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Enablence to refocus its business on optical components

13 May 2011 
Enablence wants to return to its roots by shedding its optical systems division and growing the optical components side of the business.  The announcement was made as part of the company’s preliminary financial results for the quarter ending March 31, 2011.
 
Enablence entered the systems market in 2008 with the purchase of Wave7 Optics, a vendor of passive optical network (PON) and point-to-point Ethernet access hardware.  Later the same year it bought Pannaway Networks, which provided a North American customer base and portfolio of converged broadband access equipment.  In 2010 it expanded further with the purchase of Israeli firm Teledata Networks, adding triple-play copper-based access technologies to the mix.
 
The aim of the acquisitions was to create a vertically integrated supplier, allowing Enablence to extract maximum value from its planar-lightwave circuit based optical components.  But things don’t seem to have worked out that way.  Demand for the system products has proved to be unpredictable, with customers often delaying orders, resulting in increased losses and cash consumption.  In contrast, the components division has experienced a rapid uptick in fortune and now counts more than 120 customers worldwide.
 
In the quarter ended March 31, 2011, the optical components division expects to report revenue of approximately $8.2m (€5.6m) and gross margin of approximately 33%. This compares to sales of $6m (€4.2m) and a gross margin of 21% in the quarter ending January 31, 2010 and sales of $4m (€2.8m) and a gross margin of less than 10% in the quarter ending January 31, 2009.
 
“While we are pleased with the continued growth in revenues from our components business,” said chief executive Tim Thorsteinson, “the low revenues generated by our systems division have driven us to consider strategic options available to us. We will continue to invest for growth in the components division, and will aim to optimize shareholder value in respect of our systems division.”
 
By Pauline Rigby