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New-Product Costs a Factor : Telex Corp. Slashes Its Profit Forecast

September 15, 1987|From Reuters

NEW YORK — Telex Corp., which builds and sells terminals for IBM mainframe computers, surprised Wall Street Monday by announcing that it expects lower profit in the quarter ending Sept. 30 because of expenses incurred in the development of new products.

Its stock fell sharply on the news, finishing down $13.50 at $51.875 on the Big Board.

Telex said it expects to earn $1 a share for the second quarter, compared to $1.32 a share in the same period last year. For the year ending in March, 1988, Telex said it expects to post earnings equal to last year's $5.28 per share.

The announcement prompted a number of brokerage houses to cut their earnings estimates for the Tulsa, Okla.-based firm and revise their recommendations on the stock.

"We've changed our rating from a buy to a neutral," said John Rutledge of Dillon, Read & Co. He said he had expected earnings of $6.50 per share this year.

Julian Menear, an analyst with Pershing & Co., said that if Telex shares fall any further, they will attract speculators.

He had estimated that the company would earn $6.10 per share in 1987. He noted that some Wall Street houses have predicted that Telex would earn as much as $6.80 per share this year and $7.80 per share in 1988.

Telex said it originally thought that profit from its older terminal products would cover the expenses incurred by its transition to a worldwide data, voice and intelligence-based communications company, but that this was not the case.

Dillon Read analyst Rutledge said Telex's problems reflect the industry's transition to intelligent computer terminals that offer better communications capabilities with host computers.

Telex's new products include the system 3X, a terminal for the IBM 3638 computer, and voice data, a phone with a built-in speaker and modem.

The company said it expects its performance to improve in the next two quarters. Telex earned $19.4 million in the second quarter of 1986 and $77.2 million for the year.

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