Tellium Stock Pops After Earnings
“It was the best call this earnings season,” says Rick Schafer, an analyst with CIBC World Markets. “They dealt with the Cable and Wireless issue in the open. And their other two customers actually came in ahead of plan.”
Tellium, which had ended Wednesday day down 0.02 (0.4%) at 4.99, rebounded after the company announced its earnings. It was trading up 0.76 (15%) to 5.75 shortly after the market opened on Thursday.
The company reported net revenues of $40.1 million for the quarter, up 32 percent from $30.4 million the previous quarter. Operating losses on a pro forma cash basis were $9.9 million, compared to $15.3 million during the second quarter of 2001. Including non-cash charges, operating losses were $50.7 million during the third quarter, versus $53.8 million during the second quarter of this year.
Its net loss on a pro forma cash basis was $7.4 million, or $0.05 per share, versus $13.0 million, or $0.09 per share the previous quarter. The published expectation was a loss of $0.16 per share. Including non-cash charges, the company's net loss for the third quarter was $48.2 million, versus a net loss of $51.5 million in the second.
The company also provided guidance for the fourth quarter of 2001 as well as for all of 2002. For Q4 it expects revenues to increase 22 percent over this quarter to come in at between $44 million and $49 million. And for 2002 it expects revenues of $288 million.
Fourth-quarter projections only include revenue from two of Tellium’s three announced customers: Dynegy Inc. (NYSE: DYN) and Qwest Communications International Corp. (NYSE: Q). Dynegy, which made up the largest portion of revenue this quarter, is still expected to generate a significant amount of revenue in Q4 and throughout 2002, said Harry Carr, CEO of Tellium in a phone interview after the earnings were reported.
“We expect Dynegy to be strong every quarter in the foreseeable future,” said Carr. “They have started building out their network with plans to expand it nationally and globally.”
Carr also noted that, as a percentage, Dynegy’s contribution will decline, but the dollar amount will continue to be significant, with the provider expected to be a 10 percent customer through 2002.
Qwest generated revenue in the double digits this past quarter and is expected to continue to be significant in the following quarters, he added.
Cable and Wireless (NYSE: CWP), the other announced customer, did not produce any revenue for the company (see Ciena Wins C&W Deal). This had been foreseen, but on the call Carr told analysts that the provider would not be contributing to its Q4 revenue either, a change from earlier stated expectations.
Cable and Wireless had signed a 5-year agreement with Tellium back in September of 2000 for $350 million. While Carr asserts that no terms of the contract have changed, Cable and Wireless has publicly stated that it will not deploy Tellium switches for some time, because it doesn’t yet need them.
Carr tried to reassure analysts that more customers are on the way. He said the company will be announcing new customers by the end of the year and has included new customer wins in its forecasts. And, unlike other system companies reporting earnings this season, Carr says that customers have not pushed back equipment purchase decisions.
“Customer decisions are absolutely on track,” he insisted. “They see our value proposition. And, with pressure to reduce costs, they find it pretty compelling.”
Tellium separately announced that Dick Barcus, the company's president and chief operating officer, is retiring. Bill Proetta, who currently holds the position of vice president for product management at Tellium, will succeed Barcus (see Tellium President Retires). Barcus joined Tellium in February 1998 as vice president of marketing and product management. He was appointed president and COO in May 1999.
— Marguerite Reardon, Senior Editor, Light Reading