Tyco Expects to Miss Forecast as Demand Falls

Tyco International Ltd., a manufacturing conglomerate and the largest maker of electronics connectors, said Tuesday that its fiscal second-quarter earnings will be less than forecast because of falling demand from telecommunications and computer- networking companies.

The warning overshadowed Tyco’s report of fiscal first-quarter earnings and sent its shares down 8.3%.

“During the quarter we received [electronics] orders, only to have those orders be canceled on us a week later,” Chief Executive Dennis Kozlowski said. Sales at Tyco’s electronics unit probably will drop as much as 25% in the period, after declining 19% in the first quarter, he said.

The projected earnings shortfall rattled investors already unnerved by concern that Tyco manipulates results to keep profit rising, an allegation that Kozlowski has long disputed.

Tyco, which also makes ADT burglar alarms, trash bags and medical supplies, said it expects earnings of 80 cents to 82 cents a share in the second quarter ending in March.

Analysts on average were expecting 86 cents, according to Thomson Financial/First Call.

For the first quarter ended Dec. 31, net income more than quadrupled to $1.45 billion, or 73 cents a share, from $317.4 million, or 18 cents, a year earlier, mostly because of new accounting rules for acquisitions and sales and earnings from the purchase of the CIT Group finance unit in June. Sales of security and health-care products rose.

Excluding one-time items, Tyco said it would have earned $1.47 billion, or 74 cents a share, a penny higher than analysts’ forecast. Revenue rose 20% to $10.1 billion, despite a 19% drop in electronics business revenue to $3.1 billion.

“It was a solid quarter but the company gave the bears plenty to chew on,” Michael Regan, an analyst at Credit Suisse First Boston Corp., wrote in a note to clients.

He has a “buy” rating on the shares and doesn’t own the stock.

Shares of Tyco, based in Bermuda and run from Exeter, N.H., fell $4.35 in heavy trading to $48.05 on the New York Stock Exchange.

Rising profit and sales at its health-care, finance and security and fire businesses will help meet a $3.70-a-share forecast for the year, Kozlowski said.