Inrange Lowers Guidance Post-Attack

Fibre Channel switch maker Inrange Technologies Corp. has lowered its quarterly guidance, citing the negative impact of last week's terrorist attacks in the U.S.

The move is an unhappy first for Inrange. Unlike many of its competitors, Inrange has not had to lower guidance until now. Since its IPO in September 2000, it has achieved quarterly revenue growth of at least 30 percent when compared with the same quarter the year before.

For the second fiscal quarter 2001, for instance, Inrange's total revenues were $69.4 million, a 33 percent increase overthe second quarter of 2000, and a 9 percent sequential increase over the firstquarter 2001.

Now, Inrange believes that its third-quarter revenues will fall between $55 and $63 million -- representing nearly an 8 percent decrease from third-quarter revenues of 2000 (which were $64 million). Earnings per share could range from a loss per share of $0.02 to positive earnings per share of $0.02.

But even this adjusted guidance isn't certain. Depending on variables related to last week's tragic events, Inrange says third-quarter revenues could drop below the range it's given by as much as $4 million, with a corresponding impact on earnings per share.The firm says revenue and earnings guidance for the fourth quarter and full year 2001 also will be affected by recent events, but it can't quantify the effects right now.

Our hearts and thoughts go out to everyone affected by the terrible events,” says Inrange president and CEO Greg R. Grodhaus. “As we turn our attention back to running our business, we and other companies in our industry are just now starting to understand the potential impact of this tragedy on our markets."

That impact has already been felt in several key areas. Last Tuesday's tragic events have delayed customer buying decisions and restricted the company's ability to make any follow-up sales efforts. That combination is a tough one for companies like Inrange that rely on direct sales, as opposed to OEM or distributor agreements.

Inrange has also suffered the indefinite closure of its largest worldwide sales office, which is adjacent to the World Trade Center site. In addition, international shipments, which represent about 40 percent of Inrange's revenues, have been put on hold due to limited air freight availability.

On the plus side, however, the guidance reduction doesn't appear to have kept the company from making at least one strategic move -- purchasing eB Networks (see Inrange Snaps Up Services Firm).What's more, some industry analysts say firms like Inrange, which specialize in storage network infrastructure, will see demand increase as customers focus on disaster recovery, remote disk mirroring, and storage backup -- although this speculation has not been borne out in the market over the past few days (see Late Rally Features Brocade).

In response to last week's events, Inrange has joined many other storage companies (see Disaster Recovery Takes Center Stage) in dedicating hundreds of field staffers and extra inventory to customers such as Comdisco Inc. (NYSE: CDO), Electronic data Systems (NYSE: EDS), IBM Corp. (NYSE: IBM), and SunGard Planning Solutions. These companies specialize in disaster recovery and business continuance operations, and in turn, they are enabling hundreds of corporate customers to get up and running again.

Spokespeople say Inrange will give restated fourth-quarter and full year 2001 guidance early in the fourth quarter, after it has had an opportunity to assess fully the impact of last week's tragedy on its business.

— Jo Maitland, Senior Editor, Byte and Switch http://www.byteandswitch.com