The already bleak telecom sector just got a little more depressing.
Applied Micro Circuits
reported woeful financial results after the market closed Wednesday, adding to the growing pile of evidence that a chip-stock recovery remains far off. But their stocks rose after hours as investors sought to put on a happy face.
Adding to the joy, Applied Micro took a massive $3.1 billion charge to write down the value of acquisitions it made during the telecommunications spending boom that peaked in 2000. In doing so the company became the latest to acknowledge that its growth in recent years was fueled by overspending.
Joining the Big Leagues
Following a trail blazed by the telecommunications equipment companies that are its customers, Applied Micro Circuits took the writedown because of a "dramatic and unanticipated decline" in revenue. It also said that it took a much smaller charge of $15.9 million to cover the cost of excess and obsolete inventory. Telecom companies like Nortel have booked similar charges in the past few months. The entire telecommunications sector, from suppliers like Applied Micro to giants like Cisco, has been caught red-handed as telecom spending has dried up in 2001.
Applied Micro reported a loss of 5 cents a share for its first fiscal quarter ended June, in line with reduced expectations, according to Thomson Financial/First Call. That reverses earnings of 11 cents a share in the year-ago first quarter. Including the charge, Applied Micro lost $11.18 a share in the latest period.
Revenue also met expectations at $41.2 million but shrank by 44% from the year-ago and dropped 66% from the fourth quarter.
While the size of the acquisition charge was surprising, to say the least, Applied Micro's financial numbers were within the ranges it had warned about at the end of June. At that time, it said to expect revenues of $40 million to $45 million and an operating loss of 4 cents to 6 cents a share.
Applied Micro didn't even bother to give an outlook for a recovery in its press release, saying only that business conditions remain weak. It did say though that it would take an $8 million to $11 million restructuring charge in the second quarter ending in September to cover a 5% workforce cut and plant closings.
Applied Micro Chief Executive Dave Rickey tried to strike a positive tone during the conference call, saying that he still believed that the June quarter would end up marking the bottom in terms of revenue because of the slowdown in cancellations. He said that revenue would be flat to slightly up in the second quarter ending in September as compared to the June quarter. If revenues are flat, he expects to book another loss of 5 cents a share.
More Red Ink
Broadcom also reported a loss Wednesday because of weak demand. The company lost 16 cents a share in the second quarter ended in June, reversing earnings of 24 cents a share in the year-ago quarter. Including charges related to acquisitions, stock options and taxes, the company lost $1.73 a share.
Broadcom brought in $210.9 million in revenue for the quarter, down 14% from the year-earlier quarter and off 34% from the previous quarter. Revenues were within the company's guidance, issued in early June, for a revenue decline of 32% to 35%. Analysts, however, were expecting $230 million in revenue, according to Thomson Financial.
Applied Micro gained 66 cents, or 4%, to $17.66 in after-hours trading on Island. Broadcom fared even better, picking up $1.81, or 5%, to trade at $40.81.