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ECI beats guidance with $263m Q3 revenue

Company turned cash-flow positive in the third quarter, explaining share's leap all week

Although it beat its own forecasts, the market evidently expected favorable results from ECI Telecom (Nasdaq:ECIL) for the third quarter. ECI stock leaped almost 33% over five trading days, and now we know why.

Third-quarter revenue increased to $262.9 million, compared with ECI's forecast range of $250 million to $255 million.

But it is still 1.3% below the company's second-quarter result and 15.3% below its revenue in the third quarter of 2000.

ECI had warned of sliding quarterly sales by Enavis, its unit for bandwidth management solutions. Ultimately Enavis reported $17 million third-quarter revenue, the ceiling of ECI's forecast. In the second quarter its revenue was $30.5 million.

Enavis is modifying its business model and reducing costs, hoping to improve performance in 2002.

Operating loss dropped to $16.8 million, compared with $24.8 million in the second quarter, and a profit of $7.4 million in the third quarter of 2000.

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Net loss edged below forecasts at $21.4 million or 23 cents profit per share, compared with the expected 24 cents per share.

ECI lost 28 cents per share in Q2, and netted 9 cents per share in the parallel.

The company hasn't finished with its one-time charges, though. For the third quarter it wrote down investments by $56.8 million, mainly on amortization of goodwill following the merger with Tadiran Telecommunications (in accordance with Statement of Financial Accounting Standards No. 121 (FAS 121), "Accounting for the Impairment of Long-Lived Assets to be Disposed of").

Including one-time charges, ECI's pro forma net loss deepened to $76.8 million or 83 cents loss per share, compared with 7 cents EPS in the third quarter of 2000.

"As the crisis in the telecommunications industry continued to deepen, we are pleased to report only a minimal sequential decline in revenues, a reduction in our pro forma operating loss and an improvement in our financial condition," stated president and CEO Doron Inbar.

ECI ended the third quarter with inventory of $331 million, $36.1 million less than in the second quarter. In the first quarter ECI wrote down its inventory by $90.5 million.

Cash rose $2.1 million from Q2 to $202.1 million (including short-term investments). In the first quarter ECI burned up $190 million, reduced to $32 million in the second quarter.