Test equipment maker EXFO Inc. (NASDAQ: EXFO) (TSX: EXF) revealed last week that it will miss its revenue guidance for the third quarter ended May 31, 2012 by about $8 million. EXFO said in providing preliminary results that it expects to report revenues of approximately $60.0 million versus its guidance of $68.0 million to $73.0 million when it officially discloses the quarter’s performance June 28.
"Challenging macro-economic conditions, coupled with the tightening of capital spending among network operators during the first half of calendar 2012, have rendered EXFO's end-markets very difficult for the short term," explained Germain Lamonde, EXFO's chairman, president, and CEO. "Europe turned out to be more impacted than expected, the anticipated pickup of spending in the Americas did not materialize -- especially with Tier 1 operators -- while spending in China has been sluggish.
“We believe this is not a company-specific issue, but rather a short-term industry spending pattern, since the requirement for wireline and wireless operators to invest in their networks in order to attract growing data revenue remains intact. We see a growing funnel of serious opportunities, but unfortunately they are being delayed and are taking longer to close," Lamonde concluded.
EXFO added its gross margin likely will suffer and IFRS net earnings will end below the company's initial outlook of $0.01 to $0.05 per diluted share.
Several firms in the optical communications industry and the market research companies that follow them have reported slow sales in the first half of this year (see, for example, “Ovum: Bad first quarter for optical network hardware sales”). The macroeconomic conditions in Europe have had a particularly detrimental effect, company management and industry analysts agree. Ciena’s performance during the quarter looks particularly impressive in this context (see “Ciena revenues top expectations in 2Q12”).
For more information on test equipment and suppliers, visit the Lightwave Buyer's Guide.