Sycamore Networks (SCMR), a provider of intelligent bandwidth solutions for fixed and mobile networks, declared third quarter fiscal 2009 financial results (ended April 25) well above our estimates.
Various public utility service providers are now implementing access solutions based on Sycamore’s products. Arizona Public Service, the largest and longest serving electrical utility in the U.S., is using Sycamore’s DNX multi-service core connect platform for voice & data backbone networking. In addition, Pacific Gas and Electric, Southern California Edison, and Puget Sound Energy are representative of client and prospect opportunities in the utility market.
We believe demand for agile bandwidth management solutions will improve as telecom carriers seek to deliver flexible bandwidth services, simplify end-to-end provisioning, and create resilient/scalable optical foundations for value-added voice, video and data services.
On the other hand, the revenue trend remains lumpy on a quarterly basis and the company is expected to incur net losses throughout the year. We maintain our Hold recommendation with a $4.00 valuation target based on sustained net cash levels of nearly $932 million or $3.28/share.
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