Telecommunications equipment company ECI Telecom (Nasdaq: ECIL) has reported its first quarter results. Revenue for the quarter was $155 million, 4.5% down compared with $162 million in the first quarter of 2006 and just slightly ahead of the $154 million recorded in the fourth quarter of 2006.
GAAP net profit was $18.7 million, or $0.15 per share on a fully diluted basis, compared with first quarter 2006 net income of $3.1 million, or $0.03 per diluted share. In the fourth quarter of 2006, ECI earned $2.3 million, or $0.02 per share on a fully diluted basis.
Results for the first quarter include a $12.5 million, or $0.10 per diluted share, tax benefit recorded in connection with the initial public offering of Veraz Networks. Excluding this tax benefit, GAAP net income doubled compared with the corresponding period last year.
Pro forma, non-GAAP net profit for the first quarter of 2007 was $9.7 million, or $0.08 per diluted share, up 37% compared with pro forma, non GAAP net income of $7.1 million, or $0.06 per diluted share in the first quarter of 2006.
In the fourth quarter of 2006, ECI earned, on a pro forma, non-GAAP basis, $10.1 million, or $0.08 per share on a fully diluted basis. ECI's pro forma, non GAAP, net income differs from results reported under U.S.
Cash flow from operating activities totaled $26 million for the quarter. At the end of the quarter, ECI's cash, including short and long-term deposits and marketable securities, totaled $258 million, or $2.13 per share, with no debt.
ECI confirmed its guidance for sequential growth in both quarterly revenues and pro forma net income in the second quarter and the remainder of the year.
On April 4, ECI subsidiary Veraz Networks priced its initial public offering on Nasdaq at $8 per share. ECI sold 2.25 million shares, and expects to record gains totaling close to $40 million. Recognition of the gains is as follows: tax benefit of $12.5 million, reported this quarter, as mentioned; $15 million from the sale of shares, to be recorded in the second quarter; and a $12 million gain from the increase in the book value of Veraz due to the IPO, to be recorded in the third quarter of 2007.
Following the offering, ECI owns 27.5% (23% on a fully diluted basis) of the common stock of Veraz, assuming no exercise by the underwriters of their over-allotment option. ECI said it would continue to reflect its share of Veraz's net profit under "Company's equity in results of investee companies".
ECI president and CEO Rafi Maor said, "The first quarter of 2007 marks a very good start for the year. Our Transport business continues to perform well, growing 15% year-over-year and recording strong order intake. Our Broadband Division also experienced a nice rebound, growing 11% sequentially in the quarter, driven primarily by stronger demand from one of the Division's two major customers."
"Continued robust growth in the mobile industry in emerging markets remains a significant revenue driver for our transport business, reflected in strong wireless backhaul sales in India as well as Russia and Ukraine."
"A new significant growth driver for our transport business is the transformation of our customers' business from legacy, voice-centered, services to emerging Ethernet-based services, such as voice over IP and Ethernet Private Line and other business services. While we expect voice-based applications to continue and reflect a significant portion of our transport revenues in the coming quarters, we are starting to witness demand for our carrier Ethernet products which are integrated into existing transport platforms. In the first quarter of this year, revenues from carrier Ethernet products already exceeded those generated throughout our full year 2006.
"Another trend in the transport market which we expect to benefit from is the growing need of telecom carriers to deploy flexible optical networks, which allow carriers to control traffic flows on the network based on actual traffic patterns, thereby optimizing the network's use. We believe that our advanced ROADM solution positions us very well to compete in this market."
ECI shares closed at $8.28 yesterday, giving the company a market cap of $988 million.
Published by Globes [online], Israel business news - www.globes.co.il - on May 3, 2007
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