Earnings Warnings Come in Overtime, Like World Cup Goals

by: Shlomi Cohen

Last week we were wondering where all the warnings were, and it appears that we didn’t have to wait long. Like the goals scored in the World Cup in Germany, they came in extra time - at the end of last week, after the quarter ended. The World Cup might have ended on Sunday, but it will apparently return in the season of results that begins today. Just as some company managers who have published warnings so far used the World Cup as their excuse, so some managers who missed their results for the second quarters will also probably tell us that June was a weak month because of the World Cup.

One such example is Aladdin Knowledge Systems (Nasdaq: ALDN), which warned and then plummeted more than 20% in two days. It has already claimed that it did not have good sales in Germany because of the World Cup.

Another company to take a dive was 3M Company (NYSE: MMM), which fell 9% on the Dow Jones on Friday, after it officially announced that its earlier forecast for strong global sales of LCD televisions due to the World Cup did not materialize, and therefore it would have lower-than-expected sales of optical films used in LCD displays. Advanced Micro Devices Inc. (NYSE: AMD) was the only company not to use the World Cup as an excuse for issuing a warning, stating simply that Intel Corporation (Nasdaq: INTC) had cut prices and ruined its quarter.

Another company publishing a warning was a smaller rival of AudioCodes (Nasdaq: AUDC) called NMS Communications Corp. (Nasdaq: NMSS). It plunged 33% on Friday, and contributed to AudioCodes' own 2% fall. Another company that crashed 33% on Friday was a smaller rival of Comverse Technology (Nasdaq: CMVT) called Openwave Systems Inc. (Nasdaq: OPWV), which provides browsing engines for handsets to cellular companies. Openwave also issued a warning, which apparently harmed Comverse, which lost 3% on Friday as a result.

Openwave’s warning was exceptionally severe, since instead of the anticipated earnings per share of $0.17 for the June quarter, it will report a loss of $0.13, with its sales revised downward to $92 million from $122 million. In addition, like its Israeli counterpart, it too received a summons to an inquiry over its options. Openwave ended Friday at $7.50, and just three months ago it was three times that price.

Another company that issued a warning that sent it crashing 22% was French/US software company Business Objects SA (BOBJ), which failed to close any major deals during June (World Cup again?). These are still in the pipeline.

Published originally by Globes [online], Israel business news - www.globes.co.il
© Copyright of Globes Publisher Itonut (1983) Ltd. 2006. Republished on Seeking Alpha with full permission.