Foundry Networks Says 1Q Orders Lower Than Expected
30 Mar 08:15
By Peter Loftus
Of DOW JONES NEWSWIRES
(This item was originally published late Thursday.)
NEW YORK (Dow Jones)--Foundry Networks Inc. (FDRY) said Thursday its first
quarter product orders have been lower than expected.
The San Jose, Calif., network equipment maker also disclosed in its annual
10-K regulatory filing that it was sued this month by competitor Nortel
Networks Corp. (NT), which alleged that certain Foundry products infringed on
Nortel patents. In addition, International Business Machines Corp. (IBM) last
year sent Foundry a letter alleging that Foundry products violated IBM patents,
Foundry said.
Foundry continues to "receive a lower than anticipated amount of product
orders for the first quarter of 2001 as a result of decreased or delayed
capital spending by existing and prospective customers and the slowing U.S.
economy," the company said in its filing. Foundry also had soft sales in the
fourth quarter.
The company expects its selling prices and gross margins to decline due to
its increased efforts to compete aggressively and to maintain sales levels.
Foundry officials couldn't immediately be reached for comment.
Weaker-than-expected sales at Foundry aren't a complete surprise. In the
fourth quarter, the company lowered its earnings estimates, which it met. In
January, Foundry lowered guidance for first-quarter sales.
What's more, there has been increasing evidence of a sharp slowdown in
capital spending by telecommunications service providers that buy equipment
from Foundry. And Foundry's biggest competitor, Cisco Systems Inc. (CSCO) has
strongly hinted its current quarter is running below expectations.
Another problem for Foundry and its competitors is an inventory buildup. In
its 10-K filing, Foundry said its provisions for excess and obsolete inventory
rose to $13.6 million in 2000 from $3.8 million in 1999. Inventory write-offs
rose to $4.4 million in 2000 from $1.6 million in 1999.
Regarding the patent matters involving IBM and Nortel, Foundry said it is
analyzing the validity of the claims and exploring potential courses of action.
Nortel's suit, filed in federal court in Massachusetts, seeks injunctive relief
and unspecified damages, Foundry said.
Foundry shares closed Thursday down 47 cents, or 6%, to $7.88 on volume of
2.5 million. Average daily volume is 4.3 million.
-By Peter Loftus, Dow Jones Newswires; 201-938-5267;
peter.loftus@dowjones.com
(END) DOW JONES NEWS 03-30-01
08:15 AM
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DJ Foundry Down -2: Some Analysts Not Surprised
30 Mar 11:16
By Peter Loftus
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Foundry Networks Inc. (FDRY) shares fell to a new low
Friday after the network equipment maker made cautious comments about its first
quarter in its annual report Thursday.
The San Jose, Calif., company said in its 10-K regulatory filing it continues
"to receive a lower than anticipated amount of product orders for the first
quarter of 2001 as a result of decreased or delayed capital spending by
existing and prospective customers and the slowing U.S. economy."
Foundry officials couldn't immediately be reached for comment Friday.
Some Wall Street analysts played down the significance of Foundry's
disclosure. They said Foundry wasn't necessarily pre-announcing
weaker-than-expected first-quarter results. Some analysts said they weren't
surprised that Foundry has seen weakness in the first quarter because the
entire sector is soft.
JPMorgan H&Q analyst Erik Suppiger said he had concluded a few weeks ago that
Foundry's first-quarter results would miss his expectations. In early March, he
lowered his earnings estimate to 13 cents a share from 15 cents, and cut his
revenue estimate to $95.7 million from $105 million. His new earnings estimate
matches the consensus, according to Thomson Financial/First Call.
In January, Foundry said it expected to post first-quarter revenue of $100
million to $110 million. The company hasn't publicly changed its guidance since
then.
"We do feel the networking sector is weak and we do think Foundry has
exposure to weak segments," Suppiger said.
He noted that Foundry has historically gotten much of its revenue from
telecommunications service provider customers. There has been increasing
evidence that service providers have sharply cut capital spending, a condition
that has hurt the overall networking sector. Some networkers, however, have
less exposure because they sell a higher proportion of products to corporate
customers than Foundry.
Foundry also disclosed in its 10-K filing that it was sued earlier this month
by competitor Nortel Networks Corp. (NT), which alleged certain Foundry
products infringed on Nortel patents. Foundry also said it had received a
letter from International Business Machines Corp. (IBM) last year, which also
alleged patent infringement.
Foundry shares recently changed hands at $6.19, down 21.4%, or $1.69, on
volume of 3.3 million compared with average daily volume of 4.3 million.
Earlier, shares fell as low as $6.13, displacing the previous low of $7.88
reached Thursday.
(MORE) DOW JONES NEWS 03-30-01
11:16 AM
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