O.C. Tech Firms: Good Not Good Enough
Stellar financial results last quarter didn’t save some Orange County technology companies from Wall Street’s wrath Wednesday as traders hammered Newport Corp., Powerwave Technologies Inc. and others for lowering sales or earnings estimates for the coming quarters.
Newport, an Irvine maker of precision components and instruments, reported earnings Wednesday that exceeded analysts’ average estimate by 3 cents a share. Its net income for the fourth quarter quadrupled to $12.3 million, or 36 cents a share, from $2.95 million, or 10 cents, in the prior year’s final quarter.
But Newport’s lowered estimate of its sales growth this year--40% instead of the previously estimated 50%--sent the stock tumbling 17% in after-hours trading to as low as $90 a share. It had closed at $108.44, down $5.19 a share, on Nasdaq.
One analyst said that semiconductor companies may buy less of Newport’s equipment as their own profit growth slows. Newport is “concerned there could be a slowdown later this year,” said Pacific Growth Equities analyst Joseph Noel. Still, he rates Newport shares a “strong buy.”
The company’s quarterly sales more than doubled to $86.7 million from $42.3 million a year earlier. For the year, Newport earned $27.8 million, or 86 cents a share, more than triple the prior year’s net income of $7.9 million, or 28 cents a share. Annual sales rose to $252.9 million from $144.1 million.
Powerwave, which met analysts’ expectations Tuesday by posting earnings of $12.4 million, or 19 cents a share, saw its stock fall 17% Wednesday. After the market closed Tuesday, the Irvine maker of radio-frequency amplifiers lowered its first-quarter earnings estimates and said it will take a charge as it consolidates operations in a new Santa Ana headquarters and operations facility.
The company estimated that first-quarter sales will be $105 million to $125 million and earnings will be 5 cents to 10 cents a share. It was expected to earn 19 cents a share, the average estimate of eight analysts surveyed by First Call/Thomson Financial.
Powerwave’s stock fell $7.56 Wednesday to $36.50 a share on Nasdaq.
Also, the company said Wednesday that it has received a $140-million contract to supply the latest power amplifier products to Nortel Networks Corp., which already accounts for 45% of Powerwave’s revenue, according to Deutsche Bank Alex. Brown analyst Brian Modoff. He speculated that Nokia Corp., though, could become Powerwave’s next big customer.
Wall Street also hit Irvine communications chip maker Broadcom Corp., Orange County’s biggest company by market value, on Wednesday. Its shares slid about 6% amid mixed views over its stated prospects for revenue growth in a choppy economy. The stock lost $8.50 to close at $124.94 a share on Nasdaq.
Broadcom, which after the market closed Tuesday reported fourth-quarter income that beat analysts’ average estimate by a penny a share, said it expects revenue in the first three months this year to grow 22% to 23% from the fourth quarter’s $376.1 million.
But some analysts, including SG Cowen’s Rick Billy, said that Broadcom’s revenue projection might not be as robust as it appears. After factoring in a just-completed acquisition, he said, revenue growth would be less than 10%.
Other analysts, however, said that Broadcom’s sell-off Wednesday was more likely an episode of profit-taking than serious fretting over the revenue outlook. “It is a pretty big company to be growing 100% year over year,” Morgan Stanley analyst Mark Edelstone said.
One of the bigger stock losers Wednesday was QLogic Corp. The Aliso Viejo company had gained $10.63 a share Tuesday on third-quarter earnings that beat analysts’ average estimate by 2 cents a share, but it coughed up the gain, plus some, because its high sales figures weren’t high enough. The stock lost $15.19 a share, or nearly 16%, to close at $82.50 on Nasdaq.
The company had reported sales of fiber-channel computer cards and switches that didn’t quite meet estimates. The equipment sends data over long distances and expands computer networks.
The designer of chips and circuit boards linking computers and data storage systems bought Ancor Communications Inc. last year to expand its fiber-channel product line. Investors bought QLogic stock expecting fiber-channel growth, analysts said.
“They didn’t quite get that, [and] fiber channel is what everyone pays attention to,” said James Poyner, an analyst at CE Unterberg Towbin. Though QLogic’s fiscal third-quarter fiber-channel sales were $53.7 million, Poyner said, he expected fiber-channel sales of $55.3 million.
“It’s just a one-quarter issue with a couple of customers,” QLogic Chief Executive H.K. Desai said. Half of the company’s fiber-channel revenue came from five companies. Three spent more with QLogic in the quarter, while two spent less, Desai said.
Reuters, Bloomberg News and Dow Jones Newswires were used in compiling this report.
