It used to be that
problems stemmed from a lack of big customers. Now, the problems start with the fact that big customers are spending more like small ones.
The Chelmsford, Mass.-based optical networking shop said Tuesday evening that failures among upstart telcos and sharp reductions in spending by established customers would cause fourth-quarter revenue to fall short of estimates by 36%. The bad news was an extension of what Sycamore
said last month, when it became the first networker to warn Wall Street of a growing inventory pile and take a significant writedown.
Chief among the sales-pullback culprits was a decision by major customer
to slash 2001 equipment spending by 38%, to $2.3 billion. Sycamore also said onetime largest customer
, which has also cut spending plans for the year, has already spent most of the $400 million it agreed to spend with Sycamore.
After dropping 7 cents in regular trading to close at $9.32, Sycamore slid 54 cents, or 5.8%, to $8.76 in after-hours trading on
Still No Visibility
Sycamore said that longer-than-expected sales cycles and defective parts from an unnamed component supplier were contributing to a dim short-term outlook. The company declined to give any forecast for fiscal 2002, which begins in August.
The Mesh Mess
The company missed lowered earnings expectations for its fiscal third quarter by a penny, according to
Thomson Financial/First Call
. The company posted a loss of $46.2 million, or 19 cents per share, excluding one-time costs such as restructuring and payroll tax on stock options. Revenue fell to $54.2 million, 11% below the $60.9 million analysts were expecting and below the year-ago $59.2 million.
Dan Smith, Sycamore's CEO, downplayed the negative aspects of the earnings report by pointing to cost-cutting efforts that have eliminated 132 jobs. Smith also said Sycamore was well on its way to resolving the technology problems with components.
"Sitting where we are today, we understand the issue," Smith said on a conference call with analysts after the earnings release. "We expect to have it resolved this quarter."
Even so, the bad news coming out of this release points up once more just how sharply the networkers' fortunes have fallen in recent months. For example, Sycamore is now conceding that some of its would-be customers will demand third-party certifications before they'll buy new Sycamore gear. Sycamore originally
thumbed its nose at the process, saying the costly, nine-month-long ordeal catered to the whims of old-line telcos, spewing red tape that stifled technological innovation. Even as recently as December, Sycamore felt that it could play by its own rules.
But as they say, money, or perhaps the lack of it, changes everything.