Inrange Points Finger for Q3 Loss

Inrange Technologies Corp. blamed a range of causes, including the September 11 attacks and business partner IBM Corp. (NYSE: IBM), for disappointing third-quarter earnings and associated workforce reductions, reported after the close of market Thursday (see Inrange Lowers Guidance Post-Attack).

"The tragic events that took place in the third quarter significantly impacted our September business and resulted in quarterly revenues and profits that were below our previous expectations," said Inrange CEO Greg Grodhaus in a prepared statement.

The Fibre Channel switchmaker posted a net loss of $4.4 million (including special items), or $0.05 per share, compared with a loss of $811,000, or $0.01 per share, a year earlier. Revenues for the quarter were $55 million, at the low end of the company's revised estimates, versus revenues of $64.1 million in the third quarter 2000 and $64.09 million for the second quarter 2001.

Inrange also announced it will cut 10 percent of its workforce, or 118 employees, to bring expenses in line with revenue expectations. The job cuts will take place within the month and be effected throughout the organization.

Besides the September 11 attacks, which allegedly froze orders in the last month of the quarter, Inrange fingered the following guilty parties for its revenue decline: a drop in sales of its optical and legacy products; the divestiture of the company's telecom business in July 2001, which resulted in a loss of $5 million; and IBM, which Inrange says lost the company another $5 million in estimated sales by delaying certification of Inrange's 9000 switch for FICON compliancy by four weeks.CEO Grodhaus expanded on economists reports about the terrorist attacks. "The repercussions from the September 11 events are expected to have a negative impact on the economy as a whole for at least the next five to six quarters,” he said.

The company said that since it posted its quarterly revenues there has been some improvement in the business lost as a result of the attacks, but execs would not elaborate whether this came about as a result of orders materializing after delays or whether it was new business. Separately, analysts have acknowledged that a need for backup equipment for disaster recovery has boosted storage sales in some quarters. But just now much is still open to speculation.

As to the layoffs, Grodhaus said these are expected to cut costs by about $18 million annually. Benefits will start to be seen next quarter but won't be fully realized until 2002, he noted.

The company reaffirmed its fourth-quarter guidance, issued earlier this month, of revenues in a range of $56 million and $60 million, with earnings per share (excluding special items) between $0.00 and a loss of $0.02 per share.

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