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CacheFlow misses estimates, restructures

The maker of Internet caching appliances misses earnings estimates, slashed jobs, and says its CFO is leaving.

    Internet caching appliance maker CacheFlow on Tuesday announced that it managed to hit lowered revenue estimates in its third quarter, but missed earnings estimates.

    The company also cut 10 percent to 15 percent of its workforce as part of a restructuring intended to bring operating expenses in line with anticipated lower revenue. The restructuring will result in a one-time charge in the range of $2 million to $3 million in the fourth quarter of 2001.

    In addition, Chief Financial Officer Michael Johnson is stepping down as soon as a successor is appointed. The company also painted a bleak outlook for its fiscal fourth quarter.

    Shares of the company closed off $1.19 to $14 Monday. The stock has taken a tumble since the company already warned Feb. 1 that its third-quarter revenue and net loss would miss estimates. CacheFlow makes caching appliances used to optimize Internet performance.

    In its Feb. 1 profit warning, CacheFlow didn't give a loss projection, but analysts cut estimates sharply. First Call's revised estimate had been for a loss of 44 cents a share, much steeper than its initial loss estimate of 9 cents a share.

    CacheFlow lreported a third quarter loss, excluding stock compensation expense, amortization of goodwill and acquired in-process technology related to the acquisition of Entera, was $18.3 million, or 49 cents a share. That's also wider than ITS loss in the third quarter of fiscal 2000, which was $7.2 million, or 24 cents a share.

    Including stock compensation expense, amortization of goodwill and acquired in-process technology, net loss for the third quarter of fiscal 2001 was $119.2 million, or a whopping pro forma net loss of $3.19 per share.

    Net sales for the third quarter of fiscal 2001 were $21.2 million, in line with the company's lowered estimate of $20 million to $21 million, but less than half of what analysts had been originally expecting, according to First Call's consensus estimate of $43.1 million. Sales were also down 35 percent from $32.5 million in the second quarter of fiscal 2001.

    The company blamed sequential decline in revenue on macro-economic conditions and customer delays in spending. It also said the market for caching software is increasingly competitive and is evolving to longer sales cycles. A warning from competitor Inktomi had signaled tough times for the industry back in January.

    Expectations for the fourth quarter were also dismal; revenue is expected to be flat sequentially, gross margin is expected to remain constant, and pro forma net loss, excluding non-operating charges, is expected to be in the range of $14 million to $16 million.

    For fiscal 2002, the company said that it believes "conservative guidance is appropriate near-term," and plans to issue guidance on a quarter-to-quarter basis until market visibility improves.