<Primus is launching a VOIP broandband network on a global basis, and Grover said the company represents the best investment for people looking to tap into the VOIP market. The company has a bigger infrastructure and more potential customers than pure-play VOIP companies Net2Phone Inc. (NTOP), DeltaThree Inc. (DDDC), and 8X8 Inc. (EGHT) do.>
+DJ Primus Tel Dn 21%; Saw 4Q Drop In Business Ops - Needham
02/06/2004
Dow Jones News Services
(Copyright © 2004 Dow Jones & Company, Inc.)
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02-06-04 1042ET
=DJ Primus Down -2: Revenue Mix An Issue - Needham Analyst
By Roger Cheng
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Primus Telecommunications Group Inc.'s (PRTL) shares tumbled 28% Friday after the company posted weaker results in its business customer segment in the fourth quarter, according to one analyst.
The McLean, Va., company, which provides long-distance service and Internet access, also posted a revenue mix that was weaker than expected, according to Needham & Co. analyst Vik Grover, explaining that the lower margin parts of Primus' business did better than the higher margin parts did.
While Primus saw a sales decline in its business unit and only a slight uptick in its consumer segment, it saw a 15% sales increase in its lower margin wholesale business. Primus sells capacity on its network to other telecom carriers.
"While mix shift bounces around from time to time, we will be watching the company's retail/wholesale split for signs of continued quality in order to assess the health of Primus's operations on the margin," Grover wrote in a research note.
Late Thursday, Primus said it swung to a profit of 18 cents a share in the fourth quarter, reversing a loss of 28 cents a share a year earlier. The company also estimated net income of $20 million to $25 million in 2004 on 12% to 15% revenue growth.
For 2003, Primus had $54.8 million in net income on $1.29 billion in revenue.
Primus' latest forecast prompted Grover to cut his 2004 earnings estimate to 41 cents a share from 58 cents. The analyst noted, however, much of the weakness will come from higher interest and depreciation expense, as well as from a higher tax rate. Those factors don't hurt the fundamentals of the company.
"The quarter was not great, but it was okay," Grover said. He maintains a buy rating on the stock.
A spokesman for the company wasn't immediately available for comment on the stock movement.
Shares of Primus were recently down $3.08 to $8.23 on Nasdaq volume of 8.3 million. Average daily volume is 1.4 million.
(MORE) Dow Jones Newswires
02-06-04 1134ET
=DJ Primus Down -3: Needham Still Recommends Stock >PRTL
Grover, the Needham analyst, still recommends buying Primus' stock, especially during its sell-off.
"These guys have turned the corner," the analyst said.
Grover pointed to Primus' shift to provide voice-over Internet protocol services, something that can provide faster growth than the company's traditional businesses can.
Primus is launching a VOIP broandband network on a global basis, and Grover said the company represents the best investment for people looking to tap into the VOIP market. The company has a bigger infrastructure and more potential customers than pure-play VOIP companies Net2Phone Inc. (NTOP), DeltaThree Inc. (DDDC), and 8X8 Inc. (EGHT) do.
"Those companies have a limited scope when compared with Primus," Grover said. "Primus is building momentum on its next generation business."
Grover doesn't own shares in Primus, and Needham doesn't have an investment-banking conflict.
Jefferies & Co. analyst Richard Klugman was less optimistic in his research note. He said Primus' recurring earnings of 9 cents a share for the fourth quarter came in far below his estimate of 16 cents. Much of the additional earnings came from a gain on foreign currency.
In a research note, Klugman said fourth-quarter revenue growth of 27% was below his 33% estimate, but in line with trends from the last two quarters. He noted weakness in Primus' European calling card business was offset by strength in its North American wholesale carrier traffic.
Primus' 2004 forecast also fell below Klugman's earnings estimate. He lowered his 2004 earnings forecast to 50 cents a share from 85 cents a share. The company is estimating earnings of 32 cents to 37 cents a share.
Klugman also noted 2004 estimates assumes little contribution from its rollout of VOIP service to Canada and Australia.
Klugman doesn't own shares in Primus, but Jefferies has acted as a co-manager in an offering of senior notes and private equities.
-By Roger Cheng, Dow Jones Newswires; 201-938-5393; roger.cheng@dowjones.com
(END) Dow Jones Newswires
02-06-04 1146ET
amtddj.inlumen.com
WELL FINALLY NTOP IS MENTIONED IN A STORY! <giggle>
ART |
