ECI Telecom (Nasdaq:ECIL) today announced consolidated results of operations
for the first quarter of 2001 ended March 31, 2001.
Revenues for the first quarter of 2001 were $252.5 million compared to $263.0
million recorded in the first quarter of 2000. Gross loss, (including inventory
write-off) were ($26.4 million) compared to $119.8 million gross profit in the
first quarter of 2000. On a pro forma basis (excluding one-time items), gross
profits were $68.6 million compared to $119.8 for the same quarter last year.
The operating loss for the first quarter of 2001 (including one time items:
impairment of assets, restructuring expenses, inventory write-off, allowance for
doubtful debts, capital losses) was ($242.6 million). On a pro-forma basis
(excluding one time items), operating loss for the first quarter, 2001, was
($48.5 million) compared to operating income of $17.5 million for the same
period last year.
The net loss for the first quarter of 2001 was ($256.4 million), or ($2.77)
per diluted share compared to net income of $23.0 million or $0.54 per diluted
share for the same period last year. On a pro forma basis, the net loss was
($42.0 million), or ($0.45) per diluted share compared to net income from
continuing operations of $20.3 million or $0.21 per diluted share last year.
Commenting on the results, Doron Inbar, President and CEO
said, "ECI Telecom's results for the first quarter of 2001 reflect the
continuing worldwide slowdown in telecom equipment sales, the Demerger, and our
internal restructuring processes. As of January 1, 2001, we completed the
division of our business into 5 subsidiary companies, each with an independent
management team, with the final allocation of assets expected this summer. At
the end of April, we announced additional significant restructuring measures
with a series of cost cutting measures, including a reduction in headcount and a
cut in senior management salaries. These measures will be reflected as of our
second quarter 2001 results.
"Assuming that we reach projected revenue goals, we believe that
the reduced level of expenses contemplated by this restructuring will enable the
company to reach profitability in the 4th quarter of this year. In addition, ECI
is in the process of outsourcing various functions and of optimizing its
facilities. We have also made progress in the process of spinning off other
non-core businesses.
"The current difficult environment is also reflected in our balance sheet.
The sudden and unexpected decline in the telecom market turned a component
scarcity problem into a situation of excess inventory, which we had to write
down this quarter. The inventory write-off also reflects the discontinuance of
certain aging product lines. Other write-offs taken this quarter derive from the
discontinuance of non-core activities or activities that do not offer a positive
financial contribution. The operating loss, resulted in negative cash flow.
"This quarter we are publishing unaudited pro forma operating results for
each company for the first time, excluding the effect of one-time items for each
of the subsidiaries. Each company already has a CEO and an established
management team. Each of the companies has a core board of directors and we are
currently talking with prominent industry and business leaders about joining
their boards, in some cases as Chairman. In the meantime, our highest priority
is to get expenses in line and then continue to monitor them closely in relation
to revenues."
Review of the 5 Companies
Inovia Telecoms is a leader in the multi-service access gateway market and
specializes in broadband DSL. Featuring competitive mass deployment capabilities
and a multi-service xDSL 'all-in-one' platform, its Hi-FOCuS solution enables
operators to rapidly deploy advanced high-speed services to residential and
business subscribers.
First quarter 2001 revenues for Inovia reached $63.6M compared to $62.7M for
the same period last year. Excluding one-time items, Inovia recorded an
operating loss of ($30.7M) for Q1, 2001, compared to ($7.2M) for the same period
last year. During the quarter, demand for Inovia's Hi-FOCuS xDSL broadband
access solution remained strong and the Company continued to ship significant
quantities of its systems to customers in Europe and the Asia Pacific region.
Inovia won several important tenders in Europe including an extension of an
agreement to supply wideband point-to-point systems to a major operator. Inovia
continued to strengthen its position in the Video-over-DSL market, participating
in ongoing trials with major carriers.
Lightscape Networks is a supplier of intelligent optical networking solutions
for the metro and regional optical markets. Lightscape provides fully managed
and scalable optical networks allowing "just in time" seamless coupling of
network growth to the changing service needs of the operator, while delivering a
variety of services (Lambda, data, voice, video) over DWDM, Sonet/SDH or Gigabit
Ethernet interfaces.
