After two years of plunging sales and financial uncertainty, Fujitsu Ltd’s Ross Technology Sparc chip unit, may be facing high noon in its battle for survival. Austin, Texas-based Ross says its fourth-quarter revenue will be substantially lower than expected and that net loss will be higher than the $0.29 per share analysts were looking for. What’s more, the company is now saying that its future isn’t guaranteed and it is willing to explore any avenue to avoid liquidation and live to see the day it can capitalize on its Viper 64-bit Sparc technology. Ross posted a slim $251,000 profit in the third quarter but warned then that it didn’t foresee another operating profit any time soon. Sales to OEMs of existing products continue to be the bane of Ross’s tenuous existence. It complains that for eight straight quarters it’s seen falling sales of its 32-bit hyperSparc products – and its upgrade business hasn’t picked up enough to offset the OEM decline. Ross says its even tried expanding its sales force and developing new channels but can’t seem to resuscitate the dead product line. Thus, the company warns, revenues for the foreseeable future will be significantly lower than third-quarter levels of $14.3m. Ross says it’s taking action to minimize losses by aligning its expenditures more closely to the lower level of sales, but Ross chief financial officer Kit Webster says it’s not clear yet whether that means staff will be disappearing – although it’s likely. The company’s long had its hopes tied to the development of its Viper chip and is now telling the investment community to view it as more of a development-stage company with some significant intellectual property to offer. Ongoing development of the Viper product is dependent upon the ability to secure adequate development funding, from majority shareholder Fujitsu Ltd or other strategic partners. Fujitsu has agreed to extend the term of its $20m credit facility until June 30 and will consider extensions beyond that after reviewing Ross’s business plans, but it’s not promising any further extensions or an increase to the $20m cap. As of March 31, Ross had already borrowed $15m under the line of credit and says it doesn’t have the capability to pay off the line of credit in the foreseeable future. Thus the company has decided to pursue strategic alternatives for its business and explore partnerships that help it realize Viper’s revenue potential. Webster’s laundry list of options currently being discussed include everything from an acquisition of Fujitsu’s equity interest or the entire company by a third party; new equity investments or development partnerships for the Viper program; the sale of various assets, including a design subsidiary in Israel or even the Viper development program itself – which, Webster admits, is pretty much the same as liquidating the company, another real possibility. Ross is currently in discussions with potential investors and buyers, but Webster wouldn’t mention any names. What’s left of Ross’s share price eroded $0.3438 to close at $0.625 on Thursday.
