Aviat Networks Working on Plans to Slash Operating Costs
Published on: 14th Jan 2014
By: Ian Mansfield
Aviat Networks has announced that it plans to cut its annual operating costs but has still to detail what those plans will be.
The company said that the cost savings are expected from efforts to consolidate its supply chain and locations globally, focus its selling efforts, leverage a single technology platform, and simplify its back office operations.
Management currently expects the annual savings of these efforts to be approximately $12 million to $14 million entering fiscal year 2015, bringing total operating costs down to around USD28 million.
After presenting to the Board of Directors and finalizing the plan, management will disclose additional details in the upcoming weeks.
Aviat Networks is also entering into a managed services agreement with an unnamed customer to provide a broader set of value-added services including network design and planning services, inventory and spares management and warehousing services in an Aviat-controlled facility.
Although invoicing and cash collections are triggered by the shipment of equipment from Aviat's factory, the arrangement will change the timing of revenue recognition as equipment is expected to temporarily reside in an Aviat-controlled warehouse. As a result, Aviat Networks expects to defer approximately $5 million in second quarter of fiscal 2014 revenue. The net impact on deferred revenue related to this agreement is expected to stabilize within the next three to four quarters.
Including the deferred revenue impact of the managed services agreement, Aviat Networks is lowering its expected second quarter of fiscal 2014 revenue to a range of $83 million to $87 million due to lower than expected customer orders in Africa. Management's prior revenue guidance of $100 million to $107 million for the second quarter of fiscal 2014 explicitly excluded any impact from the managed services agreement.
Although the change in revenue is expected to impact on their profits, the company is not able to say by how much at this time.
Aviat Networks ended the second quarter of fiscal 2014 with a cash balance of $63 million. Cash was impacted by a $13 million tax payment to a foreign jurisdiction. Aviat Networks continues to appeal this decision.
Aviat Networks will report complete second quarter of fiscal 2014 financial results after the market closes on January 30, 2014.