WAYNE, N.J. One week after being notified of a possible Nasdaq de-listing, Microtune Inc. is facing even more serious financial troubles.
In a set of announcements Wednesday (April 30), the silicon tuner developer based in Plano, Texas, said it will restate its audited financial results for 2001 and will adjust its unaudited results for the first quarters of 2002. Meanwhile, the start-up announced that William Housley would relinquish his positions as president and chief operating officer.
Microtune's financial troubles started in December of last year when the company had to dramatically reduce revenues it planned to report in the fourth quarter of 2002. When reporting its fourth-quarter results, the company said it had shipped products worth $16.1 million during the fourth quarter of 2002 but would only be reporting $2.2 million in revenues "as a result of charges relating to five customers."
The charges, Microtune Chairman and CEO Doug Bartek said, came as a result of payment problems with its customers and distributors.
As a result of the negative charge, Microtune had to make two changes in its reported earnings, Bartek said. "First, we've made changes on some of our distributor revenue recognition," Bartek said. "Second, we've made adjustments to revenue because a couple of our OEMs customers did not pay their bills."
The financial problems Microtune encountered late last year are coming back to haunt the company now. When the $14-million gap between shipped products and revenue emerged, Microtune's board of directors called for an internal investigation. That investigation caused the company to hold back on filing its annual 10-K report to the Securities & Exchange Commission. That led the Nasdaq to push for a de-listing of the company's stock.
Microtune's financial woes could go deeper. In its announcement Wednesday, the company said it will reduce its 2001 revenue, which was originally reported at $63.1 million, by less than 10 percent. It also plans to reduce its 2002 revenue by less than 5 percent from the $67.1 million total initially reported.
The company said it has not estimated the effect of the restatement or the adjustments on quarter-to-quarter revenue trends, but admitted that these trends could be materially or negatively affected.
The company also said it won't receive much of the revenue lost in the fourth quarter of 2002. In February, Microtune said it would record $11.6 million in deferred revenue from products shipped in the last fourth quarter after receiving payments from customers. However, the company backed off that claim Wednesday, saying that $9 million will not be collected from customers and the deferred revenue will not be recorded.
Microtune is not planning to go down without a fight. The company has requested a hearing with Nasdaq over the de-listing threat. Bartek said the company plans to have its 10-K form completed by May 31. "By the time of the Nasdaq hearing, we may have the 10-K form done," he added.
According to Bartek, the company has just under $100 million in the bank with "no debt."
Many in the industry are nevertheless wondering if Microtune's current financial problems along with continuing court battles with arch-rival Broadcom are too much to handle as a start-up in the volatile telecommunications sector.
Kinetic Strategies analyst Alan Breznick said Microtune has its work cut out for it. The potential Nasdaq de-listing and other financial problems could have a big impact on Microtune's place in the market. "This could shoot a great whole in their credibility."
The patent battle with Broadcom could also have a big impact on the silicon tuner developer. Microtune gained a victory last week when a federal court imposed an injunction on Broadcom, blocking it from selling its tuner. But a temporary court win may not lead to more design wins. "The big question in the market is will Microtune be the beneficiary of the Broadcom injunction?" Breznick said. "It's not clear right now that Microtune will get the business."
Bartek said that Microtune has talked with customers currently using the Broadcom tuner. But, while remaining confident Microtune will land some of these customers, he acknowledged it remains to be seen which company will emerge victorious in the patent fight.