82.1 F
San Fernando
Thursday, Mar 28, 2024

Cost-Cutting Helping MRV Trim Money-Losing Ways

Cost-Cutting Helping MRV Trim Money-Losing Ways By CARLOS MARTINEZ Staff Reporter After years of successive losses, Chatsworth-based MRV Communications is showing signs of turning the corner toward profitability. A once high flier in the network infrastructure business, MRV has been hit hard by a tech downturn that saw it lose $479.8 million in 2002 and $326.4 million in 2001. But it’s most recent numbers show the company’s cost-cutting efforts are starting to pay off even as it posted another money-losing quarter. For the period ending June 30, the company reported a $9.8 million loss or $0.10 per share on sales of $62 million, compared to a year earlier when it reported an $18.8 million loss or $0.21 per share on $61.6 million in sales. “The company continues to be aggressive on cutting costs and focusing on a return to profitability,” said Shaul Eyal, an analyst with CIBC World Markets. MRV’s improved revenue of $62 million for the last quarter beat Eyal’s estimates by nearly $5 million, but much of it was due to orders by a European firm whose name was not disclosed by MRV, which contributed $8 million in revenue for the quarter. The deal with the customer is not expected to generate much revenue in succeeding quarters, Eyal said, other than maintenance revenue. While domestic sales have been declining, the company’s European sales have continued to grow during the quarter, pushing its percentage of overall sales there from 69 percent second quarter last year to 75 percent a year later. Part of MRV’s growth comes from the company’s move into Ethernet networks with data and media conversion capabilities as well as related network components for business. The company’s main focus is selling equipment and components to telecom firms. Stock listless Despite the optimistic new numbers, the company’s stock has not shown much improvement in recent months. It has been hovering around $2.10 much of this week, with a 52-week high of $2.67, reached on June 12, and a 52-week low of $0.60, reached on Oct. 18. Noam Lotan, MRV’s president and CEO, said the company’s new optical products helped improve its overall sales. Most of the company’s growth in the second quarter came from system integration activity in Europe, Lotan said. Although Lotan predicted the company will reach profitability by next year, Eyal was more cautious, citing the still sluggish tech market. A key to the company’s efforts will be the continuation of its cost cutting strategy as part of its reorganization plan. MRV’s troubles are not unique. Other equipment suppliers have also been hit hard by an economy that has forced tech giants like Alcatel, Cisco and others to cut back on equipment orders. MRV took a further hit when it folded back its struggling optical components unit, Luminent, in 2000 after spinning it off just three years earlier. Besides financial losses the company also suffered the death of its CFO, Edmund Glazer, who was aboard the first plane to hit the World Trade Center on Sept. 11, 2001. With revenue dropping from $332.8 million in 2001 to $252.5 million in 2002, the company began cutting back its operations and eventually laying off 750 of its 2,200 employees last year. Worldwide operations Besides its Valley headquarters, the company also has facilities in Argentina, China, Denmark, France, Finland, Germany, Israel and Japan. MRV also went on to streamline its operations by combining many of its sales units which had targeted different segments. The company also focused on new products, such as its new fiber optic platform capable of carrying up to 16 high bandwidth channels. Although the company’s cost cuts and refocus into Ethernet and core network insfrastructure components has been helpful, it must still improve its operation if it hopes to turn the corner, Eyal said. “We would still like to see more quarters of sequential revenue growth and a much lower quarterly cash burn rate,” he said. The company ended its last quarter with $91.8 million in cash or about $10.9 million less than the previous quarter when it spent $10.9 million in cash.

Featured Articles

Related Articles