NetGear Cuts Earnings Outlook

By Reuters  |  Posted 2008-10-12 Email Print this article Print
 
 
 
 
 
 
 

The networking equipment vendors says weak consumer and partner sales brought about by the weakening economy are dragging down its revenue forecasets.

Home and business networking products maker NetGear cut its third-quarter revenue outlook primarily due to shipment delays in September, sending its shares down as much as 24 percent.

The Santa Clara, California-based company said it experienced weakness in demand for consumer products across all channels and in all geographies, particularly in the service provider channel.

The weak demand is a result of uncertainty in global financial markets, Chief Executive Patrick Lo said in a statement. He said he expects these conditions to persist until financial confidence returns to the market.

BWS Financial Inc analyst Hamed Khorsand, who has a "buy" rating on NetGear's stock, said the company faces substantial risk in the international markets, especially in Britain, Spain and France, where it gets much of its revenue.

He said he did not expect the trouble in the retail channel to dissipate any time soon because of the challenges in the international markets.

"The service provider and small/medium business segment remain the two areas where NetGear would need to excel to maintain profit levels," Khorsand said in a note to clients.

NetGear competes with Cisco Systems and D-link in designing products that enable home users and firms to share Internet access, files, multimedia content and applications among computers and other Internet devices. BSkyB is one of its biggest customers, Khorsand said.

OUTLOOK CUT

NetGear now expects revenue of $173 million to $183 million, compared with prior expectations of $208 million to $212 million.

Analysts on an average were expecting revenue of $210.2 million, according to Reuters Estimates.

NetGear raised its forecast for operating margin, excluding special items, to a range of 10.3 percent to 11.3 percent, compared with its previous outlook of about 9.5 percent to 10.5 percent.

The company expects to report other expense of $4.5 million to $5.5 million, mainly due to a stronger U.S. dollar against the Australian dollar, the British pound and the euro.

NetGear shares were trading down 68 cents at $11.75 in afternoon trade on Nasdaq, after hitting a four-year low of $9.50.

(Reporting by Shrutika Verma in Bangalore; Editing by Mike Miller)

 

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