DJ 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 |
