Inrange Misses by a Penny

As Inrange TechnologiesCorp. moves to exit the telecommunications business and focus on storagenetworking, the company today reported second-quarter earnings that were inrange with analysts expectations, but missed the consensus by a penny.

The developer of networking and switching equipment had pro formaearnings of $3.1 million, or 4 cents a share, versus the consensus estimate of$4.2 million, or 5 cents a share. Revenues were $69 million.

Earnings slid 32 percent from the same quarter a year ago, when Inrangereported $4.5 million, or 6 cents a share. But revenues grew at a healthy 33percent over last year’s $52 million. Accounting for much of the discrepancywas a slide in gross profit margins from 48 percent to 44 percent and a 58percent rise in selling and administrative expenses.

Including the effects of restructuring, amortizing goodwill, and othercharges related to exiting the telecommunications business, Inrange suffereda net loss of $5.4 million, or minus 6 cents a share, vs. $4.5 million earnings,or 6 cents a share, a year ago.

Company officials predict third-quarter earnings of 5 cents to 6 cents ashare on $74 million to $75 million revenues with gross margins similar tothe second quarter. For the year, they expect $300 million total revenues,including $125 million from open storage products and services.Just 10 months ago, Inrange spun off from electronics manufacturer SPX Corp. (NYSE:SPW)through an initial public offering. Inrange now intends to become even morefocused by exiting the telecommunications business by the end of this year.The company will then concentrate on “open storage networking,” whererevenue grew 151 percent over the year and 28 percent sequentially over theMarch quarter to $27 million. The storage networking unit’s key product isthe FC9000 Fibre Channel director.

During the quarter, IDC

forecasted Inrange will be the fastest growing Fibre Channel switchingcompany in 2001, with a director-class switch market share of 23 percent byyear end. That’s partly due to IBMCorp.’s (NYSE: IBM) agreement to resell the company’s 128-port FC9000, as well as strongsales through HitachiLtd. (NYSE: HIT; Paris: PHA).

In Wednesday morning trading, Inrange was at $13, down $1.10 a share.

— Tom Davey, special to Byte and Switch, http://www.byteandswitch.com