Nearby Kutztown University was interested in buying the building and turning it into an engineering school while renting space to TriQuint, according to the Morning Call of Allentown, Pa. The deal would have worked because TriQuint is using so little of the facility.
But during last week's earnings call with analysts, TriQuint officials said the deal fell through on Oct. 18. Now it appears TriQuint will have to write off some of the building's $22.3 million value, taking a non-cash loss in its fourth-quarter earnings.
There's still hope for a sale, though. "I believe they have another buyer they're talking to," says Sandy Harrison, an analyst with Pacific Growth Equities Inc..
The building was acquired along with Agere Systems Inc.'s (NYSE: AGR.A) optoelectronics business, a deal that closed in January 2003 (see TriQuint to Acquire Agere's Optics). Since the acquisition, TriQuint has struggled to get the business into profitable shape, and last quarter company officials said they're looking into "strategic alternatives," which could include sharing the manufacturing facility with others or selling the entire optoelectronics business.
"That business is currently under a microscope," CEO Ralph Quinsey said on the conference call.
TriQuint still believes in the optoelectronics business. The company has been developing higher-margin products, such as XFP transceiver modules for 10-Gbit/s ports, and it has been trying to shed some of the less promising pieces of the business (see TriQuint Intros DWDM, XFP and TriQuint Talking Deals at OFC).
But the industry has been slow to recover. Optoelectronics represented 12 percent of revenues -- roughly $11 million -- during the quarter ended in September. That's even with the previous quarter, and it's likely to sit at the same level for the December quarter, Quinsey said. All the while, optoelectronics continues to lose money. "That business is killing them from a profitability standpoint," Harrison says.
New products such as the XFP modules "will not be enough to offset the losses we expect [from optics] in 2005 without further action," Quinsey said. "The optoelectronics market continues to be highly competitive, with most companies operating at a loss."
For its third quarter, which ended Sept. 30, TriQuint reported losses of $4.1 million, or 3 cents per share, on revenues of $89.7 million, compared with profits of $287,000, zero cents per share, on revenues of $92.6 million for the quarter that ended in June.
For the third quarter last year, TriQuint reported losses of $5.8 million, 4 cents per share, on revenues of $78.8 million.
— Craig Matsumoto, Senior Editor, Light Reading
For more info on the state of industry financials, check out the coming Light Reading Live! event:
- Light Reading's Telecom Investment Conference, in New York City, December 15, 2004