News

6 February 2009

 

Avanex cuts workforce by 5% as revenue falls 16%

For its fiscal second-quarter 2009 (to end-December 2008), optical communications component and module maker Avanex Corp of Fremont, CA, USA has reported revenue of $38m, down 16% on last quarter’s $45.3m and 27% on $52m a year ago. This is due mainly to a significant drop in demand in telecoms as a result of macro-economic issues.

Revenue for transmission products (transceivers, transponder and modulators) fell by 27% from last quarter to 31% of total revenues. However, modulator product line was level with last quarter due to an increase in market share (involving three design wins, including one for cable TV and one for a tunable pluggable format).

Revenue from regeneration products (including control amplifiers, gain blocks, fixed-wavelength and tunable dispersion compensation modules, and integrated optical performance monitoring products) fell by about 10%, but still represented 55% of revenue. Sales of fiber-based dispersion compensator modules remained strong, while the tunable dispersion compensator product line has seen significant traction (having been designed-in at more than 10 customers).

Revenue for wavelength management products (both fixed- and reconfigurable-wavelength routing products) remained relatively flat, representing 14% of revenue.

CEO & president Giovanni Barbarossa also highlights significant progress on introducing new subsystem platforms, including an integrated reconfigurable add-drop multiplexing (ROADM) subsystem incorporating Avanex’s Wavelength Selective Switch (WSS) and amplifier model technologies.

North America comprised 33% of revenues (down from 43% last quarter), Europe 41% (up from 32%) and Asia 26% (versus 25%). Greater than 10% customers were Alcatel and (due to a couple of design wins) Infinera.

Excluding $9.6m in one-time goodwill impairment and restructuring charges, operating expenses have been cut to $12.9m (34% of revenue) from $15.7m (35% of revenue) last quarter and $16.9m (32% of revenue) a year ago. Gross margin has fallen from 31% a year ago and 17.2% last quarter to 15.4% (below the forecast 17-21%).

However, excluding the $9.6m in one-time charges, non-GAAP net loss still rose to $6.2m, compared with $5.9m last quarter and net income of $2.4m a year ago.

During the quarter, cash and investments fell by $12.4m to $37.3m (although Avanex expects cash outflows to be significantly lower in future quarters) .

For fiscal third-quarter 2009 (ending 31 March), Avanex expects revenue to fall 18-37% to $24-31m (a broader guidance range than normal since, given the current recessionary macro-economic environment, there is less visibility than typical).

During the fiscal second-quarter, Avanex reduced its headcount by 29, from 515 to 486. In fiscal Q3, the firm is implementing further initiatives to reduce its cost structure. “While the company is continuing to face challenges in light of the current macro-economic environment, we are taking action by reducing our workforce by 5% and scaling back on other discretionary expenses [saving $2.5m annually],” says Barbarossa. The firm is targeting a breakeven run rate of $46-48m in quarterly revenue.

In addition, Barbarossa believes that the proposed merger with optical component, module and subsystem maker Bookham Inc of San Jose, CA, USA (announced last week and expected to be finalized within 3-6 months) will improve the firm’s market position. “We have agreed to merge with Bookham, because we believe that the combined company can realize significant cost synergies [generating $7m of quarterly cost savings by the end of the merged firm’s fourth full quarter] and thereby create immediate value to shareholders of both companies,” he says. “For a few quarters now we have believed industry consolidation is necessary in order to prosper.”

See related items:

Bookham and Avanex agree to merge

Bookham improves cash balance despite 25% revenue drop

Avanex’s gross margin falls more than expected as revenue shrinks 13%

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Visit: www.avanex.com