Orckit Communications Ltd. (Nasdaq: ORCT; TASE: ORCT) has won an initial $12 million, plus applicable interest and costs, in an arbitration ruling from the International Centre for Dispute Resolution (the international division of the American Arbitration Association - ICDR) in New York. The award covers damages Orckit incurred in 2001-03 from Virata, a supplier of semiconductor chips that was acquired by Conexant Systems Inc. (Nasdaq:CNXT). The chips were used in Orckit's legacy DSL products.
Conextant has notified the US Securities and Exchange Commission (SEC) that it will appeal the arbitration decision.
Orckit intends to seek an additional award of costs, including attorneys' fees, expenses and interest, as allowed by the ICDR's interim award. The company added that it cannot estimate the complete payment it will recover, or the outcomes of any efforts by Conexant to challenge the ICDR's award.
The original cooperation, licensing and deliveries contract with Virata was signed in 1998. Virata was later acquired by Globespan, which was acquired by Conexant in 2004. The contract included a clause stipulating the prices and terms for the sale of processors to Orckit. Orckit claimed that Virata breached the contract in 2001, by not supplying the processors and that stipulated prices and that it sold them to three other customers at a lower price. Virata also failed to notify Orckit in advance that it was terminating the contract.
Ocrkit claimed $30 million in direct and indirect damages. The three-judge arbitration panel heard the case between January and April.
Orckit VP marketing Gad Rosenfeld said, “We’re disappointed that we haven’t been able to report wins with new customers earlier. However, we’re optimistic that we’ll still be able to announce new wins this year.” He made the comments at the RBC Capital Markets North American Technology Conference in San Francisco last week, in response to a question by a member of the audience. The question reflected investors’ worries about the company. The company’s contract with Japan’s telecommunications carrier KDDI Corp. (TSE:9433), worth hundreds of millions of dollars is all very nice, but shareholders expect to see more contracts for products of Orckit subsidiary Corrigent Systems Ltd.
Corrigent is Ockit’s sole business. The company has developed its CM-100 solution for building optical communications networks that support triple play. Orckit has a market cap of $130 million.
Orckit today published its financial report for the second quarter of 2007. The company posted a net loss of $6.4 million ($0.40 per share), compared with a net profit of $294,000 ($0.02 per share) for the corresponding quarter. Revenue plummeted to $1.9 million from $14.7 million. In its guidance for the third quarter, the company predicts a net loss of $8.4 million ($0.53 per share) on $1.5 million revenue. The guidance “does not take into account income or losses due to valuation of conversion terms included in our $25.8 million principal amount of convertible subordinated notes that were issued in March 2007.”
Published by Globes [online], Israel business news - www.globes.co.il - on August 15, 2007
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