UPDATE - ADC posts loss, sees weaker-than-expected sales
Wednesday August 20, 7:09 pm ET
By Ben Klayman
(Adds CEO, analyst comments, background, stock action throughout, byline)
CHICAGO, Aug 20 (Reuters) - Communications equipment maker ADC Telecommunications Inc. (NasdaqNM:ADCT - News) on Wednesday posted a third-quarter net loss amid sluggish customer spending and issued a disappointing sales forecast for the current quarter.
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The Minneapolis-based company managed to reach break even before one-time items a quarter sooner than expected, but the outlook of ADC President and Chief Executive Robert Switz concerned analysts.
"How come he doesn't think he's going to grow next quarter?" said Lehman Brothers analyst Steve Levy, who rates ADC shares "underweight."
"Financially, they're in OK shape," added Levy, who does not own stock in the company. "They have the cash. They're sitting right at break-even, but that's not the question.
"Can they grow in an absolute sense? Can they grow faster than the overall market?" he said. Lehman has not done banking for the company in the past 12 months.
ADC said it expects fiscal fourth-quarter sales of $180 million to $190 million, with break-even bottom-line results before one-time items for the second straight quarter.
Analysts were expecting sales of $197.7 million and no profit or loss before one-time items, according to Reuters Research, a unit of Reuters Group Plc.
Telecom equipment makers have been hurt by the slowdown in spending by telephone companies over the past two years due to excess network capacity. That has led suppliers to slash jobs, sell noncore assets and post financial losses.
Switz said the company has always said demand in the second half of the year could drop from the first half, instead of picking up as often happens when telephone companies spend the rest of their annual budgets.
"What you have in our business is a lot of wishful thinkers who are hoping there will be some catalyst in spending," he told Reuters in a telephone interview. "There is no sign that is going to happen."
[Harry: That pretty much says it all. That does not mean individual companies will not do well. ADTN is an example as some of the Bell carriers are trying to add revenue by
adding DSL to compete with cable]
In its third quarter, ADC posted a net loss of $15.1 million, or 2 cents a diluted share, compared with a loss in the year-ago quarter of $629.1 million, or 79 cents a diluted share.
Earlier this month, Switz, then ADC's chief financial officer, said the company might break even before one-time items one quarter early due to cost-cutting efforts. It had previously said it did not expect to post break-even results until its fiscal fourth quarter.
Sales in the third quarter, which ended Aug. 1, fell about 20 percent to $188.5 million from last year, and were off almost 2 percent from the previous quarter.
Analysts were expecting a loss of 1 cent a share, before one-time items, on sales of $191.4 million, according to Reuters Research.
Switz said the company is now aiming to break even on a pro-forma basis, by posting quarterly sales of $180 million, instead of its previous target of $190 million. He said ADC will look at other ways to lower costs, including outsourcing some non-manufacturing operations, but dramatic job cuts are not expected.
He was promoted last week after ADC's previous chairman and CEO, Richard Roscitt, was hired by telephone and data services company MCI, whose legal name is WorldCom Inc. (Other OTC:WCOEQ.PK - News)
ADC repeated on Wednesday that it is looking to add products lines that strengthen its core businesses.
Before the third-quarter results were announced, ADC's shares closed up 14 cents, or 6.2 percent, at $2.39 on Nasdaq. |
