Xylan

WADE DANIELS Staff Reporter Xylan Corp. reported record third-quarter sales and profits after nearly doubling the size of its workforce. The Calabasas-based company, which makes computer networking equipment, was a Wall Street darling when it went public in 1996. Its stock was trading in the $60-a-share range and its customers included such heavyweights as Alcatel SA and International Business Machines Corp. But Xylan’s stock slid to the mid-teens in 1997 after the company missed some important product-launch dates, and investors became concerned about decreased demand for its products in Asia. The stock was further hit this year by general weakness in the domestic stock market and slackened demand from Alcatel and IBM. But in recent months Xyland has hired 473 people, almost doubling its workforce to 1,003 and expanded its engineering, sales and manufacturing muscle. “Xylan has attracted some key people from other companies and beefed up in some important areas,” said Marc Woodward, a research analyst at Van Kaspar & Co. “It’s allowed them to overcome last year’s problems and meet their launch dates this year.” Xylan reported net income for the third quarter ended Sept. 30 of $10.4 million (22 cents per diluted share), a 125 percent increase over net income of $4.61 million during the same period last year. Its third-quarter sales of $91.1 million were dramatically up from $53.5 million in the year-earlier quarter. Founded in 1993, Xylan makes switches and other electronic components that allow computers to communicate with each other. Woodward said investors have been concerned that the company’s relatively small pool of customers put it in a precarious position. “Xylan could be really hurt if, say, IBM found a new solution or started making some of its own switching products,” Woodward said. However, the company has added 160 sales agents in the past year and significantly broadened its sales base. Sales to Alcatel and IBM represented 32 percent of Xylan’s third-quarter revenues, down from 40 percent the previous quarter, said Xylan spokesman Dave Rodewald. Sales to new customers more than made up for decreases in purchases from IBM and Alcatel, allowing Xylan to meet analysts’ expectations. Its stock price jumped $3 a share to $15 on its earnings release.