CEOs Discuss the Networking Market: Cisco, Avanex, JDSU, Foundry

 |  Includes: AVNX, CSCO, FDRY, VIAV
by: SA Editors

Quotes from CEOs and CFOs on recent earnings conference calls, discussing their companies and markets:

Cisco Systems, Inc. (NASDAQ:CSCO)

John Chambers - President and CEO

The key financial highlights for Q2 include the following: Record revenue of approximately $8.4 billion, a 27% year-over-year increase and a Cisco standalone increase of approximately 18%, which was above our standalone guidance of 14 to 15% provided in the Q1 conference call. This is the fastest standalone year-over-year revenue growth we have seen in several years. As a reminder, our long-term revenue guidance is for growth in the 10 to 15% range...

Revenue growth from our key products and services was extremely strong across all categories...

n terms of our revenue guidance for Q3 fiscal year '07, we are going to lead with the total growth year-over-year, which will now include two months of comparison for Scientific Atlanta, as the acquisition closed in the first month of Q3 of last fiscal year. We will then follow with Cisco's standalone growth, which does not include Scientific Atlanta.

Therefore, our revenue guidance for Q3 fiscal 2007, including our usual caveats as discussed in prior calls, is for year-over-year revenue growth of 19 to 20%. We are also increasing our guidance for Q3 Cisco standalone year-over-year revenue growth to approximately 15 to 17%. This is higher than any recent quarterly guidance from a standalone perspective that we have provided.

To put in this perspective relative to prior quarters' guidance, this compares to the standalone guidance of 14 to 15% for Q2, which at that point in time was the highest standalone guidance that we provided in many years' quarters.

Avanex Corporation (AVNX)

Jo Major - Chairman, President & CEO

Revenue grew to a new record $55.6 million, up 9% from $50.9 million in the prior quarter, and up 54% from the second quarter of the prior fiscal year. We saw strong growth from our new products, led by our integrated amplifier developed for next generation network deployments, as well as solid growth from our transmission products and initial revenue from the submarine market.

Our top customers in the quarter were Alcatel at 28% of revenue, Tellabs at 21% of revenue, and Infinera and Cisco, each at 10% of revenue. We were also pleased with our gross margin improvement this quarter. For the second quarter in a row we achieved a new gross margin record. Gross margin grew to 19% from 10% in the previous quarter. Margin expansion will continue to remain the key initiative for the Company throughout the fiscal 2007.

GAAP net loss in the quarter was $8.6 million or a loss of $0.04 per share, compared with a net loss of $9.7 million or $0.05 per share in the previous quarter, and a net loss of $18.5 million or a loss of $0.13 per share in the second quarter of the prior fiscal year...

In calendar 2007, we expect the market in the first half of the year to be roughly flat due to changes in certain large deployment schedules, followed by growth in the second half of the year. We continue to see the submarine market firming up for calendar year 2007 and 2008...

As I previously mentioned, we expect some near term flatness in market demand due to the delay of capacity expansion projects. But we do anticipate the market to return to growth in the second half of calendar 2007. For the third fiscal quarter of 2007, we are now forecasting revenue to be in the range of $54 million to $57 million, and gross margin to be between 17% and 21%.

JDS Uniphase Corporation (JDSU)

Kevin Kennedy - CEO

Highlights of our second quarter results include non-GAAP revenue of $366.4 million, up 15% from last quarter and up 16% from the same quarter a year ago, primarily due to seasonal strength in the Communications Test and Measurement business. Non-GAAP gross margin of just under 41% was up from 35% last quarter and from 36% in the same quarter a year ago. Segment mix was the primary driver, although gross margin improved across all four businesses during the quarter.

Importantly, we achieved the first positive non-GAAP operating margin result in almost six years, with non-GAAP operating income of almost $20 million or about 5% of total revenue.

Additionally, the second quarter represented our fifth consecutive quarter of positive non-GAAP EBITDA, which increased more than threefold sequentially to about $34 million or 9% of revenue.

Moving to the bottom line, JDSU delivered the second consecutive quarter of positive non-GAAP net income increasing to $30 million from just under $7 million last quarter and from a loss of $4 million in the year ago quarter. On a per share basis, non-GAAP earnings of around $0.13 per diluted share compares to the $0.03 per share last quarter and to a loss of $0.02 per share in the same quarter a year ago. Finally, the company book-to-bill was once again greater than 1...

Dave Vellequette - CFO

Now, to our financial guidance for the third quarter. As for our revenue guidance included among other things; first, ongoing pauses among our network equipment manufacturer and carrier customers associated with industry consolidation, all be it in a generally favorable environment for optical and broadband equipment. Second, continued execution of inventory and supply chain rationalization among our network equipment manufacturer customers in the optical communications business.

Third, the Communications Test and Measurement segment tends to have a high level of book and ship activity. Based on customers' historical order flow, these orders tend to be weighted towards the third month of the March quarter. Although the team has a strong track record of turning in quarter business, manufacturing constraints may impact our ability to fulfill some orders in the quarter. With these factors in mind, we expect third quarter revenue to be in the range of $333 million to $353 million.

Foundry Networks, Inc. (FDRY)

Bobby Johnson - President and CEO

Foundry posted record quarterly revenue of $132.7 million for the fourth quarter, an increase of 14.3% over last year's $116.1 million. In addition to our record quarter, we had record second-half revenue of $251.5 million. We're also pleased t have posted record full year results with $474 million in revenue. This represents a 17.4% increase over last year.

Looking back at last quarter, all the key financial successes that I would like to highlight include, number one, our book-to-bill ratio continued to be greater than one. Number two, overall our North American commercial business continues to perform well growing 28% sequentially and 27% over Q4 '05. Our European and Middle East business also posted record results and continues to experience good momentum, gaining 10% over the third quarter and 28% over Q4 '05. Then fifth, our annualized revenue per employee has increased to $650,000 based upon the fourth quarter's revenue run rate...

Dan Fairfax - Chief Financial Officer

Looking at the current period, we believe that our North American and European enterprise business will continue to be robust although offset somewhat by typical seasonal trends. Historically our business activity in these markets declines mostly in the first quarter compared to the fourth quarter and we are unsure of the momentum we saw in these markets coming out of Q4 will be enough to offset some of this normal seasonality.

Looking at the US Federal government vertical market, while there is always a greater level of uncertainty here as we evaluate our pipeline and our understanding of the available funding at this point, there isn't anything we see today that indicates a material short-term impact to our business opportunities within this market.