Premisys Says Profit Won’t Meet Forecasts
Premisys Communications Inc., a maker of telecommunications equipment, said Monday that fiscal second-quarter earnings will fall short of forecasts and revenue will be unchanged from the first quarter because of weak international orders and increased competition.
Separately, Premisys said President and Chief Executive Nick Williams is being treated for frostbite in a San Francisco hospital and expects to return to work in June. Premisys said it’s considering whether to appoint an interim chief executive while Williams recuperates.
Fremont-based Premisys, whose equipment helps telecommunications companies handle Internet traffic, has had to cut prices on a key product and is struggling to get a new product ready for shipment. The company expects revenue of $25 million and earnings of 8 cents to 10 cents a share in the quarter ended Friday, less than the 16-cent average estimate of eight analysts from First Call Corp.
“Competition is increasing and creating a lot of pricing pressure on the gross margin line,” said Chandan Sarkar, an analyst at Soundview Technology Group. “They’ve had some fairly poor execution in both sales and engineering.”
Premisys shares fell $1.50 to close at $8.38 on Nasdaq. Before Monday, Premisys stock had declined 62% this year.
Premisys also said sales in the fiscal third quarter will be unchanged to “somewhat greater” than the second quarter’s. Operating expenses will be “consistent with the revised revenue expectations,” the company said. It wasn’t more specific.
Chief Financial Officer John Hagedorn told analysts on a conference call that the company’s direct sales force booked about $1 million in international sales for the second quarter. Premisys had expected to sell $5 million in equipment directly to international customers.
Premisys also said it failed to ship its SlimLine product, which lets new phone companies provide phone lines to small-business customers, as it made adjustments to both hardware and software. SlimLine is expected to be available in January, Hagedorn said.
The company also said its gross margin--the percentage of sales left after production costs are subtracted--narrowed to about 60% in the second quarter because of discounted prices for its StreamLine product.
Premisys said it expects gross margin to narrow to the “mid- to upper-50% range” in the third quarter.
Premisys will report second-quarter results Jan. 14.
In the 1998 fiscal second quarter, Premisys earned $4.01 million, or 15 cents a share, on sales of $24.6 million.
Williams, who joined Premisys in April 1997 as chief operating officer and president and was promoted to chief executive July 27, suffered frostbite after he got lost while skiing in a snowstorm Dec. 19. The San Francisco Chronicle reported that the former Marine was lost in California’s Squaw Valley ski area, in the coldest weather in years, before a rescue helicopter found him on the morning of Dec. 21.
