Powerwave Tech Down 9% On South Korean Economic Woes
By Matthew Newman
NEW YORK (Dow Jones)--Powerwave Technologies Inc.'s (PWAV) shares fell 9% Wednesday on investors' ongoing concerns about the firm's large exposure in South Korea, analysts said.
Powerwave, which supplies radio frequency power amplifiers used in wireless communications networks, derives 75% to 80% of its annual revenue from South Korea, analysts said.
Powerwave shares have fallen steeply in the past four weeks as the economic and financial crisis in South Korea has deepened. Despite last month's $57 billion bailout agreement with the International Monetary Fund and major banks' agreement to rollover short-term loans to South Korean lenders, investors remain nervous that the South Korean economy will sink into recession this year.
Shares of Powerwave, based in Irvine, Calif., were recently trading down 1 7/16 to 15 1/2 on the Nasdaq Stock Market. The shares fell to as low as 14 7/8 on Wednesday, inching close to the 52-week low of 12 3/8 reached on Dec. 29. Wednesday's decline follows a loss of 5.9% on Tuesday.
Analyst Albert Lin of Soundview Financial Group. said the shares may now be oversold and suggests there may be a good buying opportunity.
"Fear has taken over a lot of investors," he said.
Lin said there is no question that South Korea's woes will continue to impact the company, but Powerwave is diversifying its sales in the U.S., which will cushion the blow from declining South Korean revenue.
Brian Modoff, who follows Powerwave for BT Alex. Brown Inc., agreed with Lin's assessment, pointing out that Powerwave has gained sales with BellSouth Corp. (BLS), GTE Corp.'s (GTE) GTE Mobilenet unit and AT&T Corp.'s (T) AT&T Wireless unit, in addition to several original equipment manufacturers.
Modoff said Powerwave's sales to BellSouth, for example, jumped to about 10% of the company's revenue in the fourth quarter from about 6% in the third quarter.
"Over time, the stock is under pressure because of South Korea, but if you dig a little dipper you find that they have better sales domestically," Lin said.
Lin said another reason he is bullish on Powerwave's long-term prospects is that the wireless communications business in South Korea isn't likely to suffer as much as other industries.
He argues that South Koreans will continue to want cellular telephones and Powerwave's South Korean customers - such as multinational companies Samsung Electronics Co., LG Electronics Inc. and Hyundai Group - are in better position to weather the country's economic storm.
Lin predicted that the company's fourth-quarter earnings will be 28 cents a share, higher than Wall Street's expectations.
Seven analysts surveyed by First Call Corp. estimate the company will earn 27 cents a share in the fourth quarter. Powerwave reported earnings of 15 cents a share a year earlier.
-By Matthew Newman; 201-938-2094; matthew.newman@cor.dowjones.com |
