Shares drop 39% on warning
By Binti T. Harvey, CBS MarketWatch
Fri Apr 03 14:40:22 1998
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BEDFORD, Mass. (CBS.MW) -- The sound of screaming shareholders accompanied shares of Security Dynamics as they hurtled 39 percent lower Thursday.
The manufacturer of network and Internet security products couldn't protect its profits apparently, as it projected lower-than-anticipated first quarter earnings results. The company expects net income of about 14 cents a share, a nickel below Street expectations. In the same period a year ago, the company earned 12 cents a share.
The profit warning that pushed the stock over the edge also deflated some great expectations. Wall Street has had high hopes for Security Dynamics since it came back from a low of 20 a year ago to more than double its value.
Security Dynamics (SDTI) has been closely-watched and widely-held because it's one of the few stocks in the Internet space to post profits consistently. Net income grew at a rate of 50 percent in 1997, and analysts expected 60 percent growth in 1998.
The bubble burst however, as shares plummeted 16 7/16 to 26 15/16 Thursday. The stock traded on volume of 31.3 million, significantly higher than the average daily volume of 1.1 million. Shares recovered slightly in early trading Friday, rising 13/16 to 27 3/4.
SDTI
NASD
Last Chg.
28 +1 1/16
% Chg. Vol.
+3.94% N/A
Day Lo. Day Hi.
26 1/2 28 7/16
Open Prev.
26 15/16 26 15/16
As of
Apr 04/98 2:51 am ET
Last Trade
Apr 03/98 4:00 pm ET
15 MIN. DELAY
In a conference call, the company attributed the shortfall to expected sales which didn't close before the quarter's end. Adams Harkness Hill analyst Sherri Wolf said the company also faced some product transition issues as well as greater competition during the quarter.
Wolf said the stock took such a huge hit because the pre-announcement came as a real surprise. "The company was doing well, and we knew there was some softness in its RSA product, but the core business has always been able to offset weakness anywhere else," Wolf said.
Wolf doesn't expect the company to resolve its problems right away, but continues to recommend the stock as a long-term investment. "The problems will continue in the near-term, so we'll shave our 1998 and 1999 estimates, but its still a leading consolidator in the market and long-term, it's still a high-quality company."
Binti T. Harvey is an online reporter for CBS MarketWatch. |
