Shares in Adaptec Inc took a dive on Friday after the company warned that third-quarter earnings will fall well short of Wall Street expectations. The Milpitas, California maker of network interface cards, says revenues for the quarter ended December 31 will fall in the range of $250m to $255m.
At that revenue level, earnings per share should come in at roughly $0.35 – $0.40. The First Call consensus was looking for $0.56. Adaptec shares responded by losing an even 40% of their value, falling $14.375 to $21.5625 on Friday amid a general retreat in technology stocks. The company is blaming the dismal quarter on poor sell-through at its North American distributors. And, as Adaptec’s products usually go into high-end machines, the trend toward cheaper PCs is hurting the company as well. An Adaptec spokesman said he sees this as merely a bump in the road and not a continuing trend, adding that the company’s OEM business did better than anticipated during the quarter, with sales to the likes of Hewlett-Packard Co, IBM Corp and Intel Corp remaining strong. He explained that the company’s hopes for the immediate future are tied to the rise of Windows NT and Adaptec seems confident that NT will lead to improved sales despite the dawn of the $700-$800 PC. Making matters worse for the third quarter, however, the company anticipates investment write-down and other charges and a change in accounting principles required by the FASB. Reflecting these adjustments, Adaptec expects to report net income in the range of just $26m to $28m, and earnings per share of $0.21 to $0.23.
