Power-One Cuts Forecasts on Slow Sales

Power conversion devices maker Power-One Inc., stung by a slowdown at networking giant Cisco Systems Inc., Friday cut its revenue and earnings expectations for 2001, sparking an 11% drop in its stock.

The Camarillo, Calif.-based company’s stock fell $3.44 to $28.75 in Nasdaq trading. In the last year, the company’s shares have traded as high as $89.81.

Power-One said it will seek to cut costs and relocate production facilities from Europe and North America to Asia and the Dominican Republic.

“Through 2000, they were going at full blast,” said Stephens Inc. analyst Todd Cooper. “Now they can focus their attention in other places,” including meeting unfilled orders in Europe.

Power-One said it will increasingly focus on European telecommunications companies.

Last month Power-One, a maker of AC/DC converters and voltage power switches used in communications and other equipment, provided 2001 financial guidance that took into account slowing business conditions at some of its largest customers, especially Cisco, which made up 36% of Power-One’s fourth-quarter revenue.

Earlier this week, however, Cisco reported earnings that missed analysts’ expectations for the first time in years. “It kind of caught [Power-One] off guard,” Cooper said.

“Our primary objective now is to reduce dependence on any one customer,” Power-One Chairman and Chief Executive Steve Goldman told analysts. He said Cisco had an “inventory bubble” that would be gone by the third quarter, and the company “may not even be a top-10 customer in the second quarter.”

Power-One now expects revenue growth of 35% to 40% for the year, totaling $690 million to $720 million. Earnings per share are expected to range from $1 to $1.05, excluding goodwill amortization.

Wall Street analysts had been expecting revenue of $800 million and earnings per share of $1.35 for the full year, according to research firm First Call/Thomson Financial.