Ortel Lowers Expectations of Sales for Two Quarters

Alhambra-based Ortel Corp. on Wednesday reduced sales expectations for its cable-television equipment for the current fourth quarter and the fiscal 1998 first quarter.

Ortel, which also manufactures telecommunications equipment, blamed the weaker outlook on a “recent slowing of domestic orders” in its “core broad-band business” or cable-TV equipment.

“Order rates for repeaters and other new product introductions are not at a pace to fully offset the domestic broad-band weakness,” W.H. Selders, president and chief executive, said. “Revenue for the fourth quarter may be relatively flat or slightly less than this year’s third quarter.”

The statement caused Ortel’s shares to tumble 39%, dropping $8.125 to close at $12.50 in Nasdaq trading. Ortel said net income for the third quarter ended Jan. 31 rose 50% to $2.1 million, or 17 cents a share, from $1.4 million, or 12 cents, in the year-earlier period. Sales rose 72% to $23 million from $13.4 million.

“The company projects lower operating results in the next few quarters,” Yossy Benderly, an analyst at Kaufman Bros., wrote in a research report. “Earnings comparisons in the next few quarters should be weak.”

Benderly cut his stock price target for Ortel shares to $18 from $27 and his rating to “hold” from “buy.” He expects the company to have earnings of 62 cents in fiscal 1997 and 77 cents in fiscal 1998.

Analysts at First Call also cut their earnings estimates. Analysts expect the company to earn 62 cents--down from 68 cents--per share in fiscal 1997, and lowered to 73 cents from 92 cents per share earnings for fiscal 1998.

In the fourth quarter of fiscal 1996, Ortel had a loss of $2.33 million, or 19 cents a share, on sales of $15.4 million.

Analysts at Morgan Stanley and Raymond James Financial cut their rating to “neutral” on Ortel shares.

For the current nine-month period, revenues of $61.1 million increased 45% from $42.3 million in the corresponding prior-year period. Net income for the same period rose to $6 million, or 48 cents per share, from $4.7 million, or 39 cents, a year ago.