Investor Fear Over Rival Product Pushes Datum Shares Down 19%

Shares of Datum Inc., an Anaheim-based maker of atomic clocks, plunged 19% Wednesday as investors fretted that the company could be wounded by a rival product developed by Westinghouse Electric Corp..

Datum’s stock price fell $2.84 to $12.16 per share in heavy trading on the Nasdaq market after Westinghouse announced it has developed a walnut-sized atomic clock that will sell for about $1,000--less than half the price of a widely used clock built by Datum.

Atomic clocks are used to provide highly accurate time measurements in high-tech applications such as global positioning satellites, base stations for cellular phone transmissions and telecommunications lines. Datum, through its Efratom unit, is a leading supplier of atomic clocks for these purposes.

David Young, vice president of finance at Datum, said the dip in the stock price reflects investors’ fears that the company might be overrun by a new and large competitor. “Westinghouse is a very big company and we are very small,” said Young, who added that Datum expects annual sales of about $70 million this year. “I suspect people are reading that this is a big player getting into this business.”

But Young, industry analysts and even Westinghouse officials said Datum investors appeared to be overreacting to the Westinghouse announcement.

The new clock won’t be ready for commercial markets for 18 months, and will primarily be used for “missiles, guidance systems and military applications,” said Ted Foster, general manager of Westinghouse’s electronics, information and sciences division. “We’re not even offering this clock for sale in the same markets Datum is in.”