Somera ekes out small profit; predicts flat 2003

Somera Communications today reported third quarter net income of $192,000 on revenues of $50.5 million. Revenues actually ticked up from $49.2 million in the second quarter of 2002 though net income fell from $985,000, in part because of a $1.5 million charge related to reductions in workforce and strategic site development.

However, just posting a profit in the current environment was an accomplishment, said Rick Darnaby, CEO of Somera.

“Q3 was one of the worst quarters in telecom history,” he said.

Somera, which distributes both new and refurbished equipment, saw its international business increase in importance with sales from outside the U.S. accounting for about 18% of total revenue. Additionally, the company reported that its services revenue -- which has blended margins in the 30%-35% range -- increased over the last quarter, which offset some of the drop off in equipment sales. By comparison, redeployed equipment brings in margins in the high 40% range.

Going forward, the company is predicting a flat fourth quarter and expects 2003 revenue to come in close to 2002 revenues. “There is a concern that some budgets in the market will just be zeroed out,” said Darnaby.

In light of the flat projections, the company said it expects to further cut operating expenses to about $14 million per quarter from the $15.7 million it spent in the third quarter. However, that will not involve any major workforce reductions.

“Currently we have no plans for a significant reduction in force, but we will continue to redeploy people,” said Darnaby.