RadiSys falls on weak Q1 outlook
Shares of RadiSys Corp. (Nasdaq: RSYS) ended the day at a new 52-week low following news that the provider of embedded solutions for the communications networking market announced a first quarter 2008 outlook below Wall Street’s projections.
The Hillsboro, Ore.-based company reported after the close on Tuesday that it projects first-quarter results to be between a loss of $0.04 per share and a profit of $0.02 per share. Four analysts polled by Thomson Financial had forecasted net income of $0.05 per share.
Revenue for the first quarter, which ends on March 31, is projected between $75 million and $83 million, below the consensus estimate of $88.4 million.
“Our wireless business in the first quarter will increase year over year, but will be down from the record levels seen in the fourth quarter due to the acceleration of customer demand into the fourth quarter as well as first quarter seasonality,” said president and CEO Scott Grout in a statement.
Analyst Edward Jackson from financial services firm Cantor Fitzgerald reacted by downgrading RadiSys to “hold” from “buy” and lowering the stock’s 12-month target price to $12 from $16.
“We see little chance for a recovery in valuation until we are well into [the first quarter of 2008],” Jackson wrote in a research note.
The analyst is also concerned that RadiSys is too dependent on telecommunications giant Nokia Siemens. The Finland-based company accounted for 47% of RadiSys’ sales in the fourth quarter of fiscal 2007 and 40% of revenue in fiscal 2006.
“While the growth of business with Nokia Siemens has clearly benefited Radisys, it does increase the potential volatility of their revenue,” Jackson wrote.
In the fourth-quarter of fiscal 2007 RadiSys had a net income of $4.5 million, or $0.17 per share, above the $0.13 per share expected by Wall Street.
“We had a strong quarter in our wireless business due to some acceleration of customer demand into the fourth quarter,” explained company chief Grout.
Profit for all of 2007 was $7.8 million, or $0.33 per share, compared with $12 million, or $0.50 per share, a year earlier.
At close, shares of RadiSys Corp. (RSYS) were down $2.60, or 20%, to $10.26. The previous 52-week low of $10.50 was established on Aug. 23, 2007, while the 52-week high of $17.48 was reached on Nov. 2, 2007.
