PairGain Profits Drop 66% Amid Tough Competition

PairGain Technologies Inc.’s first-quarter profits fell 66% while revenue dipped 16%, as stiff competition in a key product line eroded profit margins, the company reported Tuesday.

Net income fell to $4.2 million, or 6 cents a share, from $12.2 million, or 16 cents a share, a year earlier. Revenue fell to $60.9 million from $72.6 million.

The Tustin manufacturer of communications networking systems said the decline in the bottom line came from reduced gross margins, which fell to 41.9% from 50.8% during the same period last year.

Price competition in its line of high-data-rate digital subscriber line access products, which made up more than half the company’s sales, were primarily responsible for the decrease in margins, the company said.

The per-share earnings fell a penny short of Wall Street’s expectations, according to a survey by Zack’s Investment Research.

The financial results were released after the stock market closed.

The stock rose 22%, or $2.25 a share, to $12.50 in heavy trading on the Nasdaq market. Nearly 17.1 million shares changed hands, making PairGain the seventh most active stock in U.S. markets.

During the quarter, the company bought back 200,000 shares of its stock, bringing the total number of shares repurchased under a program announced last October to 1.2 million, the company said. The company also invested $5 million for a minority stake in ANDA Networks Inc., a Santa Clara communications technology firm.