Tyco International Limited (TYC) Message Board

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Non-Tech : Tyco International Limited (TYC)

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To: JDN who wrote (3724)	2/7/2007 4:41:28 PM
From: rich evans	Read Replies (2) of 3770

Tyco reported results which were the same gross margin as last quarter of 33.6%. The problem is that Tyco's SGA expense was up 1% to 20.4%. This could be expected as it is Q1 when tyco gives its annual share based compensation awards which this year totaled 86mil. The problem is that guidance for Q2 for operating margin was way down to 12.5%-13%. This is lower then Q1 which was 13.1%. Operating margin for Q2 typically goes up as SGA expense is less. This means that gross margins are expected to decline in Q2- not good. I don't understand why? Electrical segment did not have it copper costs go down as expected as they are a first in - first out inventory cost accounting and therefore still had high priced copper to take out averaging 3.42/pound. This cost 15 mill on a year to year comparison with Q1/06. But copper is now 2.5/pound so eventually these better costs should help gross margins in electrical segment. Regardless, tyco is forecasting lower gross margins and operating margins of about 1% so what is up. Last year OM for Q2 for tyco was 13.7%. before special items. Don't understand the conservative guidance. And market is reacting to it negatively. Rich

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