Unexpected Profit Warnings: Ormat and Radware Caught Us Off-Guard

I have noticed a new practice in the current reporting season. Two companies, Ormat Technologies Inc. (ORA) and Radware Ltd. (RDWR), both of which happen to be Israeli, have published profit warnings after announcing a date for their financial report, which is an agreed signal between companies and investors that no warnings are in the offing, or at least no announcements with any connection to the results until these are published.

In Radware's case, the post-announcement warning is forgiveable, since it announced the date for the report early, in mid-March, and it is common knowledge that the sales that could make or break the quarter are closed only in the last two weeks.

Ormat, on the other hand, has been remiss, because the severe warning, a substantial loss instead of a substantial profit, was published only yesterday. That's a whole month after the end of the quarter. What is even more astounding it that it comes two weeks after the company named a date for the publication of its report. My bet is that they won't like this at all on Wall Street.

In this era of the "Harel affair," without, of course, implying that something similar could be afoot at Ormat, I would strongly advise the company to take a good look at its real-time auditing system as my hunch is that two weeks ago they didn't think there would be a warning. Had they known, they would have announced it, or not have named a date for the report. Cisco Systems (CSCO), for example, whose sales are slightly larger than those of Ormat, ended its quarter three days ago and will unveil its results in eight days time. Surely no one thinks that there'll be a sudden profit warning there as well?

ORA and RDWR 1-yr chart:

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.