Paradyne closes year with a loss

Excluding special items, the Largo telecom company meets analysts' lowered targets for the fourth quarter.

By JEFF HARRINGTON

© St. Petersburg Times, published February 8, 2001

LARGO -- Paradyne Networks Inc. lost $2.5-million in its fourth quarter, struggled through a shortfall in revenues and warned of a challenging market in 2001.

In other words, the Largo company was in line with investors' much-lowered expectations for a tech company whose customer base has cooled considerably.

Paradyne, which makes equipment used to provide high-speed Internet access over copper telephone wires, fought a dry-up in demand through most of last year.

The trend persisted into results for the fourth quarter, ended Dec. 31, which the company reported late Wednesday. Its net loss of $2.5-million, or 8 cents a share, compared with net income of $4.3-million, or 13 cents a share, in the year-ago period. Revenues were $51.9-million, down 15 percent from $60.8-million in the fourth quarter of 1999.

Excluding a restructuring charge, good will amortization and deferred stock compensation, the company lost $694,000, or 2 cents a share, which was in line with expectations.

For the year, Paradyne lost $34.2-million, or $1.08, compared with 1999 net income of $7.9-million, or 26 cents a share.

Revenues were $243.7-million, up 10 percent from $220.7-million.

Chief executive Sean Belanger said he was pleased with the results given his industry's tough times. "We are fortunate to have a diversified set of customers and products," he said in a statement.

Timothy Slevin, an analyst with Parker/Hunter Inc., called it a good sign that Paradyne met the lowered expectations.

"In light of the issues that have affected many other small telecommunications equipment manufacturers . . . this appears a much better relative performance," he said.

The burning question on investors' minds, Slevin said, is where Paradyne sees the business going through 2001. His question was left unanswered in a late Wednesday conference call as the company declined to give a guidance on earnings beyond the first quarter of 2001.

Belanger said demand for narrowband products, such as modems, was below expectations, but demand for broadband products exceeded expectations. Considered old technology, narrowband products are viewed as too slow to deliver the massive volume of data, such as full-motion video, sought by customers.

Belanger took over the reins of the company in December from Andy May and has moved quickly to cut costs during the slowdown.

Last month, Paradyne cut about 20 upper-level management jobs and said it is closing its Redbank, N.J., development center, idling up to 65 workers. The cuts are part of a larger effort to reduce its work force by about 130 jobs, or 13 percent, to 740.

When it went public in 1999, Paradyne was one of the hottest stocks of the year. It went into a free fall with other tech stocks last year, though, as shares tumbled more than 90 percent from their high of $22 a share.

Shares closed Wednesday at $2.66, down 3 cents, before the company released earnings.

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