The Clearwater telecom pioneer's stock falls after it reports flagging sales and more than $10-million in losses.
By JEFF HARRINGTON
Published August 21, 2003
CLEARWATER - Shares in Digital Lightwave tumbled as much as 28 percent Wednesday after the struggling tech company said sales in its second quarter plummetted 60 percent while losses topped $10-million.
Adding more pressure, the Clearwater company said it is running out of money to pay short-term debts, and the holding company of its wealthy principal shareholder, Bryan Zwan, has indicated to regulators that it's reluctant to lend Digital more money.
In a delayed filing with the Securities and Exchange Commission, Digital reported a net loss of $10.1-million, or 32 cents a share, in the quarter ended June 30 compared with a loss of $12-million, or 38 cents a share, in the year-ago quarter. Sales fell to $1.7-million, compared with $4.2-million a year ago.
The maker of fiber-optic testing equipment was briefly the best-performing stock in the Tampa Bay area and one of the hottest on Wall Street, its shares peaking at $150 each in early 2000. Its stock Wednesday dipped as low as 95 cents a share before closing at $1.06, down 27 cents, or 20.3 percent.
Digital's fortunes fell in step with its biggest customers: the saturated telecom market. Since 2000, the company has accumulated a deficit approaching $100-million.
Zwan, the company's founder and controlling shareholder, has lent Digital about $10.5-million since February through a holding company called Optel LLC. But Optel has not committed to additional loans, saying in SEC filings that it first wants indications that Digital has restructured.
Meanwhile, creditors are seeking a total of $20-million in damages, and the company's liabilities within the past year have risen about $9-million to $41-million.
Joseph Noel, an analyst who tracks the optical industry for Pacific Growth Equities, said Wednesday's numbers and the apparent lack of additional support from Zwan means Digital "very well could be close to the end."
"Our position for the past year has been that this company is likely to go out of business," Noel said, suggesting either bankruptcy or a closure as the likely scenario. He pointed out that one of Digital's chief competitors, Acterna Corp., is in bankruptcy reorganization because of the poor telecom market.
Noel gave Digital credit for creating an innovative, portable device to test phone lines in the 1990s. But during the company's heyday under former chief executive Gerry Chastelet, it failed to aggressively develop new product lines, he said, giving competition time to catch up.
Now "the revenues are nothing to speak of, their technology is no longer unique and the optical market is in the gutter," Noel said.
Digital Lightwave spokesman Paul Harris said there are some positive developments. For one, the company last week reached a settlement with its landlord to avoid being forced out of its highly visible headquarters at the southern end of the Bayside Bridge.
