After disclosing fourth-quarter earnings would be below analysts’ projections and problems in its
two-way pager production, Glenayre Technologies Inc. President and Chief Executive Officer Gary Smith resigned last
week, replaced temporarily by Chairman Ramon Ardizzone.
Smith first joined Glenayre in 1996 as president and
chief operating officer, shortly after which he was promoted to CEO. In the management shakeup, former Chief
Financial Officer Stan Ciepcielinski was promoted to chief operating officer. That position has been vacant since Smith
became CEO. The company said it is now searching for a CEO and a CFO.
Glenayre said it expects to report a loss
of between 1 cent and 5 cents per share before fourth-quarter restructuring charges and write-offs, whereas the
consensus earnings estimate was 6 cents per share for the quarter. After restructuring charges and write-offs, the
company said it expects to report a loss of between 19 cents and 23 cents per share.
Glenayre pointed to a problem
in manufacturing its new AccessLink II two-way pager as a significant factor in the disappointing earnings results. The
problem resulted in a significantly lower manufacturing yield. “Typically we run above 90 percent yield and we
were considerably below that,” said Gary Hermansen, president of Glenayre’s Wireless Access Group, the
company’s pager manufacturing unit. The products the company did ship were fully functional, he said, just not great in
number.
“We had to make minor design modifications to allow us to improve the yield,” he said.
Whether production will ramp up in January as promised remains to be seen.
This is not the first time the company
has had problems filling orders because of production problems. In the second quarter, Glenayre reported problems
converting orders into shipments, citing delayed infrastructure shipments as well as production problems with another
pager line, the AccessMate, which combined led to negative earnings per share. Hermansen said such manufacturing
glitches in new products are common, and pointed out AccessMate today is meeting demand.
“There has been
such a strong demand for both the Mate and Link II that there was a lot of pressure to produce them,” he said.
“When you’re ramping up at high levels, the problems you find are the kinds you don’t see until you make
thousands of them.”
1998 was a tough year for Glenayre. The company posted a 77 percent drop in earnings
per share in the first quarter. In November, the company reduced its work force by 10 percent.
Analysts who follow
the company said management has always been a problem at Glenayre. One analyst suggested the only way out of
Glenayre’s financial problems would be to sell the company.
Adding to the financial hardship for the fourth quarter
was an $8 million paging infrastructure order scheduled to ship in the fourth quarter that has been delayed to next year.
Glenayre also said it either plans to shut down or sell its Options business unit, formerly known as CNET, which will
carry a $7 million write-off for the quarter.
Ardizzone said the company will break this slump by expanding into
other areas, such as the voice-mail industry.
“Glenayre will actively pursue all avenues necessary to improve
the financial performance of its current businesses,” he said. “We will leave no stone unturned to re-
energize our future and re-establish ourselves as a growing corporation. While Glenayre has had disappointing financial
results during the last few quarters, it has maintained its leadership role in the two-way pager device and overall paging
infrastructure markets while continuing to explore and innovate through the extraordinary quality and technical
competence of its people.”
Glenayre has a tough task ahead of it. In January 1997, Glenayre stock traded as
high as $22.30. In December 1997, when Glenayre stock was at about $9, analysts at Robert M. Cohen & Co.
speculated the company could see a turnaround and set a 12-month price target of $17.50. At press time, the company’s
share price was $4.
