Avaya Beats Estimates But Sees Continued Instability Ahead

Avaya

The company reported revenue of $1.28 billion for the second fiscal quarter ended March 31. That compares with revenue of $1.85 billion in the same period last year, a decline of about 31 percent. Loss for the quarter was $10 million, or 5 cents per diluted share, compared with net income of $78 million, or 25 cents per diluted share, in the second quarter 2001.

In March, Avaya cut its revenue expectations to the $1.24 billion to $1.28 billion range, down from a range of $1.25 to $1.36 billion. At that time, the company said it expected a loss of 6 cents to 10 cents per share, compared with its previous estimate of an 8 cent per share loss.

Overall, revenue declined 2.1 percent sequentially from the first quarter, compared with a revenue decline of 9.4 percent in the first quarter of fiscal 2002 from the fourth quarter of fiscal 2001.

Garry McGuire, Avaya CFO, said a narrowing of revenue losses over the past three quarters means this quarter may be the bottom point for the company. But he stopped short of forecasting a complete recovery.

"While we're hopeful we've seen a bottoming of revenue declines, and in fact have seen a number of positive signs, including growth in our funnels and backlog, there is still too much uncertainty in the economy for us to be specific about a revenue and earnings outlook for the third fiscal quarter," he said. "Despite the uncertainty, however, we expect a modest improvement in revenues and earnings in the third fiscal quarter."

McGuire said Avaya proceeds of $633 million in capital were used in part to pay down $300 million that had been drawn on existing bank credit facilities.

"We've moved aggressively in [the second quarter to put concerns of liquidity well behind [us," McGuire said.

He added that the company is on track to return to profitability by the fourth quarter of this year.