Copper Mountain leveled

(Telephony) DSL equipment provider Copper Mountain Networks reported fourth quarter results that matched analysts’ lowered expectations, but the company dropped a bomb on investors, saying revenue for its current quarter would be only in the $8 million to $10 million range.

According to First Call/Thomson Financial, analysts were forecasting revenue of $50.9 million for the first quarter of 2001, and in the year-ago first quarter Copper Mountain recorded revenue of $60.8 million. The stock market reacted swiftly, sending Copper Mountain shares down more than 25% in morning trading.

For the fourth quarter, Copper Mountain posted net revenue of $47.0 million, up 5.5% over 1999, and a net loss of $34.4 million, or 66¢ per diluted share. That compared to net income of $6.3 million, or 11¢ per share, for the same quarter last year.

"Clearly, Copper Mountain’s fourth quarter was very challenging, as our CLEC customers had to reduce their capital expenditures and reschedule equipment purchases in response to a difficult financing environment," said Rick Gilbert, president and CEO of Copper Mountain. "In particular, our fourth quarter results were significantly impacted by the loss of revenue associated with NorthPoint Communications, and based on their recent bankruptcy filing, we have taken a charge of $4.9 million [to increase bad debt reserves]."

The vendor also took a $35 million charge for inventory writedowns, $28.6 million of which relates to future inventory purchase commitments. "We feel this action will match our investment in inventory to our current short-term outlook," Gilbert said. "In addition, we have implemented hiring restrictions and discretionary expense controls."

Copper Mountain’s customer base is comprised almost entirely of CLECs, said John Creelman, Copper Mountain’s chief financial officer, although the company is trying to diversify its customer base to include incumbent carriers, international PTTs, and the MTU market. One healthy CLEC, McLeodUSA, accounted for 64% of the vendor’s revenue in the fourth quarter.

Besides the dramatically reduced first quarter revenue estimate, Copper Mountain said it was "virtually impossible" to give accurate guidance beyond the current quarter because customer purchasing patterns had become volatile and uncertain. Creelman did say that the vendor’s gross margins would drop substantially, from the fourth quarter’s 53% range to between 40% and 45%.

For fiscal year 2000, Copper Mountain reported revenue of $281.6 million, a 150% increase over 1999, and net income of $1.7 million, or 3¢ per diluted share.

Copper Mountain also disclosed that its end-of-year balance sheet included a short term investment of $3.4 million in commercial paper issued by Southern California Edison Company, one of the utilities that has been hit hard by California’s energy crisis. According to Copper Mountain, the fair value of the instrument has declined; however, the decline and "ultimate realization" of the investment is undetermined.