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Copper Mountain: The worst is yet to come

Copper Mountain met analysts’ reduced estimates in its fourth quarter Thursday but posted a loss of $91,000, or breakeven on a per-share basis, on sales of $47 million. But it also warned that its first-quarter sales will plummet to between $8 million and $10 million.

Earlier in quarter, Copper Mountain warned investors that it would miss its already reduced sales estimates, citing weakness in the competitive local exchange carrier (CLEC) customer base.

The digital subscriber line provider had previously warned that it would post sales of around $60 million in the quarter before lowering that forecast to between $46 million and $49 million.

Copper Mountain (Nasdaq: CMTN) shares closed up 13 cents to $7.81 ahead of the earnings report before falling to $6.52 in after-hours trading.

First Call Corp. consensus expected Copper Mountain to break even in the quarter.

The $47 million in sales represents a 6 percent improvement from the year-ago quarter when it earned $6.7 million, or 12 cents a share, on sales of $44.6 million.

In the quarter, it posted a net loss of $34.4 million, or 66 cents a share, compared to a net profit of $6.3 million, or 11 cents a share, in the same period last year.

For the fiscal year, it pocketed $41.3 million, or 71 cents a share, on sales of $281.6 million compared to a profit of $15.2 million, or 29 cents a share, on sales of $112.7 million.

Chief Executive Officer Rick Gilbert told analysts the company’s “challenges will increase in 2001,” adding that it expects a significant sequential decline in total sales.

Company executives told analysts to expect sales between $8 million to $10 million in the first quarter.

First Call Corp. consensus was expecting sales of $50.9 million in the first quarter.

Frank McEvoy, an analyst at USB Piper Jaffray, said that $8 million figure would translate into a loss of around 26 cents a share in the quarter, well below the break-even mark analysts were expecting.

“This is a reflection of what’s going in the data CLEC space,” he said. “They need to try to diversify their customer base. It’s not easy to do, but Copper Mountain has to get into the ILEC space if it wants to turn things around.”

Copper Mountain isn't the only DSL provider that's fallen on hard times of late.

Efficient Networks (Nasdaq: EFNT), Turnstone Systems (Nasdaq: TSTN) and Paradyne (Nasdaq: PDYN) all have either issued profit warnings, announced layoffs or missed estimates in their latest quarters.

Copper Mountain executives didn’t give any guidance for sales or earnings for the rest of 2001 during a conference call with analysts.

“Unfortunately, because of these rapidly changing conditions, we have very limited visibility on our customers' future buying patterns at this time," Gilbert said.

Copper Mountain also took a $35 million charge in the quarter for inventory write-downs, $28.6 million of which is related to future inventory purchase commitments.

Last quarter, it met analysts’ estimates when it posted a profit of $15.8 million, or 27 cents a share, on sales of $93.5 million.

The stock moved as high as $125.69 in July before collapsing to a low of $4 a share in December.

Six of the 10 analysts tracking the stock rate it a “hold.”