Sycamore reports Q3 operating loss

(Telephony) Optical networking provider Sycamore Networks yesterday reported a fiscal third quarter loss and warned conditions impacting negatively upon the company would continue into the fourth quarter.

In a conference call to investors, President and CEO Dan Smith pointed to a reduction of capital expenditures within its customer base and continued sluggishness in the capital markets for emerging service providers as reasons for the loss.

The Chelmsford, Mass.-based company posted a pro forma net loss of $42.6 million, or 19 cents per share, for third quarter 2001, excluding amortization of deferred stock compensation, payroll tax on stock option exercises and restructuring charges. This compares to a pro forma net income of $6.8 million, or 2 cents per share for the same three-month period last year.

Actual net loss for the quarter was $225.1 million compared to a $5.67 million profit for the same period last year. For the fiscal year to date, Sycamore has suffered a net loss of $237.5 million.

Third quarter earnings were in line with revised guidance the company provided in April and with Thompson Financial/First Call’s 22-analyst consensus.

Sycamore incurred a one-time restructuring charge of $165.8 million, which includes costs associated with 132 job reductions, consolidating work force into designated facilities, and inventory and asset write-downs.

The inventory and asset write down, which represents $137 million of the total restructuring charge, reflects costs associated with product discontinuations within Sycamore’s transport business unit.

“We’ve rationalized our transport product offerings and development programs to eliminate non-strategic products and over-lapping feature sets,” Smith said.

A spokesman said that the facility consolidation would move employees from four facilities into three and that no additional job losses would result.

In addition to these restructuring moves, Chief Financial Officer Frances Jewels said the company would implement cost control programs that include curtailing hiring except for strategic positions, eliminating discretionary spending and reducing temporary employees and consultants.

Sycamore expects the various restructuring moves to generate $13 million to $15 million in quarterly cost savings and is forecasting fourth quarter revenues of $50 million to $60 million, Jewels said. This compares to $90.4 million in revenue year over year.

Jewels also said due to low visibility, the company would not provide guidance beyond the fourth quarter 2001.

Although Sycamore would continue working with smaller carriers that show promise, Smith said the company would expand its relationships with existing larger accounts and sharpen its customer focus on the larger – and less cash-strapped – ILECs.

“We continue to believe that there are still opportunities with well-funded, emerging carriers, which we are aggressively pursuing,” he said. “It is important that we accelerate the transition of our customer base to include a higher concentration of incumbent carrier customers.”