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7 May 2007


Avanex’s revenues enter dip, but targets break-even by September quarter

For its fiscal third-quarter 2007 (to end-March), optical communications component and module maker Avanex Corp of Fremont, CA, USA has reported net revenue of $55.1m (which includes $3.2m from product lines of Avanex France S.A. – since renamed 3S Photonics – which was divested on 16 April). This is down slightly from $55.6m the prior quarter but still up 37% on $40.1m a year ago.

“Following an exceptionally strong growth quarter [to end-December], we maintained our revenue level, although it was impacted by annual pricing negotiations,” says chairman, president and CEO Jo Major.

However, “the continued focus on improving our cost structure generated further net loss improvements [from $10.2m a year ago and $8.6m last quarter to $6.7m],” adds Major. Gross margin was 19% (the same as last quarter), which is up from just 4% a year ago.

“In the third quarter, we continued to improve the fundamentals of our cost structure and flexibility of our operating model,” says Marla Sanchez, senior VP and chief financial officer. “The improvements from the margin expansion programs we launched three quarters ago offset annual pricing adjustments, allowing us to sequentially maintain our gross margin, reduce our operating expenses and improve our net loss.”

“Divesting our semiconductor fabs in France marks the final step in our major restructuring efforts,” adds Major. “We have succeeded in evolving our operating structure into a low-cost, flexible model that has the ability to react quickly to market demand and provide us with a solid foundation for growth”.

“We remain confident in the long-term strength and growth of our markets. The demand for video services and broadband access are the underlying trends fueling market growth,” he continues. “The factors indicating the strength of our markets include the announcements of multiple large capital spending programs at the carrier level, increasing installation trends for fiber, and solid booking trends announced by our customers. We are laying the groundwork for our next wave of growth by developing innovative technologies and strengthening our market presence in key growth segments within the overall telecommunications market.”

“In the near-term our sales will be impacted by cyclical deployment patterns of large capacity expansion projects, but we anticipate that we will return to growth in the latter part of the calendar year,” concludes Major. For its fiscal fourth-quarter 2007 (to end-June), Avanex expects revenue to fall slightly to $47-52m, but gross margin to rise to 20-25%.

Major says that the firm’s top priority remains achieving non-GAAP EBITDA break-even (earnings before interest, taxes, depreciation and amortization) no later than the September 2007 quarter (excluding the effect of non-recurring events, including costs associated with the French divestiture).

See related items:

3S Photonics launched on completion of Avanex France sale

Avanex France to become 3S Photonics

Avanex sells III-V fabs

Avanex reports record revenue (up 54%) and gross margin