Occam’s losses multiply

Occam Networks reported sharp declines in revenue and net income during the third quarter, in accordance with warnings the company gave last month.

The access equipment vendor’s revenue was down 19% sequentially and down 25% from a year earlier to $15.7 million in the quarter. Its net loss ballooned to $4.9 million—more than five times the size of its second-quarter loss and down from a positive net income of $1.6 million a year earlier.

The company attributed its woes to two factors: customers delaying their purchase decisions due to an accounting audit that forced Occam to restate its financial results recently, and an increase in the number of its customers (most of whom are small rural telcos) choosing fiber-to-the-premises (FTTP) networks over copper-based broadband. Those decisions lead to equipment purchase delays as carriers conduct the initial construction required for fiber deployment, Occam said. And customers often fund these rollouts with federal grants, which prolongs the projects more.

“The market is transitioning from copper to fiber faster than we anticipated,” said Chris Farrell, Occam’s chief financial officer.

Still, Occam was able to add 10 new customers in the quarter--the twelfth time it has achieved that feat consecutively--and now claims 258 total customers.

The company is expecting between $85 million and $95 million in revenue next year, an increase of 25% to 40% over 2006 revenue and an unknown increase over this year. (Occam declined to provide projections on fourth-quarter revenue, but it has reported $54 million for the first three quarters of this year.)

The company estimated it would need about $28 million in quarterly revenue to break even—and it is expecting, on average, between $21 million and $24 million next year.

Occam is still working to correct the internal controls that led to its financial restatement and is integrating the assets of Terawave, an acquisition Occam hopes will help it penetrate the market for passive optical networking.

The company claimed not to need additional financing, insisting its working capital was sufficient to fund its operations. “We expect to maintain that cash cushion for any other potential strategic initiatives in the future,” said Bob Howard-Anderson, Occam’s chief executive officer.