With the networking selloff over the last few trading sessions, the drop in NWK today was not too surprising. The real reason turns out to be recycled "old news." A buying opportunity for those in the know ?
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NEW YORK (Dow Jones)--Investors who thought there was new bad news about Network Equipment Technologies Inc. (NWK) walloped the company's stock before realizing that an earnings shortfall the company discussed in a federal filing was already common knowledge.
''The company wasn't saying anything new and the stock dropped like a rock,'' said Mark Kelleher, analyst at Fechtor Detwiler & Co. in Boston.
Shares rallied as investors realized that existing earnings and revenue projections already take account of the expected revenue shortfall.
Network Equipment, based in Redwood City, Calif., develops computer software and platforms.
The company's NYSE-listed shares hit 14 1/2 before rebounding. At the close they were down 1 1/8, or 6.2%, to 17 on volume of 699,600. Average daily volume is 133,000.
Network Equipment Chief Financial Officer Craig Gentner said he believes the stock will level off on Wednesday.
''Most people realize that this was a mistake and it should not have happened,'' Gentner said.
Investors were confused by a report published by Federal Filings Business News that cited the federal filing, said Kelleher. Instead of realizing that the revenue shortfall was already expected, many investors thought the report indicated a new downturn, he said.
Gentner said the Federal Filings bulletin failed to provide the necessary context for its report. Federal Filings Business News is owned by Dow Jones & Co. (DJ), which publishes this wire service.
''I'm kind of puzzled that the stock was shellacked as much as it was,'' said Bert Hochfeld, analyst at Josephthal Lyon & Ross Co. ''This was not new news. At least it shouldn't have been.''
According to Federal Filings, the company said in its latest 10Q filing with the Securities and Exchange Commission that it expects revenue for the fourth quarter and fiscal year ending in March to be lower than the comparable periods of fiscal 1996.
The company has been saying for at least nine months that revenue for the current fiscal year would be below the previous year's levels due to weakening sales and fluctuations in its revenue from government contracts, Hochfeld said.
The consensus of eight analysts surveyed by First Call Inc. is that the company will earn 34 cents a share in the fiscal fourth quarter, down from 43 cents in the year-ago quarter.
Fiscal fourth-quarter revenue is expected to drop to a range of $86 million to $91 million from $91.8 million in the year-ago period, analysts said.
Kelleher said he expects revenue for the 1997 fiscal year to fall to $324.4 million from $338.9 million a year ago.
Kelleher and Hochfeld said they have not changed their projections.The company is expected to report earnings in April, they said.
(END) DOW JONES NEWS 02-11-97
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