From LA Times - Friday, January 16, 1998
IRVINE--Investors jittery over the Asian economic turmoil sent
Powerwave Technologies Inc.'s stock plunging 25% Thursday
after the company said it expects customers to postpone
some orders in its largest market, South Korea.
Underscoring the dangers of relying heavily on a single
geographical area in the global economy, Powerwave chief executive
Bruce Edwards said customers might delay or cancel their orders if
market conditions within South Korea remain troubled.
The South Korean market accounted for 83% of the company's
total revenues in 1997, and three of Powerwave's largest customers
are based there. The company makes power amplifiers used in
wireless telephone networks.
"Anyone involved in business in Korea right now has got to be
feeling the effect," Edwards said.
The stock sank to a record low Thursday, dropping $3.56 a share
to $10.44, in heavy trading on the Nasdaq market. More than 5.4
million shares changed hands, 25 times the average daily volume over
the last three months.
"What's happening with Powerwave right now is absolutely typical
of this industry," said Tony Robertson, an analyst with BancAmerica
Robertson Stephens. "This is an incredibly volatile field, because very
few suppliers handle most of the [digital] and cellular phone market."
Last year, the Korean currency, the won, lost half its value, making
U.S. goods more expensive. That has meant trouble for some
suppliers that have large operations in Asia, as well as several
manufacturers within the portable phone industry that either have
offices or significant business ties to the area.
In the last three months, many of the big portable phone
manufacturers and suppliers have also felt a pinch from the stock
market. Motorola Inc. shares dropped about 17%, Nokia Corp. fell
about 18% and Ericsson stumbled more than 15%.
Indeed, Edwards noted that Powerwave has been slowly expanding
into related technologies and suppliers in other regions, specifically
North and South America, as well as Europe. But South Korea will
remain the company's dominant market for the time being, Edwards
said.
Like many other technology issues, Powerwave became a Wall
Street darling after its initial public offering in 1966, when its stock sold
at $12 a share.
Powerwave capitalized on its reputation as a fast-growing company
that had found a solid niche market.
Last July, the firm made a secondary stock offering of 3.25 million
shares, giving some of Powerwave's key executives, employees and
financial backers an opportunity to cash in on the firm's growth. The
stock sold for $22 a share.
The company was hot. Its staff grabbed awards from technology
and accounting organizations, which honored the wireless firm for its
innovation and expansive growth.
In October, Powerwave stock jumped to $48.50 a share.
But as the Asian markets continued to fluctuate, Powerwave's
share price began to drop amid ongoing concerns about the firm's
large exposure in South Korea.
"Fear has taken over a lot of investors," said analyst Albert Lin of
Soundview Financial Group.
Even a strong earnings report failed to impress Wall Street.
Late Wednesday, the company announced that earnings and sales
more than doubled in the fourth quarter ended Dec. 28.
Net income for the three months climbed to $5.3 million, or 29
cents a share, from $2.2 million, or 15 cents a share, a year earlier.
Revenues surged to $37.8 million from $16.7 million.
Analysts had predicted that the company's fourth-quarter earnings
would reach somewhere between 25 and 28 cents a share.
Despite the hefty increases, three analysts downgraded their
recommendations on Wednesday. |
