xml.10kwizard.com
Executive Summary
We develop and market optical networking products and provide services associated with such products for telecommunications service providers worldwide. Our current and prospective customers include domestic and international wireline and wireless network service providers and government entities with private fiber networks (collectively referred to as "service providers"). Our optical networking product portfolio includes fully integrated edge-to-core optical switching products, network management products and design and planning tools. We believe that our products enable network operators to efficiently and cost-effectively provision and manage optical network capacity to support a wide range of voice, video and data services.
Our business has been significantly impacted by the decline in the telecommunications industry which began in 2001 and continued for several years. This decline and the resulting spending constraints by service providers in the optical networking market, caused a decrease in the demand for our products which had an adverse impact on our revenue and profitability. Spending constraints in the optical networking market continued to ease modestly as service providers responded to increased market demand for broadband network services. Drivers for this demand include broadband internet access, high-speed wireless applications and other high bandwidth-intensive communications requirements. As a result, our revenues increased over the past two fiscal years as we met capacity expansion requirements for existing customers and introduced our products and services to new customers.
Total revenue for fiscal 2006 was $87.4 million, an increase of 34% compared to fiscal 2005. Total revenue for fiscal 2005 was $65.4 million, an increase of 47% compared to fiscal 2004. Our net income for fiscal 2006 was
Table of Contents
$19.4 million compared to a net loss for fiscal 2005 of $29.9 million. We continue to maintain a significant cost structure, relative to our revenue, particularly within the research and development organization. We believe that these investments have enabled us to advance our technology and secure new business. While our fiscal 2006 operating results improved, we expect that market conditions will remain challenging and we anticipate that we will continue to generate operating losses for at least the next fiscal year.
As we remain focused on improvements in our business, our management and Board of Directors will continue to consider strategic options that may serve to maximize shareholder value. These options include acquiring or making strategic investments in companies with either complementary technologies or in adjacent markets to add complementary products and services, expand the markets we serve and diversify our customer base.
On September 6, 2006, we acquired Eastern Research, Inc., an innovative provider of network access solutions for fixed line and mobile network operators worldwide. We believe that the addition of Eastern Research's products, technology and talent positions us to diversify and increase our customer base, expand our addressable markets, and broaden our customer offerings.
Our total cash, cash equivalents and investments were $985.1 million at July 31, 2006. Included in this amount were cash and cash equivalents of $169.8 million. We intend to fund our operations, including fixed commitments under operating leases, and any required capital expenditures over the next few years using our existing cash, cash equivalents and investments. We believe that, based on our business plans and current conditions, our existing cash, cash equivalents and investments will be sufficient to satisfy our anticipated cash requirements for the next twelve months. We also believe that our current cash, cash equivalents and investments will enable us to pursue the strategic options discussed above.
As of July 31, 2006, Sycamore and its subsidiaries employed approximately 246 persons, which was a net reduction of 30 persons from the approximately 276 persons employed on July 31, 2005. |
