Sycamore Falls on Q3 Warning

Sycamore Networks (Nasdaq: SCMR)fell US$2.16 to $6.91 in early trading Friday on news that the company’sthird-quarter revenue and earnings will miss targets after a sudden drop incustomer demand.

“Due to market conditions, it is necessary that the company reduce a portionof its operating expenses,” said Sycamore president and chief executiveofficer Dan Smith.

The Chelmsford, Massachusetts-based company is the latest in a string oftelecommunications equipment makers to say it is losing money as a result ofweak and canceled customer orders.

Sycamore said that revenue for the period would fall between $50 million and $60million, roughly $100 million to $110 million less than expected.

Net loss is now expected to be in the range of $38 million, or 16 cents per share, and$45 million, or 19 cents per share. Analysts surveyed by First Call/ThomsonFinancial had expected earnings of 5 cents per share on revenue of $151.8million.

During the same period last year, net income was $11.7 million, or 5 cents pershare, on revenue of $59.2 million.

Sycamore also said that it will slash its workforce by 12 percent, or 140employees. Among the other initiatives the company will take in a bid totrim costs involve the consolidation of two transport business units intoone entity, as well as a delay of facility expansion, and inventory and fixedasset write-downs.

These actions will result in a one-time charge of $140 million to $150million.

“We are taking the necessary steps to improve our operating performance byfocusing on key projects for our customers while taking a prudent approachto managing our cost structure,” said Smith. “We believe that this approachwill allow us to immediately capitalize on new opportunities as marketconditions improve.”

Sycamore’s quarterly results warning also cast a gloom over other networkingequipment manufacturers in the sector. Juniper Networks (Nasdaq: JNPR) wasdown $4.36 to $32.80, while Ciena (Nasdaq: CIEN) dipped $2.75 to $35.94.

Similarly, Internet infrastructure firm Extreme Networks (Nasdaq: EXTR) alsodipped early Friday, losing $2.11 to $13.90after it announced that its fiscal third-quarter earnings and revenue wouldfail to meet expectations. Extreme also plans to pink-slip an unspecifiednumber of workers, cut its cost structure by 10 percent, and take totalcharges of $47 million.

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