Revenues for Lightscape Networks in the first quarter of 2001 were $53.4M
compared to $62.9M for the same period last year. Excluding one-time items,
Lightscape recorded an operating loss of ($4.4M) for the first quarter, 2001,
compared to an operating profit of $8.4M for the same period last year. Market
weakness has slowed the penetration of new products, reduced visibility and
affected gross margins. However, during the fourth quarter Lightscape Networks
successfully released its next generation optical platform, the XDM, for mass
deployment. The XDM has been carrying live traffic in several customer networks
and has undergone trials in Germany, France, Holland, and the UK.
Enavis provides bandwidth management solutions. Its current flagship product
is the T::DAX, digital cross connect platform. Its new next generation
optical/data platform is targeted for trials by the end of 1H02.
First quarter, 2001 revenues for Enavis reached $36.8M, compared to $32.2M
for the same period last year. Excluding one-time write-offs, Enavis recorded an
operating income of $0.3M in Q1, 2001, compared to an operating profit of $4.7M
for the same period last year. The growth reflects the increasing interest in
Enavis' bandwidth management products. Despite difficult market conditions,
Enavis increased its sales in North America with both repeat and new customers.
InnoWave is a leading supplier to the Fixed Wireless Access (FWA) market
worldwide. InnoWave delivers a cost effective, easy to deploy and reliable
alternative solution to wireline systems.
First quarter 2001 revenues for InnoWave totaled $35.2M compared to $22M for
the same quarter last year. Excluding one time items, InnoWave recorded an
operating loss of ($1.7M) in the first quarter, 2001, compared to an operating
profit of $1.5M for the same period last year. During the quarter, InnoWave
continued to supply large quantities of its MGW systems to GVT, Brazil, which
has so far connected over 50,000 subscribers to its wireless network.
Significant quantities of the MGW systems were also shipped to Telmex, Mexico
during the quarter and other new and repeat orders were received. Due to the
slowdown in the telecom sector, particularly in the US, InnoWave has
restructured its broadband activities during the quarter. The Company also made
significant progress in the development of the eMGW system, a Wireless DSL
system which is in demand from current and new customers. Commercial deployment
is expected in Q1, 2002.
Next Generation Telephony Solutions (NGTS)
is dedicated to bringing carrier
class, toll quality solutions and value to packet telephony. NGTS focuses on
providing wire line quality trunking gateways, supporting MGCP, H.248 and H.323.
NGTS offerings includes SIP application servers.
Revenues for NGTS in the first quarter of 2001 were
$18.2M compared to $38.9M for the same period last year. Excluding one-time
items, NGTS recorded an operating loss of ($5.7M) compared to an operating
profit of $7.5M for the same quarter last year. Most of the revenue decrease
is attributable to a decline in sales of legacy DCME products, which
nevertheless remain profitable. The weak sales reflect the financial
difficulties faced by customers of the ITX 1000 (Voice over IP carrier-class
solution). NGTS expects sales for its ITX 1000 VoIP solution to pick up in the
second quarter. Several global operators have approved the solution and will
use it for the interconnection of traffic in their network.
ECtel, in which ECI holds 75%, had a strong quarter with revenues up 38.2% to
$18.2 million compared to $13.2 million for the first quarter of last year.
Inbar continued, "At this point, our newly separated companies are operating
independently. All are moving quickly to align expenses with market demand and
are monitoring both expenses and cash flow on a weekly basis. ECI's central
functions, which support our five Companies, were recently strengthened via the
appointment of a Chief Operating Officer, who is focused on cost cutting, and a
Chief Marketing Officer, who is promoting the Companies to the ECI customer
base. We continue to talk with potential strategic telecom and financial
investors. In addition, we continue to pursue our objective of creating separate
publicly traded companies, subject to market conditions.
"We have taken a number of painful measures this year to bring our expenses
in line with anticipated revenue levels. We believe that at anticipated revenue
levels, these measures will lead us to profitability towards the end of the
year".
Published by Israel's Business Arena on May 23,
2001.