Tag - Electronics

A recent changing of the guard in management and the board of directors of a little-followed microcap network device play suggests an emerging value situation worth investigating.

Irvine, Calif.-based Lantronix, Inc. (Nasdaq:LTRX) has remained a story of unfulfilled potential for its shareholders in recent years. The $56 million market capitalization company is a leading player in the emerging device networking market. Lantronix’s secure communication solutions provide remote access, management and control of virtually any electronic device via the Internet. The company’s products are used in markets ranging from security, industrial and building automation to medical, financial, government, consumers electronics and appliances.

While the long-term future of the device networking market looks bright, a world here-and-now filled with interconnected devices can’t come soon enough for Lantronix. The company’s annual sales have nudged up only modestly over the past few years, to $55.3 million in fiscal 2007 from $49 million in fiscal 2003. Losses have been reduced over this stretch, but sustained profitability has still proven elusive. This situation could be about to change. Last month, the company announced the appointment of Jerry Chase as the company’s new chief executive. The hiring of Chase follows a year in which the company has also made significant changes to its board of directors. Four of Lantronix’s five directors have joined the board over the past year.

Chase joins Lantronix following a successful previous turnaround stint. From 2004 to 2007, Chase was CEO of digital video equipment maker Terayon Communications. Under Chase, Terayon sold two of its three unprofitable units and grew revenue in its remaining division to $60 million from $24 million. In April 2007, Terayon was acquired by Motorola, Inc. (NYSE:MOT). Chase’s compensation package with Lantronix includes accelerated vesting of a portion of his stock options depending on the stock’s performance, beginning with Lantronix’s share price staying above the $1.50 level on a sustained basis. Lantronix closed at $0.93 a share on Monday, around the middle of a 52-week range of $0.47 to $1.72.

Tessera Technologies, Inc. (Nasdaq: TSRA) shares are plummeting after the U.S. Patent Office rejected a patent by the developer of miniaturization technologies after a reexamination. Siliconware Precision Industries (Nasdaq: SPIL), a Taiwan-based packager of semiconductors, contested Tessera’s patent.

“An initial, non-final office action in an ex parte reexamination is not a final decision and should not be characterized as such,” Tessera CEO Bruce McWilliams said in a statement. “We are one year into the process and just received the first office action on the ‘627 patent. We believe in the strength and validity of our battle-tested patents and will continue to vigorously defend them.”

McWilliams said it is “not unusual” for the Patent Office to preliminarily reject a patent claim. Tessera noted that its quarterly guidance does not include “settlements from the company’s current enforcement actions.”

At closing, TSRA shares were down 38.99%, or $8.99, at $14.07. Over the last 52 weeks, shares have ranged from $11.11 to $46.43.

iRobot Corp. (Nasdaq: IRBT) issued revenue guidance for the fourth quarter and fiscal year above the consensus on Wall Street, but still saw shares slide due to the overall bearish sentiment plaguing the broader market.

For the fourth quarter of 2007, the robot maker said it expects revenues in the range of $98 million to $100 million and revenue for the full year 2007 in the range of $248 million to $250 million. Four analysts polled by Thomson Financial were on average forecasting revenues of $90.93 million for the fourth quarter, while five analysts polled by Thomson Financial were on average forecasting revenues of $239.63 million for the fiscal year. 

The small cap expects GAAP earnings per share between $0.79 and $0.81 in the fourth quarter and between $0.33 and $0.35 for the full year, including the anticipated income tax valuation reversal. For the fourth quarter last year, the company recorded a loss of $0.08 and earnings of $0.14 for fiscal 2006.

Six analysts polled by Thomson Financial are on average projecting earnings of $0.07 per share, while seven analysts surveyed by Thomson Financial are on average projecting earnings of $0.47 per share for the fiscal year.

The Burlington, Mass.-based company attributed its expectations to a successful holiday season for its new iRobot Roomba 500 Series robot. The company said its government and industrial robots business also contributed strongly to the quarter.

iRobot noted that there were two one-time events in the fourth quarter that impacted fourth-quarter and full-year profitability: an anticipated income tax valuation reversal of at least $8 million, and estimated litigation and settlement costs of approximately $1.6 million associated with the company’s resolution of a lawsuit against Robotics FX that announced last month.

iRobot will announce actual fourth-quarter and full-year 2007 financial results on Feb. 19.

Shares of iRobot (IRBT) edged down 0.51%, or $0.10, to $19.75 at 10:21 a.m. ET. Shares of iRobot have been trading in the range of $12.76 to $24.30 for the past 52 weeks.

Sanmina-SCI Corp. (Nasdaq: SANM), a global electronics manufacturing services firm, this morning said it expects to meet or exceed the consensus EPS estimate on Wall Street of $0.03 per share.

The small cap also said it booked revenue of $2.53 billion for its first quarter of fiscal 2008, ended Dec. 29, 2007. The current quarter’s results exceeded the consensus of 16 analysts polled by Thomson Financial of $2.40 billion. Last year, Sanmina recorded sales of $2.78 billion.

