Ungrateful Offspring Stings Avanex
Melanie Lindner, 12.27.07, 4:15 PM ET
After divesting its stake in former French subsidiary 3S Photonics back in March, Avanex is still suffering the consequences.
Shares of Avanex hit their lowest price in two years on Thursday after the fiber optic-based product maker reduced its second-quarter forecast. Avanex attributes the decrease to the premature ending of its distribution agreement with 3S.
On Thursday, Avanex filed an arbitration complaint in New York against 3S Photonics for various breaches of its obligations to its former parent company, including prematurely terminating its exclusive distribution agreement with Avanex. The technology company said it no longer expects to receive future distribution sales associated with 3S Photonics, which will reduce the company's total sales in the near-term.
Avanex now expects sales between $51.0 million and $53.0 million for the quarter ending Dec. 31. The Freemont, Calif.-based company previously forecast sales between $56.0 million and $58.0 million. In the second quarter of fiscal 2007, Avanex's sales reached $55.6 million.
Analysts polled by Thomson Financial predicted sales of $57.4 million in Avanex's second quarter.
Avanex said its third-quarter sales should be flat, or even slightly lower than its second quarter due to the 3S Photonics dispute. Analysts had been expecting earnings to rise in the third quarter to $60.1 million.
On news of the decreased forecast and pending arbitration, Avanex nosedived 29.2%, or 40 cents, to 97 cents, in heavy Thursday afternoon trading.
Avanex makes and sells photonic processors, which increase the speed and capacity of fiber-optic communication networks. Optical fibers are often used to transmit information over long distances. Fibers work better than metal wires because there is less interference.
us.rd.yahoo.com*http://www.forbes.com/2007/12/27/avanex-fiber-optics-markets-equity-cx_ml_1227markets17.html?partner=yahootix |
