AUGUST 10, 2009 -- Sunrise Telecom Inc. (Pink Sheets: SRTI), which provides test and measurement tools for telecom, wireless, and cable networks, has announced unaudited financial results for the three months ended June 30, 2009.
Net sales for 2Q09 were $13.2 million compared to $14.0 million in 1Q09 and $20.2 million in 2Q08. Net sales for 2008 included sales from the Protocol Products Group (now named Accanto Systems), which was sold to LTE Innovations on Dec. 12, 2008. Backlog as of June 30, 2009 was $2.5 million, compared to $4.7 million as of March 31, 2009 and $11.1 million at the end of 2Q08.
Gross margin of 51% for 2Q09 is down from 62% in 1Q09 and down from 62% in 2Q08. The decline in gross margin was primarily due to an increase in one-time charges such as provisions for warranty and inventory and inventory write-offs. The company is currently reviewing the cause of such write-offs.
Second-quarter operating loss was $2.2 million, compared to an operating loss of $0.6 million in the prior quarter and an operating loss of $3.8 million in 2Q08, the latter primarily due to one-time charges in cost of goods sold. Net loss per share on a GAAP basis was $(0.04) compared to net loss of $(0.03) per share in 1Q09 and net loss of $(0.07) per share in 2Q08.
The company says it has made substantial progress during the past year toward its cost-cutting and productivity improvement program. The integration of the wireline, fiber optics, and broadband product groups into a single business has been completed. The Protocol Products Group has been sold and the Swiss-based high-resolution OTDR business was divested.
As part of Sunrise Telecom's cost-cutting initiatives, total headcount has been reduced by 40% since year-end 2007.
Additional highlights include:
- debuted enhanced version of the CM2000 Cable Modem Network analyzer featuring digital video, high-speed data, and voice installation and service functions
- introduced the UDSL-3Play module for the MTT platform, a tool for DSL-based triple play services
- unveiled the XTT 5000, a tool for carrier 10-Gigabit Ethernet and IP services testing
- announced consolidation of most manufacturing operations in Taiwan for a planned annual savings of $2 million in cost of goods sold plus an additional $3 million in cash savings generated from lower inventory levels by year end. This consolidation is expected to further address the material weakness in controls over inventory management noted in the 2009 Q1 form 10Q
- voluntarily deregistered its shares with the SEC by filing Form 15-12G as a result of the company's strategic alternatives review and in order to achieve annual savings of approximately $2 million in administrative and regulatory compliance costs
- announced intention to post regular quarterly and annual reports on the Pink Sheets web site and continue to trade under its current symbol in order to preserve investor liquidity and transparency regarding company performance
"We are pleased that second-quarter revenue came in as expected despite the challenging economic environment," says Sunrise Telecom chief executive officer Bahaa Moukadam. "Our cost-cutting efforts significantly reduced our operating expenses, which are down to $9.0 million for the quarter compared to $16.2 million in the second quarter last year. The third-quarter revenue will be a challenge with a traditionally soft European market in the summer months. I am optimistic the combination of new products and better execution will grow our top line and expand our margins leading to a return to profitability in the fourth quarter."
Third-quarter business outlook
Based on current backlog and order expectations, Sunrise Telecom forecasts its third quarter sales to be in the range of $11-$13 million.