Sanmina noted cash flow generated during the quarter is expected to exceed $100 million. Cash flow from operating activities for the company’s last quarter was $123 million.

The company will release full financial results on Jan. 23.

Shares of Sanmina-SCI jumped (SANM) 9.23%, or $0.12, to $1.42 in pre-market. Shares of Sanmina-SCI have been trading in the range of $1.29 to $3.94 for the past 52 weeks.

The string of bad news continues for Circuit City Stores, Inc. (NYSE: CC). After reporting after Monday’s close that December sales declined, the consumer electronics retailer was downgraded today by Cowen and Co. to “neutral” from “outperform” on account of no time table for a turnaround.

“We believe the turnaround will be challenging in the near-term due to maturing product cycles, a lack of compelling new product cycles on the horizon and a difficult consumer backdrop,” Cowen and Co. analyst Jonathan Cramer wrote in a research note today.

The analyst says value is present; but that there’s no time horizon for when an external catalyst, will “unlock that value.”

Cramer put together a top 10 list of catalysts, which if they occurred, would stimulate positive stock performance. The list includes the necessity for differentiation from competitors, maintaining or reducing store count, reversing a negative comp trend, stabilizing gross margins, implementation of cost controls, consistent store experience, divestiture of Canadian operations and an external cash infusion.

On account of the indefinite delay in the company’s turnaround, Cramer is lowering his estimates to a net loss of $1.38 per share for fiscal 2008 and a net loss of $1.27 per share for fiscal 2009. The mean estimate of 21 analysts surveyed by Thomson Financial is for a net loss of $1.21 for 2008 and a net loss of $0.55 for 2009.

Circuit City reported Monday after the close that total net sales decreased 8.9% to $1.92 billion from $2.1 billion in December 2006 and that consolidated comparable store sales declined 11.4%, driven by a 12.2% decrease in domestic segment comparable store sales.

Shares of Circuit City (CC) edged up $0.18, or 4.28%, to $4.39 at 12:46 p.m. ET. Shares of Circuit City have been trading in the range of $3.61 to $22.02 for the past 52 weeks.

Shares of Genesis Microchip Inc. (Nasdaq: GNSS) are rocketing in pre-market trading after the developer of integrated circuits said that STMicroelectronics (NYSE: STM) will acquire Genesis for an aggregate value of approximately $336 million, or $8.65 per share.

The offer price represents a premium of 60% over Genesis’ closing share price on Dec. 10, 2007 and a 26% premium over the average closing share price during the last sixty trading days.

Shares of Genesis Microchip (GNSS) rocketed 56.3%, or $3.04, to $8.44 in pre-market trading. Shares of Genesis Microchip have been trading in the range of $4.90 to $11.16 for the past 52 weeks.

Shares of Deswell Industries Inc. (Nasdaq: DSWL) are down to a new 52-week low on news before the start of trading of that the maker of injection-molded plastic parts and other electronics saw a decrease in second-quarter earnings.

The net income for the three months ended Sept. 30 was $1.8 million, or $0.11 per share, a decrease of 57.7% compared with a net income of $3.6 million, or $0.24 per share, during the same quarter of 2006. One analyst polled by Thomson Financial was expecting the Macao, China-based company to report a profit of $0.17 per share.

Net sales increased 7.6% to $38.4 million, from $35.7 million during the third quarter of 2006, but fell short of the projected $40 million.

“While we saw modest overall revenue improvement, margins continue to be impacted by high raw material and component costs, increasing labor rates and the increased value of the Chinese renminbi,” said CEO Franki Tse in a statement.

Tse also attributed the profit decline to higher value added tax rates imposed by the Chinese government on certain export products.

Deswell Industries’ total gross margin decreased to 17.4% from 24.8% in the same quarter a year earlier, a decline the company blamed on a change in customer and product mix and a rise in labor and overhead costs.

“To help absorb the higher costs, we recently initiated price increases across our business,” said Tse. “We also expect a slight headcount reduction in the upcoming quarter.”

At 1:41 p.m. ET, shares of Deswell Industries (DSWL) had retreated $1.06, or 24%, to $6.55. The previous 52-week low was $8.53, established on Nov. 9. The 52-week high of $13.04 was reached on June 22.

Multi-Fineline Electronix, Inc. (Nasdaq: MFLX), manufacturer of flexible printed circuit boards and related component assemblies for the electronics industry, reported robust fiscal fourth-quarter results and disclosed fiscal full-year results.

For the three months ended Sept. 30, net income increased 36% to $3 million, or $0.12 per diluted share, up from $2.2 million, or $0.09 per share, during the fourth quarter of 2006. Six analysts had forecasted a net loss of $0.03 per share for the quarter.

Net sales increased 51% to $166.7 million from $110.3 million in the same quarter last year. Four analysts polled by Thomson Financial were on average forecasting sales of $118.52 million. Net sales were primarily due to increases in net sales from the company's four largest customers.

Net sales for the fiscal year ended Sept. 30, 2007, increased to $508.1 million from $504.2 million for fiscal 2006. Six analysts polled by Thomson Financial were on average projecting sales of $460.68 million for the fiscal year.

