Rainbow Technologies Says Earnings Will Fall Short

Computer security products maker Rainbow Technologies Inc. said Friday that a sudden slowdown in North American orders will cause it to report lower-than-expected quarterly earnings of 10 cents to 14 cents a share.

The Irvine producer of information protection and software products said it would miss the target of 18 cents a share that analysts had expected for the fourth quarter. It expects to report financial results Feb. 28.

The warning came as no surprise because companies are spending less on information technology, said analyst Jeffrey Van Sinderen of B. Riley & Co. in Los Angeles.

Nevertheless, the news, released after the market closed, sent Rainbow stock down sharply in after-hours trading. During regular trading, Rainbow’s stock lost 6 cents to close at $11.44 a share on Nasdaq. But in after-hours trading, the stock traded as low as $9 a share.

The company said the general economic slowdown resulted in lower sales in both its secure software distribution products and its Internet performance enhancement businesses. In the latter market, Rainbow’s two biggest customers are Sun Microsystems Inc. and Intel Corp., both of which also have had slower growth in recent months.

Rainbow said it also had higher levels of investment and currency losses than anticipated, though the losses were partially offset by the sale and licensing of certain assets.

Despite the lower quarterly earnings, its annual results will set records for revenue and earnings growth, the company said.

The company, which announced an ambitious growth and reorganization plan in December, said management is optimistic about its operating results this year, but it warned that its growth for the next two quarters could be slower.