Bethel Finances: Ceragon slumps on lower guidance

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Bethel Finance news:
Wireless backhaul solutions developer Ceragon Networks Ltd. (Nasdaq: CRNT; TASE:CRNT) posted record revenue for the third quarter of 2011, and beat the analysts' revenue and earnings per share consensus. But the company halved its 2012 revenue growth forecast from 20-25% to around 12%.

Ceragon's share price fell 17.2% on Nasdaq yesterday to $8.57, its biggest one-day drop since September 2001, giving a market cap of $308 million. The share price fell 0.1% in morning trading on the TASE today to NIS 31.96.

Revenue rose 86% to $116.1 million for the third quarter from $62.3 million for the corresponding quarter of 2010. GAAP-based net loss was $6.7 million ($0.19 per share) for the third quarter compared with a net profit of $4.6 million for the corresponding quarter. Non-GAAP fell nine-fold to $595,000 (0.02 per share) from $5.5 million. The company beat the analysts' consensus of $0.01 earnings per share on $114 million revenue.

Ceragon had $45.9 million in cash and cash investments at the end of September.

Ceragon's revenue is geographically diversified: 25% of revenue from Latin America, 17% each from Europe and Africa, 16% from the Asia-Pacific region, and 13% from North America. Indian sales accounted for 12% of total revenue, half the company's expectations.

Ceragon president and CEO Ira Palti said, Business remains good with our book-to-bill ratio for the first nine months of 2011 above one. We expect to continue growing revenues, probably at a slower pace than originally expected because we cannot ignore the macro economic uncertainty and the issues in India affecting order patterns. Our plan to migrate customers to lower-cost higher functionality and capacity products is proceeding smoothly, and we continue to expect we will reach our gross margin target of the mid-30s by the end of next year. Given the current level of visibility, we believe targeting a non-GAAP operating margin of 8%-9% by the end of 2012 is realistic."

Palti said, "India has a few local issues with telecom regulations and we expect it to be in the same situation until the middle of the next year." India amended phone-license rules last year, requiring equipment vendors to allow authorities to inspect telecommunication source code for security threats.