Sycamore Sicker-More (SCMR)

April 28, 2008 by Douglas A. McIntyre

Sycamore Networks (NASDAQ: SCMR) is showing the risks of being a small technology company with the bulk of orders coming from a few companies.  The bandwidth management solutions company has issued a revenue warning that is pretty dismal, with the blame being put on lower than expected orders associated with one of the company’s major customers.

The target for this quarter (fiscal Q3-2008) is approximately $21 million in revenues, down from $41.45 million sequentially and down from $43.54 million in the same quarter in 2007.  First Call had estimates at $45.6 million.

This will also bring down the company’s goal of higher revenues for fiscal 2008 versus 2007.  Companies that lower guidance by 50% usually go into the "investor purgatory" for quite some time.  Before the drop, its market cap was still $1.06 Billion.

This stock closed at $3.74 on Friday, and the 52-week trading range had been $3.21 to $4.35.  Shares were just released from a share halt at 8:30 AM EST and shares are down at a new 52-week low at $3.00.

The one thing that may actually help stabilize the stock and keep it from crashing too much further is that the company has $933 million in liquidity listed after its cash and equivalents, short-term investments, and long-term investments.  Its entire liabilities are listed as $44 million.  This drop should actually take the company well under its book value.

We’ll be reviewing this one for our weekly "10 Stocks Under $10" newsletter, but this week’s newsletter was already full and was sent out in the wee-hours of this morning.

Jon C. Ogg
April 28, 2008

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