Sycamore swings to profit

Sycamore Networks reported positive net income for its fiscal fourth quarter, surprising analysts who expected the optical equipment vendor to continue its years-long trend of losses.

For the quarter ending July 31, 2005, Sycamore reported net income, under generally accepted accounting principles, of $1.4 million, or $0.01 per share, compared with a net loss of $9.2 million, or $0.03 per share, a year earlier. Excluding stock-based compensation and payroll taxes on stock option exercises, the net income was $1.6 million, or $0.01 per share.

The company reported quarterly revenue of $18.5 million, up 27% from a year earlier. Revenue for the full fiscal year 2005 was up 47% to $65.4 million.

Most analysts did not expect the profit. In April, for example, Standard & Poor’s Equity Research predicted Sycamore would not post a profit for at least two more years, if not longer.

In August, however, Sycamore announced a contract to supply equipment for a nationwide backbone network for Korea Telecom, estimated by Lehman Brothers to be worth $35 million to $50 million over the next two or three years.

Dan Smith, Sycamore’s chief executive officer, said times are still tough in the optical networking space, but he sees some encouraging trends, such as the increased capacity demands posed by broadband and wireless buildouts, an improved regulatory environment and the consolidation of large carriers.

In August 2004, the company began pursuing “strategic options,” including a sale of the company, but its high cash balance has given the company plenty of breathing room.