Applied Signal Technology says demand is slow but steady
Applied Signal Technology, Inc. (Nasdaq: APSG), the Sunnyvale, Calif.-based developer of digital intelligence, security and reconnaissance systems, is well positioned to serve government security needs, executives said on a Tuesday evening.
“We don’t see changes in demand in the foreseeable future,” CEO Gary Yancey said on the call. “There is a high government demand for intelligence, surveillance and reconnaissance products due to the global war on terror.”
There is a slow but steady demand in terms of growth, and investors will see a cash flow in 2008 similar to 2007, he said.
Yancey announced the company’s wireless products division secured a $7 million contract with a government agency that will be realized in the third quarter ending July 28. Due to security concerns, Yancey would not disclose which agency received the contract.
Applied Signal Technology is also being looked at by two large government agencies for a data mining contract, Yancey said. However, the contract probably won’t be awarded until 2008, he said.
The company announced Tuesday afternoon $41 million in revenue for the second quarter ended May 4, down from $43 million a year before. Applied Signal reported a $1.6 million second-quarter profit, or $0.13 a share, up from $1.5 million, or $0.13 a share, in the same period of 2006.
The company met the expectations of analysts polled by Thomson Financial, who predicted profits of $0.13 a share. In Tuesday’s trading, shares of Applied Signal Technology closed down $0.15 at $16.97. In after-hours trading, the stock lost $0.10 at $16.87.
In response to investor queries, Yancey acknowledged the unpredictable nature of government contract work.
“I’m not sure we’ll ever get into a proactive state with respect to the current situation,” Yancey said. “It’s reactive to terrorist threats and is different from the Soviet Union.”
Also on the call, Yancey said:
• The company will be hiring throughout the remainder of the year.
• The company has had “aggressive” proposal activity
• There will be product demonstrations by the end of the summer
• The company shift from products to development has been because requirements are changing rapidly due to the war on terror. “We’re not worried about superpowers, but individuals and groups,” Yancey said. “It has changed the requirements a lot.”
• The company will have $1.1 million in charges rated to unanticipated wage increases at the end of 2007
• Stock option expenses were $1.1 million for the second quarter and $2.2 million for the year
