It's gone from bad to worse for Copper Mountain Networks. The provider of digital subscriber-line equipment handed out pink slips to 25 percent of its staff Wednesday and announced the resignations of both its chairman and chief financial officer.
Copper Mountain (Nasdaq: CMTN) shares closed off 9 cents to $4.47 ahead of the news before falling to $3.88 in after-hours trading.
After the bell Wednesday, Copper Mountain told the Street that it would ax 25 percent of its 450-employee staff and take a one-time charge of between $5 million and $7 million in the quarter.
In its prepared release, Copper Mountain executives blamed the cuts on "continued turbulence" with its core competitive local exchange carrier (CLEC) customers and a weak U.S. economy.
Most of the workforce reductions will be in sales, customer support, operations and general and administrative support, the company said.
"It's a very sad and very stressful day here," said Margaret Kuhn, a spokeswoman for Copper Mountain. "All the employees were notified today. Nobody likes to see these things happen."
Kuhn said none of Wednesday's layoffs came from the company's research and development or engineering divisions. She added that the company does not plan to alter its sales or earnings guidance for the current quarter.
Chairman Joseph Markee and Chief Financial Officer John Creelman both announced their resignations to "pursue other opportunities," leaving Chief Executive Officer Rick Gilbert to pick up the pieces as he assumes the chairman's role.
Michael Staiger, who served as the company's vice president of business development, was promoted to the CFO post.
This latest dose of bad news comes just after Copper Mountain's disappointing fourth-quarter results; it posted a loss of $91,000 on sales of $47 million and warned that its first-quarter sales would plummet to between $8 million and $10 million.
"This isn't unexpected when a company's revenue run rate goes from $90 million to $10 million almost overnight," said Tim Savageaux, an analyst at WR Hambrecht. "This is one step on what could be a very long road to recovery assuming that it's even able to make it back."
"Disintegrated" customer base
Copper Mountain's dependence on smaller, independent local phone carriers as the foundation of its customer base left little margin for error, analysts said.
NorthPoint Communications, one of its largest customers, filed for Chapter 11 bankruptcy protection in January, and other customers have either cut back expansion plans or canceled orders during this sharp economic downturn.
Meanwhile, larger phone carriers are still trying to unload the glut of DSL equipment they purchased in the past year.
"Most of Copper Mountain's problems aren't of their own doing," Savageaux said. "Their customer base disintegrated. Although it's a pretty ugly story right now, it's hard to say these guys did anything wrong."
First Call consensus expects the Palo Alto, Calif.-based company to lose 29 cents a share on sales of $8 million in its first quarter.
The stock hit a 52-week high of $125.69 in July before falling to a low of $4 in February.
Seven of the nine analysts tracking the stock rate it a "hold."
Back in May 1999, Copper Mountain shares got off to an auspicious beginning when the stock jumped more than 226 percent in its initial public offering.