C-Cor fourth quarter earnings reflect cable industry’s turmoil

C-Cor.net, which today announced fourth quarter and fiscal year 2002 results, faces the same dilemma dogging most of its vendor brethren: its growth is dependent on an aggressive strategy but it’s primary customer base – cable operators – is in turmoil.

That contradiction led to a fourth quarter that ended with net sales of $69.2 million, compared to $38.8 million for the same period a year ago, a 79% improvement. Sales for the full year were also up to $265.7 million, compared to $223.3 million in fiscal year 2001.

On the other hand, the company, hard hit by the ongoing financial difficulties of its bankrupt primary customer Adelphia Communications, recorded a $37.2 million loss for the fourth quarter, including a $44.9 million allowance to accounts receivable related to Adelphia. For the entire year, the company recorded a loss of $41.9 million or $1.24 a share, compared to a $7.8 million -- or 24-cent -- loss in fiscal 2001.

C-Cor.net recorded net sales of $12.4 million from Adelphia in the fourth quarter and $78.5 million for the entire fiscal year. With Adelphia financial woes ongoing, C-Cor.net said it anticipates only nominal revenues from the troubled MSO in the first half of next year, while projecting $110 million to $120 million in sales from everybody else.

With all this turmoil, C-Cor.net is integrating a software business element it acquired from ADC Telecommunications and an international product line based on its acquisition of Philips Broadband Networks in an investment climate that is “faced with a lack of confidence in American business,” said Dave Woodle, chairman and CEO.

“We see in the near-term a downturn in spending, but as we look at next year … we think the addition of the Philips capability mainly in the international area and maintaining our investment in the software business, that we’re positioned for the future,” said Woodle.

The strategy shift will not come without pain. The company has announced a cost reduction program, including salary freezes.

“C-Cor has been in the business of supporting the cable industry now for nearly 50 years,” Woodle said. “Probably the most potential exists today for the user of these networks that we’ve ever seen in the 50 years because it’s extending beyond adding additional video capability but adding capability for voice, video and data and becoming a broadband network of choice.”

Additionally, he said, C-Cor.net’s customers are “getting more aggressive looking at small-medium business enterprise” and “moving ahead looking at home networking and networking of storage capabilities to move volumes of data through their network.”

Most importantly, Woodle predicted a resurgence in the international marketplace where the company has a position with the former Philips Broadband Networks business unit.

Even so, he admitted, things will continue to be slow for the next six months.

"Several major customers have not started up … as quickly as we may have thought at one point, but AT&T [Broadband] is coming back [and] will probably be our largest revenue customers in the second half of the [calendar] year,” Woodle said. “And we have developed an agreement with Adelphia in terms of how to do business.”

C-Cor.net remains “bullish” on cable, Woodle said.

“We are focused on what we can control, adapting to the environment that we have. We’ll do it both reactively and try to adjust to what we need to for our customers’ environment, but proactively maintaining an investment in our strategic plan. We haven’t veered from that plan.”