Net income decreased to $3 million, or $0.12 per diluted share, below the $0.16 per share six analysts polled by Thomson Financial were on average expecting. For fiscal 2006, the company booked net income of $40.4 million, or $1.59 per diluted share.

Multi-Fineline said that net income was impacted by reduced gross margins, a charge in the third quarter of $7.8 million before tax and $4.8 million net of tax, related to expensing deferred transaction costs associated with a terminated offer to acquire MFS Technology Ltd.

The company’s CEO Phil Harding said the company's growth slowed during the year because of a significant decrease in sales to an electronics manufacturer that has historically been M-Flex's largest customer. According to Harding, sales to its largest customer declined 33% to represent 57% of total net sales in fiscal 2007, compared with 85% in fiscal 2006.

Shares of Multi-Fineline (MFLX) gained 31.95% or $4.71 to $19.45 at 12:42 p.m. ET. Shares of Multi-Fineline have been trading in the range of $9.70 to $23.19 for the past 52 weeks.

Astronics Corp. (Nasdaq: ATRO) shares are up after the supplier of lighting, electronics and power distribution systems for the aerospace industry reported third-quarter net income of $4.1 million, or $0.48 per share, above analyst estimates of $0.26 per share and up 156% from $1.6 million, or $0.20 per share, a year earlier.

“We continue to see strong demand across the aerospace industry for the full range of our products,” CEO Peter Gundermann said in a statement. “We aim to compel our customers to choose us as partners as they develop new aircraft by offering innovative technology and high-value systems.”

Quarterly net sales jumped 36% to $37.7 million, higher than Wall Street projections of $33.4 million and from $27.8 million during the same period of 2006. Gundermann said fiscal year sales are anticipated to increase about 40% to a range of $155 million to $160 million, from $110.8 million last year.

In explaining the results, the company cited improved commercial transport sales, as many airlines are currently refurbishing older aircraft.

In midday trading, ATRO shares are up 6.2%, or $2.48, at $42.45. Over the last 52 weeks, shares have ranged from $14.56 to $45.44.

Shares of Napco Security Systems, Inc. (Nasdaq: NSSC) are sliding today after the supplier of electronic security equipment reported fourth quarter earnings below analyst expectations.

For the three months ended June 30, the Amityville, NY.-based firm recorded earnings per share of $0.05, well below the consensus of five analysts polled by Thomson Financial of $0.09. Napco earned $0.12 per share for the fourth quarter of 2006.

“It’s really the gross profit line—mostly on lower absorption as they try to move inventory; however, it positions the company well for 2008 with $3 million less in inventory,” Jefferies analyst Yvonne Varano said in relation to the company’s beaten down bottom line. “Business continued to do well locking in top line growth, while residential intrusion sales pulled down the bottom line.”

Revenues declined 2.8% to $20.5 million, compared with $21.1 million for the fourth quarter of 2006. Four analysts polled by Thomson Financial were on average expecting revenues of $20.43 million. 

While revenues slightly curtailed, Varano said Napco’s Video Gateway product line, a video security surveillance technology, has done very well and she expects it to perform well going forward.

Net income for fiscal 2007 decreased 31% to $4.2 million, or $0.21 per diluted share, compared with net income of $6.2 million, or $0.30 per diluted share for fiscal 2006. Four analysts polled by Thomson Financial were anticipating fiscal 2007 earnings of $0.25 per share.

Revenue fell 5% to $66.2 million from $69.5 million last year.

The company’s pipeline includes a newer product called “Freedom,” a code-free wireless alarm system, but is in its early stages in market penetration, according to Varano.

“[There will be] slower market acceptance of the product because it changes the way people are used to securing their premises,” said Varano. “Though, I think at some point it will be more broadly accepted.”

Going forward, international sales, which have historically been in the mid teens percentage wise, should be a growth area for Napco, according to Varano.

Shares of Napco (Nasdaq: NSSC) slid $0.57, or 9.27%, to $5.58 in midday trading.

Manufacturer of non-rechargeable and rechargeable batteries for portable electronic products Ultralife Batteries, Inc. (Nasdaq: ULBI) reported this morning that it will acquire Innovative Solutions Consulting, Inc. (AMEX: ISC), an engineering and technical services company, for approximately $3 million.

Under the terms of the deal, the purchase price will comprise $1 million in cash and an earn-out totaling up to $2 million to be paid over three years based on exceeding certain agreed-upon annual sales measures. Management anticipates that the transaction will be accretive in 2008.

ISC generated approximately $4 million in revenue in 2006.

The acquisition is expected to close by the end of September.

Shares of Ultralife Batteries were halted in pre-market trading.

Plasma-etch systems maker Tegal Corp. (Nasdaq: TGAL) announced a European electronics maker has ordered three new advanced plasma etch systems.

Tutogen Medical Inc. (AMEX: TTG) was upgraded to a “buy” rating from “neutral” by Roth Capital Thursday. Roth raised its target price for Tutogen Medical to $13 per share from $10.50 per share based on valuation.

These are the biggest percentage gainers in Thursday’s trading among companies with market capitalizations under $500 million: