On the eve of its merger with Dialogic Corporation, Veraz Networks Inc. (Nasdaq:VRAZ) reported a heavy GAAP-based net loss of $6.2 million ($0.14 per share) for the second quarter of 2010, more than double it net loss of $2.9 million for the corresponding quarter of 2009. Non-GAAP net loss was $5.3 million ($0.12 per share) compared with a non-GAAP net loss of $1.9 million for the corresponding quarter.
Veraz's share price fell 18.2% on Friday to $0.63, giving a market cap of $28 million, 43% less than the value when the Dialogic merger was announced. The firm faced merger related expenses and lower revenue. The company will hold a special shareholders meeting on September 30, and the merger is scheduled to take place in October.
Veraz develops multimedia generation network (MGN) application, control, and bandwidth optimization products, as well as software switches for telephony. The merger with Dialogic, a provider of mobile, video, IP and TDM solutions, will be in the form of a share-swap at a 30-70 ratio. Dialogic shareholders will own 70% of the merged company, and Veraz shareholders will own 30% of it. The merged company will continue to be listed on Nasdaq, under the name Dialogic, and Dialogic president and CEO Nick Jenson will manage the company. Veraz president and CEO Douglas Sabella will be appointed president and COO
In the merger announcement Veraz said that the merged company would have $250 million in annual revenue and 1,000 employees, including 170 in Israel.
Veraz's revenue fell 13% to $14.7 million for the second quarter from $16.8 million for the corresponding quarter. Sabella attributed the drop in revenue to "restrictions in shipping already accepted orders in India - an issue that is being experienced by many of the technology companies selling into Indian carriers. The impact of the Indian restrictions amounted to $1.5 million for the second quarter."
Other Israeli companies, including Ceragon Networks Ltd. (Nasdaq: CRNT; TASE:CRNT), Orckit Communications Ltd. (Nasdaq: ORCT; TASE: ORCT), and ECI Telecom Ltd. are facing similar propblems.
Sabella said, "Whereas we normally recognize $2 million in quarterly revenue from India, we could not close most of the deals in the second quarter." He added, "We received a $600,000 order in Africa, which we could not deliver, and a $1 million order, which was transferred to the third quarter."
In addition to the drop in revenue, Veraz posted a $2 million increase in its administration and general expenses to $5.1 million for the second quarter, which contributed to the higher net loss. Three months ago, the company announced the merger with Dialogic, and merger related costs apparently contributed to the increase in this item.
Veraz had $30.6 million in cash and cash equivalents at the end of June, and no debt.
Published by Globes [online], Israel business news - www.globes-online.com - on August 15, 2010
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