From Dow Jones:
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May 4, 1999
Dow Jones Newswires
Newbridge Expects To Fix Order Intake Problems Over 2 Qtrs
Dow Jones Newswires
By Ben Dummett
TORONTO -- Newbridge Networks Corp. (NN), a networking equipment vendor, predicts it will take the next two fiscal quarters to fix the order intake problems behind its profit warning for its fourth quarter.
Newbridge, Kanata, Ont., warned just after the market's close Tuesday that its earnings for the fourth quarter ended April 30 will fall sharply below analysts' expectations because its manfacturing capability failed to handle the company's order flow for its equipment.
Newbridge said it sees revenue of C$460 million in the fourth quarter, but the total would have been C$115 million higher at C$575 million without the manufacturing problems, Alan Lutz, Newbridge's chief operating officer, told Dow Jones in a telephone interview. The company is now shipping the C$115 million worth of equipment that it was unable to during the fourth quarter, Lutz said.
Lutz said it will take the first two quarters of fiscal 2000 to fix the company's order intake and manufacturing capabilities, forcing the equipment vendor to take an a conservative view for revenue during this period.
Lutz declined to give revenue and earnings projections for the next two fiscal quarters.
However, when asked if the company would still increase earnings per share as earlier projected by 50%, Lutz indicated this target will be met. "We haven't changed our operating plans that we took to the board," he said.
Still, investors will likely be wary of any of the company's earnings projections, since the latest profit warning is the second in as many quarters.
On a conference call with analysts, Alan Lutz of Newbridge Networks Corp. (NN) said that, of the C$460 million the company booked in revenue for the fiscal fourth quarter, about C$320 million came from sales of wide area network packet equipment and C$140 million from time division multiplexing equipment.
Lutz also said the company's three biggest customers for its high-growth ATM business in its fourth quarter were Germany's Siemens AG (G.SIE), and SBC Communications Inc. (SBC) and Bell Atlantic Corp. (BEL) of the U.S.
Despite the inability to meet all orders, Lutz said the company doesn't expect to lose any customers, as demonstrated by the company now shipping the equipment backlog from the fourth quarter.
To fix the order intake and manufacturing problems, Lutz suggested the company will look at hiring sub-contractors to help it meet order demand, streamlining its quality control testing of equipment, and introducing incentives to its sales force to book sales earlier in a given quarter.
Newbridge's order intake and manfacturing that hurt the company's profit for the fourth quarter became evident when the company first issued its profit warning for the third quarter.
Newbridge blamed the third-quarter shortfall on its failure to have enough inventory of certain parts in stock to meet orders.
In a telephone interview with Dow Jones, Lutz said the inventory problem has turned out to be a "harbinger" of the current problems.
Newbridge didn't detect the severity of the problems until now, Lutz said, because it had been focused on improving Newbrige product offerings and its sales force.
-By Ben
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