NEW YORK-Glenayre Technologies Inc. recently issued an advance warning that it expects its third-quarter net income to be “significantly below” results posted in the same period last year.
According to unaudited financial statements available on Glenayre’s World Wide Web site, the company earned net income of $21 million during the third quarter of 1995. “Net income could be in the range of 40 percent to 45 percent below third quarter 1995 net income,” Glenayre said.
Glenayre expects to report its third quarter results by the end of October, but no date has been set yet. Its announcement came just two days after Motorola Inc. issued a similar warning about its own third quarter, which also ends Sept. 30. The similarity between the two announcements ends with their timing, however.
Motorola placed primary blame for its lowered expectations on slowdowns and price competition in semiconductor and wireless handset sales, while saying its infrastructure business is unaffected. Glenayre, headquartered in Charlotte, N.C., specializes in infrastructure equipment and related software and services used in paging, cellular, voice processing, mobile data and point-to-point wireless communications. It has systems in place in more than 110 countries.
“The estimated shortfall is due to a lack of short-term shippable orders, sales mix and the current level of expenses,” Glenayre said. “The company remains optimistic about its future growth, based on a strong forecast and record backlog from worldwide markets.”
Glenayre officials said the company’s, “core paging business is off by a quarter, both domestically and internationally,” said Rakesh Sood, senior communications analyst for Hambrecht & Quist, San Francisco. “It’s a bit surprising, and the explanation is a temporary push-out of some shippable orders.”
Although Glenayre’s announcement said the company hasn’t lost market share, Sood said he believes “market share loss at the margins” may be contributing to its lowered third-quarter expectations.
Donaldson, Lufkin & Jenrette Securities Corp., New York, estimates that Glenayre has an 80 percent share of the domestic paging switch market and a 60 percent share of the paging transmitter segment. These estimates were released Sept. 10 in a report by Eric C. Buck, telecommunications equipment analyst.
Sood also said that delays in the commercial deployment of narrowband personal communications services systems have contributed to Glenayre’s short-term problems. “This is beyond second-quarter decreases in estimates, and forecasts a further push-out,” he said. “We could wait for six months for anything significant to happen.”
In its announcement, Glenayre also said its sales and earnings will be below Wall Street estimates for the third quarter.
“The consensus was 39 cents (per share); we were at 38 cents; now, we’ve lowered that to 19 cents,” Sood said. “You’re always trying to account for new technologies, but in many cases you’re just too optimistic.”
DLJ’s Buck is more sanguine over the longer run. “We expect the company to capture a substantial share of the $1.8 billion we estimate will be spent in the industry over the next several years for the build-out of narrowband PCS,” Buck said. “Recent weaknesses due to the timing of NPCS shipments have created what we consider an excellent (Glenayre stock) buying opportunity.”
