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Sycamore Networks Inc. Reports Operating Results (10-Q)

November 24, 2009 | About:
10qk

10qk

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Sycamore Networks Inc. (SCMR) filed Quarterly Report for the period ended 2009-10-24.

Sycamore Networks Inc. develop and market products that transport voice and data traffic over wavelengths of light. The products are designed to enable the customers to quickly and cost effectively create usable network capacity over existing fiber and thereby to create new high speed data services. The company's customers are new and established providers of local voice and data transport services, long distance carriers, Internet service providers, cable operators, foreign telephone companies and carriers who provide services to other carriers. Sycamore Networks Inc. has a market cap of $844.9 million; its shares were traded at around $2.97 with and P/S ratio of 12.5.

Highlight of Business Operations:

Revenue for the three months ended October 24, 2009 increased 1% to $15.6 million year over year. Net loss was $10.4 million for the three months ended October 24, 2009, compared to net loss of $5.8 million for the same period ended October 25, 2008.

General and administrative expenses consist primarily of salaries and related expenses, professional fees and other general corporate expenses. General and administrative costs are net of insurance recoveries associated with the Companys now concluded stock option investigation. General and administrative expenses increased for the three months ended October 24, 2009 compared to the same period ended October 25, 2008. The increase was primarily due to a larger insurance recovery of $1.3 million in the three months ended October 25, 2008 compared to an insurance recovery of $0.2 million in the three months ended October 24, 2009. The impact of the insurance recoveries was partially offset by a decrease in personnel expenses of $0.3 million primarily related to the cost reductions initiated during fiscal year 2009 and a decrease in the amortization of intangible assets of $0.3 million. The decrease in the amortization of intangible assets is due to the full impairment charge of such assets recorded in fiscal year 2009.

In conjunction with the workforce reduction and early lease termination plans previously announced by the Company during fiscal year 2009, certain actions were implemented in the first quarter of fiscal 2010. These actions were taken in order to re-align our cost structure, pace our development more closely in line with customer requirements and to better position the Company for success in the longer-term. During the first quarter of fiscal 2010 the Company recorded a restructuring and related asset impairment charge of $6.4 million of which $6.3 million was charged to operating expense and $0.1 million to cost of product revenue. This charge relates to (i) employee separation packages including severance pay, benefits continuation and outplacement costs amounting to $3.4 million, of which $3.3 million was charged to operating expense and $0.1 million to cost of product revenue, (ii) a facility related termination agreement of $1.9 million, and (iii) a related asset impairment charge of $1.1 million.

Income tax expense was $120 thousand for the three months ended October 24, 2009 primarily related to income tax expense in certain states and profitable foreign jurisdictions. Income tax benefit of $46 thousand was recorded for the three months ended October 25, 2008. The tax benefit results from the excess of refundable research and development credits over income tax expense in profitable foreign jurisdictions.

Total cash, cash equivalents and investments were $920.3 million at October 24, 2009. Included in this amount were cash and cash equivalents of $350.4 million compared to $347.7 million at July 31, 2009. The increase in cash and cash equivalents for the three months ended October 24, 2009 was primarily attributable to cash provided by investing activities of $8.8 million offset by cash used in operating activities of $6.4 million.

Net cash used in operating activities was $6.4 million for the three months ended October 24, 2009. Net loss for the three months ended October 24, 2009 was $10.4 million and included non-cash charges including share-based compensation of $0.8 million, an impairment charge of $1.1 million and depreciation and amortization of $2.0 million. Accounts receivable increased to $13.6 million at October 24, 2009 from $12.9 million at July 31, 2009. The increase was primarily due to the timing of shipments. Our accounts receivable and days sales outstanding are impacted primarily by the timing of shipments, collections performance and timing of support contract renewals. Inventory levels decreased to $14.0 million at October 24, 2009 from $16.1 million at July 31, 2009. The decrease was primarily due to the sale of existing on-hand inventory. Deferred revenue decreased to $13.9 million at October 24, 2009 from $15.5 million at July 31, 2009 due to the timing of service contract renewals and the revenue recognition of prior quarter product shipments.

Read the The complete ReportSCMR is in the portfolios of Third Avenue Management, Martin Whitman of Third Avenue Value Fund, George Soros of Soros Fund Management LLC.

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