Wednesday, January 31, 2007

ECI Reports Q4 Revenues, CFO Steps Aside

ECI Telecom reported Q4 2006 revenues of $154 million, compared with $169 million recorded in the fourth quarter of 2005 and $170 million recorded in the third quarter of 2006. For the entire year 2006 revenues grew 4% compared with 2005 to reach $656 million. Net income (GAAP) for Q4 was $2.3 million, or $0.02 per share on a fully diluted basis, compared with fourth quarter 2005 net income of $7.6 million, or $0.06 per diluted share. Some highlights:

  • Revenues for the Optical Networks Division continued to rise for the 14th consecutive quarter, totaling $103 million for Q4, up from $88 million in the comparable quarter last year and $101 million the third quarter of 2006. The company cited strong demand in emerging markets, primarily for cellular backhaul solutions.

  • Revenues for the Broadband Access Division totaled $40 million for Q4, down from $68 million in the comparable quarter last year and, as anticipated, down from $57 million in the third quarter of 2006. The sequential decline in revenues was attributed to lower revenues from one of the Division's principal customers. For the year, the Division's sales totaled $225 million, compared with $262 in 2005.

  • Revenues for the Data Networking Division (formerly Laurel Networks) were $2.5 million for Q4, up from $1.9 million in the fourth quarter of 2005 and compared with $3.7 million in the third quarter of 2006. On a GAAP basis, the operating loss for the Division totaled $11.2 million, while the pro forma, non GAAP operating loss was $7.3 million, reflecting continued high R&D spending.

  • In January, Veraz Networks filed a second amendment to its S-1 Registration Statement with the SEC as part of its proposed initial public offering. ECI, which holds 33% of Veraz.

  • For 2007, ECI expects its revenues to increase in a range of 4-8% compared with 2006 and net income to grow faster than revenues.

  • ECI's Chief Financial Officer (CFO), Giora Bitan, has decided to step down as CFO in order to resume his venture capital career. ECI has launched an external search to find Bitan's successor.

"Our Optical Networks Division completed another year of exceptional growth and increased market share. Our optical business grew 17% year over year, higher than industry average. Over the past few years, ECI has established itself as a leading provider of innovative optical transport solutions, primarily in emerging markets, where a significant increase in cellular subscribers creates a strong demand for our cellular backhaul solutions. A point in case is our success in India where our revenues more than quadrupled in 2 years from $24 million to over $100 million in 2006. At the same time, the Division also continues to benefit from further deployment of 3G networks by its European customers."
"The growth of our optical business was offset, in the second half of 2006, by the slowdown in our broadband access business. As we previously indicated, sales of our Broadband Access Division declined in the third and fourth quarters due to weaker demand from the Division's two principal customers, but we expect them to gradually recover during 2007, starting already in the 1st quarter. Our two principal broadband customers are in the process of transforming their networks to support advanced triple play services; however, for regulatory and other reasons, deployment is slower than originally anticipated. Despite this slowdown, we expect to continue to play a major role in the build out of these customers' next generation broadband networks," stated Rafi Maor, ECI's President and CEO.


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