SCIENCE/ TECHNOLOGY : Defense-Spending Cutbacks Squeeze EIP Microwave Inc.

The cutback in Pentagon spending is squeezing one small Newport Beach-based defense contractor.

EIP Microwave Inc. said Tuesday that it has discontinued its quarterly cash dividends and is searching for a strategic partner as a result of declining sales to the military.

The manufacturer of test and measurement equipment is eliminating its 3-cent-a-share quarterly dividend to help finance new product development and is seeking a business partner said Jonathan W. Clem, vice president and general manager for finance.

The company said it will consider selling an equity stake in the firm.

EIP has been developing a line of test products that are compatible with the VME computer architecture used in the telecommunications industry for more than a year, Clem said.

EIP manufactures high-frequency test and measurement instruments primarily for the defense and telecommunications industries. It employs a total of 87 people at its manufacturing plant in Milpitas and corporate headquarters in Newport Beach.

Military sales have been shrinking and currently make up slightly less than half of the company’s revenue.

For its fiscal year ended Sept. 30, EIP reported net income of $127,000, down from $771,000 a year earlier. Due to a decline in defense business, sales declined 18% to $11.3 million from $13.8 million a year earlier.

EIP stock closed unchanged Tuesday at $1.75 per share in over-the-counter trading.