CoSine: The Big Sell-Off?

It looks as if CoSine Communications Inc. (Nasdaq: COSN) could be on the block after a poor second quarter.

The company reported revenue of $2.6 million and a net loss of $9.7 million, or 96 cents per share, in its second-quarter results. Revenue for the same quarter last year was $6 million, and the net loss was $7.7 million, or 79 cents per share. CoSine executives said on today's earnings conference call that they are exploring various strategic alternatives,” which raises the possibility that all, or part, of the company will now be sold off.

In what must be one of the shortest calls of this earnings season, the Redwood City, Calif.-based firm also said that it has retained Broadview International as its financial advisor.

Broadview describes itself as a leading global M&A advisor specializing in the IT, communications, healthcare technology, and media industries. According to the company’s Website, the firm has announced 330 M&A transactions worth almost $54 billion in value.

Speaking after the results had been announced, Kevin Mitchell, directing analyst at Infonetics Research Inc. said that a sell-off could well be on the cards. “One potential outcome is that a company likes some of the assets, and picks them up,” he says.So, why the poor performance? CoSine execs on the earnings call earlier this evening blamed trends in the telecom sector for the company’s second-quarter performance, as well as “slowing” of the market for IP-based network services.

Mitchell also pointed to intense competition from vendors of edge routing products such as Cisco Systems Inc. (Nasdaq: CSCO), Laurel Networks Inc., and Juniper Networks Inc. (Nasdaq: JNPR).

”What CoSine initially designed was a network-based IPSec and VPN box -- there are uses for that, but there’s a very limited need for that particular application. You don’t need hundreds of these boxes in your network,” Mitchell noted.

— James Rogers, Site Editor, Next-gen Data Center Forum