Citing an inability to predict revenue trends for its FTTH Systems Division, on top of revenue declines within the division that have drained the company’s cash reserves, Enablence Technologies Inc. (TSX VENTURE: ENA) announced today that will “explore all strategic alternatives for the most value-enhancing and efficient divestiture of the Systems Division.” The move will enable the company to focus on its more lucrative and stable Optical Components and Subsystems Division.
The announcement came as part of Enablence’s release of preliminary results for the quarter ending March 31, 2011. The company preliminarily reported revenues of approximately of $14.7 million, of which $8.2 million derived from the Components Division. Enablence’s reserve of cash and equivalents shrunk by $9 million – more than 50% -- during the quarter, in large part because of the need to prop up the operations of the Systems Division, the company stated.
Enablence said that North American and international revenues declined within the Systems Division during the quarter, in part because anticipated orders were deferred to later quarters. “The Company does not believe it is currently able to accurately predict future revenue trends in the Systems Division,” Enablence commented.
The divestiture of the systems business, which the company asserted would happen as quickly as possible, will return Enablence to its roots as a supplier of components and subsystems based on planar lightwave circuit (PLC) technology. The company jumped into the FTTH systems market with the acquisition of Wave7 Optics in 2008, followed by the purchase of Pannaway Technologies later in the year.
To help fund its new focus, Enablence has entered a non-brokered private placement of common shares worth $10,010,000. Paradigm Capital Inc. and “several" institutional investors have subscribed. Enablence plans to use the funds to expand the Components Division as well as its joint venture with China’s SUNSEA Telecommunications Co. Ltd.
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