Israel's Gilat Satellite Networks Ltd. on Monday, May 14, reported a first-quarter loss that widely missed Wall Street's estimates, as the satellite systems maker blamed the economic slowdown in the technology sector.
Gilat said it lost a proforma 45 cents a share in the first quarter, excluding all special items, compared with analysts' average expectation of a 10 cent loss, according to Thomson Financial/First Call, which tracks analysts' estimates. Estimates ranged from a gain of 7 cents to a loss of 15 cents.
Gilat said its net loss amounted to $58.6 million, or $2.51 a diluted share, compared with net income of $6.5 million, or 28 cents, in the year-ago quarter. Revenues rose 17 percent, to $100.3 million from $85.9 million last year.
"The first-quarter results were incredibly poor," said William Kidd, analyst with C.E. Unterberg, Towbin. "The company is reporting substantial gross margin deterioration, uptick in operating costs, and even worse, immense balance sheet deterioration. It was a pretty bad quarter in all respects."
Shares of Gilat fell as much as 10 percent to $11 earlier in the day on Nasdaq before closing up 7.17 percent at $13.15. The stock was 86 percent below its year-high of $93.38.
However, in a conference call with analysts, Yoel Gat, chairman and chief executive of Gilat, sounded an upbeat note.
"The core markets are coming back. In the last few weeks, we've seen an improvement in almost all of our business lines," he said.
Gilat said that based on improving visibility for the second half of the year, it was maintaining its guidance for the balance of 2001, with revenues estimated at $125 million for the second quarter, $150 million for the third quarter and $200 million for the fourth quarter, with earnings per share at 15 cents, 33 cents, and 65 cents, respectively.
It also set guidelines for cash flow from operating activities. Gilat said it expected a loss of $40 million in the second quarter, a gain of $4 million in the third quarter and a gain of $39 million in the fourth quarter.
The company said in the conference call that it used $105 million in cash in the first quarter for items including restructuring, increased inventory, increased accounts receivable, increased advances to suppliers, investment in a software product and a long-term capital lease.
It also said it was taking a charge to increase bad debt reserves by $20 million due to financial uncertainties with certain customers.
Gilat, which is in the process of shifting its business to a wholesale model rather than direct sale, said it cut about 500 employees, or more than 25 percent of its global work force, in the first quarter and closed some of its administrative, marketing and support offices. The company first announced the restructuring in April.
Selling Internet access to Internet service providers rather than directly to the public is expected to help Gilat's financial results since it would no longer shoulder customer acquisition costs.
"If the company could show just even a small amount of progress ... that would be a big step forward," C.E. Unterberg Towbin's Kidd said. General Electric Co. owns a 20 percent stake in Gilat. ― (Reuters, Chicago)
By Yukari Iwatani
© Reuters 2001
© 2001 Mena Report (www.menareport.com)