Dec. 10 Advanced Digital Dn 6%; 4Q Sales Dn, Miss Street Estimate DJ
Dec. 10 Merriman Curhan Cuts Advanced Digital To Neutral From Buy DJ
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Advanced Digital Dn 6%; 4Q Sales Dn, Miss Street Estimate
December 10, 2004 11:46 a.m.
By Chhandasi Pandya Of DOW JONES NEWSWIRES
NEW YORK -- Shares of software provider Advanced Digital Information Corp. (ADIC) fell 10% Friday after the company reported a slowdown in fourth-quarter sales and lackluster earnings.
The Redmond, Wash., company said late Thursday that earnings came in at $4.91 million, or 7 cents a share, down from $5.75 million, or 9 cents a share, a year earlier. Wall Street had expected the company to earn 2 cents a share, but analysts noted that 4 cents of per-share earnings came from a tax benefit.
Citing lackluster original equipment manufacturer sales, the company reported total revenue for the period fell 2.2% to $115.4 million, short of the mean analyst estimate of $120.6 million, and below the $118 million last year.
"Sales through new reseller channels as well as success of our disk-based backup and archive products helped drive branded sales growth during the period. Each of these trends bodes well for the future," Chief Executive Peter van Oppen said in a release.
While branded sales rose 9% in the fourth quarter and gross margin, as a percentage of sales, grew by 250 basis points to 29.4%, analysts saw the results as a mixed bag.
Merriman Curhan Ford & Co. cut its rating on the shares to neutral from buy, and slashed its 2005 earnings per share estimate to 16 cents from 34 cents, on revised revenue expectations of $447 million, from $541 million.
"While gross margins did improve due to a strong mix of branded business, ADIC's top-line miss leaves us questioning the company's growth opportunity," analyst Brion Tanous wrote. "Higher margins must be demonstrated to justify the stock's current multiple of 66X forward earnings."
Meanwhile, Adams Harkness analyst Mark Kelleher reiterated a buy rating on the stock, saying that the company's decision to focus more on its branded business will continue to help gross margin. However, he lowered 2005 earnings estimates to 28 cents a share from 37 cents, on revenue of $502 million, from the previous estimate of $583 million.
Shares recently traded down 10.5%, or $1.10, at $9.38 on volume of 1.3 million shares, compared with the daily average of 451,702.
During a conference call after reporting earnings Thursday, Advanced Digital said it expects to post flat revenue in the first quarter, and 2005 sales in a range of $460 million to $500 million. The mean analyst estimate for 2005 sales is $523 million.
The company said on the call that sales would be affected as lower margin OEM products are replaced by more branded products next year.
Robert Baird & Co. analyst Daniel Renouard, in a note, called the outlook "disappointing" and lowered his 2005 estimate to sales of $480 million and earnings per share of 25 cents, from his previous estimate of 31 cents a share on sales of $506 million.
"We believe incremental margin improvement from a higher mix of branded revenue and EMC sales may not offset the disappointing FY05 outlook," he wrote.
He added that much of the increase in branded sales came Advanced Digital's partnership with EMC Corp. (EMC) and "given EMC's historical dominant relationship with suppliers, we are cautious of expected margin upside from the relationship."
Robert Baird maintains a market in Advanced Digital's securities. Renouard, the analyst, doesn't own shares. Merriman Curhan analyst Tanous wasn't available for disclosure, and the firm has received banking fees from Advanced Digital. |
