Acorn International clocks lackluster Q3
Investors are punishing shares of Acorn International (NYSE: ATV) after the integrated multi-platform marketing company reported third-quarter results well below analysts’ estimates, but maintained guidance.
For the three months ended Sept. 30, the Chinese small cap recorded net income of $6.1 million, or $0.06 per share, well below the consensus of two analysts polled by Thomson Financial for $0.22 per share. For the same quarter last year the company earned net income of $4.5 million, or $0.00 per share.
Net revenues were $73.2 million, below the $75.60 million two analysts polled by Thomson Financial were on average forecasting. The current quarter’s top line represented an increase of 21.5% over the $60.3 million booked in the third quarter of 2006.
Income from operations was $2.6 million, down 41.6% from $4.4 million in the third quarter of 2006.
Acorn said it did not achieve the growth it expected in operating income in this past quarter due to heightened competition in the mobile handset and Ozing electronic learning product categories.
Commenting on the tough quarter, the company said it views the slowdown as “temporary.”
To combat the more competitive landscape, the company said it is adjusting its product mix on TV and implementing a new pricing and distribution strategy for Ozing. Specifically, on the direct sales side, the company adjusted its product mix to reduce the TV placement of overly competitive mobile handsets and increased the marketing of higher margin products such as cosmetics and collectibles. In distribution, Acorn said it assessed competition in the ELP market and has developed a new pricing and distribution strategy for Ozing to improve its overall competitive position.
Acorn noted that the cost of flash memory has declined “significantly” since September 2007, which assist in improving the gross margin on its Ozing product beginning in the fourth quarter.
The company said it also plans to continue to strengthen its long-term partnerships with established domestic handset manufacturers such as Gionee, Konka and Amoi on the promotion of mobile handsets and with China Unicom to expand its marketing of CDMA cell phones and related services on our direct sales platform.
For the full year 2007 the company is maintaining its guidance. Management expects to achieve net revenues of $240 million to $265 million and net income of $24 million to $26 million. The consensus of three analysts polled by Thomson Financial is for earnings of $0.73 on revenues of $268.62 million for the year.
Shares of Acorn International (ATV) tumbled 15.04%, or $1.85, to $10.45 at 1:46 p.m. ET. Shares of Acorn International have been trading in the range of $9.50 to $32.33 for the past 52 weeks.
