Dow Jones Tape on RSYS today:
Radisys Off 13%; SEC Requested Documents On Inventory
Acctg
Dow Jones News Service ~ January 31, 1997 ~ 11:12 am EST
(MORE) DOW JONES NEWS 01-31-97
11:11 AM
Radisys Off -2-: Co. Said To Be Cooperating With SEC >RSYS
By Thomas Granahan
NEW YORK (Dow Jones)--Radisys Corp. (RSYS) shares were off 14% after the
company revealed on a conference call last night that the Securities and Exchange
Commission has requested documents pertaining to the company's inventory
accounting.
Rumors began circulating late last year that the company was being informally
investigated by the SEC concerning its accounting practices. Radisys said at the
time that the government had not requested any information, and in fact, the
company had voluntarily contacted the SEC to offer its cooperation.
According to analysts, on its conference call last night reviewing its fourth-quarter
earnings, company management said it has provided the requested information and
has not heard back from the SEC.
Perhaps exacerbating today's selloff is the large contingent of shortsellers in the
stock. Jensen Securities analyst Tom Carley noted that those short Radisys stock
have for months been claiming the company was under SEC scrutiny.
Also complicating matters is a lawsuit filed by a former Radisys employee claiming
that the company inflated its earnings through improper accounting practices. Bruce
Taylor, former vice president of operations at the Hillsboro, Oregon, company,
claims in his suit filed last year that he was fired for bringing the accounting
discrepancy he discovered to the attention of management.
The company reiterated on the call that it believes Taylor's suit is groundless.
Officials at Radisys, a supplier of embedded computer technologies, weren't
immediately available.
The shares were recently off 8 1/2 at 49 on Nasdaq volume of 585,600 shares,
compared with average daily turnover of 244,400. Earlier the stock was as low as
48.
(MORE) DOW JONES NEWS 01-31-97
11:50 AM
=Radisys Off -3-: Co.'s 4Q Net Strong, Above
Views >RSYS
The suit filed by former Radisys employee Taylor said the company misreported
inventory and overstated its earnings before and after its initial public offering in
October 1995, with the intention of maintaining the stock price.
Taylor said he was terminated after he persisted in alerting Radisys management to
the problem.
The suit is now said to be in the discovery stage.
Perhaps lost in the news of the SEC request for accounting documents is the
company's strong fourth-quarter earnings. Radisys said Thursday it earned $3.6
million, or 46 cents a share, in the period, up from $630,000, or 11 cents, a year
ago. The latest fourth-quarter earnings beat the analysts' consensus estimate of 42
cents reported by First Call Inc.
''In terms of the fundamentals, it was a great quarter,'' said Carley of Jensen
Securities.
Cowen & Co. analyst Robert Stone, who maintained his strong buy rating on the
stock, said the fourth-quarter earnings were 8 cents above his estimate, helped in
part by stronger-than-expected margins. Cowen was lead underwriter of Radisys'
IPO.
Gross margins, as anticipated, actually fell on a sequential basis to 41.7% from
46.5% in the third quarter. The decline was the result of lower royalty revenue in
connection with retained backlog as a result of the company's buy of Intel Corp.'s
(INTC) Multibus division. Stone had expected margins in the 39% range.
Stone said the company received nine major design projects in the quarter. He said
most of those new programs are expected to begin volume production at the end of
the year. Stone also said 10 new products began ramp toward volume production.
''While embedded system design wins usually take several quarters to enter volume
production, their product life cycles may last three to five years or more, providing
significant recurring revenues,'' he said.
Stone left his 1997 earnings estimate of $1.82 a share unchanged, while Carley left
his at $1.50.
Radisys also said that its co-founder and chief technology officer, Dave Budde, has
resigned.
''Budde was very talented, but I don't think his departure has anything to do with
(today's stock activity),'' Stone said.
Budde retired to spend more time with his familiy and to travel.
As of Dec. 13, 1996, short interest in Radisys totaled 1.4 million shares.
(END) DOW JONES NEWS 01-31-97
1:09 PM
=Radisys Off -4: Co. To Release Statement Later
Today >RSYS
A spokeswoman at Radisys said the company has complied with all of the requests
from the SEC.
''We're obviously willing to cooperate and we've sent them all the information they
wanted,'' the spokeswoman said.
She added that the SEC would not comment on whether it was conducting an
actual investigation into the company's accounting practices. Radisys has not heard
back from the SEC since supplying the information, and she said there was no way
to tell when or if it will.
The spokeswoman also said Radisys will be releasing a statement later in the day.
(END) DOW JONES NEWS 01-31-97
1:58 PM
=Radisys Off -5: J.P. Morgan Says Selloff Buying
Opportunity
J.P. Morgan Securities analyst Daniel Kunstler said the selloff in Radisys shares
presents investors a good buying opportunity.
The analyst trimmed his first-quarter earnings estimate to 42 cents a share from 45
cents, but kept his 1997 view of $1.89 unchanged.
He reiterated his buy rating on the shares, and his price target is 52.
(END) DOW JONES NEWS 01-31-97
3:43 PM |
