Q1 revenues.
He tried to downplay the company’s reliance on a single customer for the lion’s share of its revenue in the first quarter, saying the company is engaged in conversations with 360networks Inc., which has bought long haul network assets from Dynegy Inc. (NYSE: DYN). While Dynegy had once been a strong customer of Tellium’s, its sales had fallen off as it neared completion of its networks.
Despite the newfound revenue, some investors may not be convinced that the company will continue on its upward path. Tellium, like many other tech companies in the current environment, has a lot of cash, yet is still losing money. There are grumblings that certain investors could be positioning themselves to take a bigger stake in the company in order to force its officers to look for a buyer or liquidate its assets, such as what has happened at CoSine Communications Inc. (Nasdaq: COSN) (see Mellon Pressures CoSine for Sale).
— Marguerite Reardon, Senior Editor, Light Reading