Vicor Corp. Releases Financial Results

February 22, 2007 by Jeff Shepard

Vicor Corp. reported its financial results for the fourth quarter and fiscal year ended December 31, 2006. Revenues for the quarter increased to $48,033,000 compared to $46,294,000 for the corresponding period a year ago.

Net loss for Q4 was $38,150,000, or $.92 per diluted share compared to net income of $2,080,000, or $.05 per diluted share, in Q4 2005. The net loss in Q4 2006 was primarily due to a loss from a litigation-related settlement described below. For the year ended December 31, 2006 revenues increased by 7.1% to $192,047,000 from $179,351,000 for the same period of 2005. The company reported a net loss for 2006 of $29,738,000, or $.71 per diluted share compared to net income of $3,916,000 or $.09 per diluted share in 2005.

Gross margin declined to 41.0% in Q4 2006 from 42.7% in Q4 2005 and decreased on a sequential basis from 42.5% in Q3 2006. The book-to-bill ratio for Q4 2006 was 0.94:1 as compared to 1.00:1 in Q3 2006. Backlog at the end of 2006 was $36.4 million as compared to $38.6 million at the end of 2005. In Q4 2006, the company recorded $200,000 for expensing stock-based compensation in accordance with Statement of Financial Accounting Standards No. 123 (revised 2004) (FAS 123R).

Commenting on the fourth quarter, Vicor’s CEO Patrizio Vinciarelli noted: "Demand fell short of expectations as we continued to experience delays in significant orders projected to be booked in Q4. As in Q3, these delays caused disappointing book-to-bill and revenue levels. While demand for Vicor bricks was relatively soft, there was progress with key V-I Chip engagements, leading to record bookings and shipment of V-I Chips. Margins were lower than expected because of non-recurring factors."

The company also announced that it has reached an agreement in principle with Ericsson, Inc., to settle a lawsuit brought by Ericsson against the company in California state court. Under the terms of the settlement agreement, reached on February 16 after a Court ordered mediation, the company will pay $50 million to Ericsson, of which $12.8 million will be paid by the company’s insurance carriers. The company’s decision to enter into the settlement followed an adverse ruling by the court in January in connection with a settlement between Ericsson and co-defendants Exar Corp. and Rohm Device USA, LLC, two of the company’s component suppliers prior to 2002. The company strongly disagrees with the ruling, which it is appealing. Although a successful appeal would enable the company to seek recoveries from Exar and Rohm, there is no assurance that it will be successful in the appeal. In light of this ruling and after taking into consideration the possibility of further recoveries from the insurance carriers, the company decided to settle the Ericsson case at this time. Accordingly, the company recorded a net loss of $37.2 million from litigation-related settlement in the fourth quarter of 2006.