Vertel’s Future Is a Question Mark as Losses Mount By CARLOS MARTINEZ Staff Reporter Software and telecommunications component-maker Vertel Corp. of Woodland Hills is facing an uphill battle to continue operating. The seven-year-old company has been grappling with a string of losses for four years, and despite harsh cost-cutting measures and, most recently, the divestiture of one of its product lines, it has been unable to stem the tide. “They’re one of those companies that has been badly hit by the drop in the tech market and it remains to be seen whether they can recover,” said Tim Welch, an independent technology consultant based in Los Angeles. “It’s hard to be optimistic about them.” Vertel develops and sells automation and networking software products to original equipment makers like Lucent Technologies, Nokia and Alcatel. But, as did other suppliers to these companies, Vertel found orders dried up when the telecom bubble burst. “Those are all companies that have drastically cut back on purchases and their suppliers are adapting or going out of business,” said Jonathan Kramer, president of Kramer.firm, a technology consulting firm in Santa Monica, of telecom providers like Nokia. “Vertel’s problems are not unique, but they are serious.” Vertel lost $2.2 million or $0.22 per diluted share on a 30 percent sales decrease to $2.3 million for the third quarter ended Sept. 30. That compared with a loss of $2.8 million or $0.08 per diluted share on revenues of $3.3 million in the same period of the prior year. The company has not posted a quarterly profit since June, 2000 when it earned $63,000 or $0.07 per share, on sales of $5.2 million. The company lost $7.8 million in 1999, $5.3 million in 2000 and $12.1 million in 2001. The company cut 30 percent of its 108-person workforce last year and reduced administrative and sales expenses in its most recent quarter. For the period ended Sept. 30, Vertel said it reduced its general and administrative expenses by 34 percent compared to the second quarter of the year and by 10 percent compared to the third quarter of 2001. The company cut its sales and marketing expenses 22 percent compared to the third quarter of last year. But in its most recent performance report, Vertel officials warned that even its unrelenting attention to costs may not be enough to restore the company’s balance sheet. “Since the beginning of the year, we have reduced the total number of employees by approximately 40 percent and implemented other cost reduction initiatives,” said Craig Scott, Vertel’s CFO. ” Although we plan to increase revenues and continue reducing expenses, we believe it is likely we may require additional financing in the first quarter of 2003 to fund our operations for 2003 and continue operating as a going concern,” Scott said. Officials at Vertel declined to elaborate on their published statements, but the first of the company’s cost cutting moves in 2003 occurred earlier this month when Vertel announced an agreement to sell one of its product lines, e-ORB software to England-based Prism Tech Ltd. for $1.2 million.