Avaya Sees Profit Drop

Excluding restructuring charges, fiscal fourth-quarter earnings beat the Street estimate by 4 cents a share.
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posted a sharp year-over-year decrease in fiscal fourth-quarter earnings after the market close Tuesday.

The Basking Ridge, N.J., communications-network company posted net income of $48 million, or 10 cents a share, for the fourth fiscal quarter of 2006. Excluding restructuring charges, earnings were 17 cents a share.

These results are drop-off from the fourth quarter last year, when the company posted net income of $660 million, or $1.36 a share. Excluding a tax benefit and other items, earnings were 20 cents a share last year.

Fourth-quarter revenue was $1.36 billion, up 5% from the $1.3 billion it posted a year ago.

Analysts, on average, were looking for earnings of 13 cents on $1.34 billion in revenue.

Avaya incurred pre-tax restructuring charges of $62 million in the fiscal fourth quarter, primarily related to workforce reductions in the United States and Europe. The company expects to incur additional restructuring charges of roughly $65 million to $75 million in the first half of fiscal 2007 related to workforce reductions.

"We finished fiscal 2006 with a strong quarter," said CEO Lou D'Ambrosio. "The transition by enterprises to IP telephony and Intelligent Communications continued to drive growth in product sales and IP line shipments."

For the full fiscal year, Avaya posted net income of $201 million, or 43 cents a share, compared to net income of $921 million, or $1.89 a share, in fiscal 2005. Fiscal 2006 revenue was $5.15 billion compared to fiscal 2005 revenue of $4.9 billion. On average, analysts were expecting fiscal-year 2006 results of 46 cents a share on $5.12 billion in revenue.