Zhone Cites Slowdown in International Sales

Citing weakness in its international business, Zhone Technologies warned that its revenue for the third quarter 2006 is expected to range between $41 million and $43 million compared to previous estimates of approximately $54 million. Due to the anticipated lower revenue level, gross margins are expected to be between 35% and 36% which is below the previous guidance of approximately 38%.



Zhone's chief executive officer Mory Ejabat stated, "Our revenue for the third quarter is expected to be substantially below expectations primarily due to weakness in our international business. In particular, we experienced the effects of fluctuations in the buying patterns of our largest customers in the Middle East and Latin America and a greater than expected seasonal slowdown in Europe. Due to this weakness, our SLMS revenue will also decline sequentially which is particularly disappointing after five consecutive quarters of strong growth in both our international and SLMS businesses. Despite this temporary setback, we expect our revenue to rebound over the next few quarters with continuing customer wins and expansion from our existing customer base of over 600 customers."http://www.zhone.com