COSTA MESA — The other shoe dropped Friday for beleaguered Satellite Technology Management Inc.'s shareholders as its stock price plummeted 38% in the wake of a company announcement that it expects a second-quarter loss and a precipitous drop in sales.
The company's common stock plunged to $3.88 a share in hectic trading on the NASDAQ market Friday, down from Thursday's closing price of $6.25, with 870,400 shares changing hands--nearly one of every five shares outstanding.
Satellite Technology said Friday morning that it anticipated a decline in second-quarter quarterly revenue to "about $750,000" from $4.9 million a year earlier.
It blamed the drop on customers holding back orders as they await the outcome of a federal probe into allegations that the company illegally exported one of its products to Iran last year and attempted to export a second proscribed system earlier this year. Company officials would not disclose the size of its anticipated quarterly loss.
Company President Emil Youssefzadeh, a former Hughes Aircraft engineer who started the company in 1982 to take advantage of markets created by the breakup of AT&T, repeatedly has denied any wrongdoing.
Satellite Technology, which had been holding its own in the market before the illegal export charges were disclosed May 12, posted a profit of $905,000, equal to 19 cents a share, in the second quarter of 1992.
The company went public early last year at $10 a share and the stock hit $13.50 a share in February before slipping gradually into the $8.75-$9.50 range just before the explosive disclosure that Satellite Technology, might have violated federal trade restrictions by selling some of its products to the Iranian government.
Illustrating the degree of seriousness with which the investment community took Friday's news of a potential loss, the company's stock value dropped only 13.6% to $7.50 a share the day the export probe was announced.
Mark Matheson, an analyst with Crowell, Weedon & Co. in Los Angeles, said Friday that if, as the company maintains, the illegal exporting allegations are unfounded, shareholders are panicking unnecessarily. The company has cash reserves alone that are worth $3.73 a share.
The company is the target of a Department of Commerce probe into an alleged illegal export of one of its satellite terminals to Iran and the seizure at the Port of Long Beach on May 7 of a second such system, which includes a computer that the government contends is barred from shipment.
Youssefzadeh said Friday that his company and its attorneys "are continuing our substantive dialogue with the government to promptly resolve this matter and demonstrate the company's full compliance with the U.S. Export Administration regulations."
The issue is whether the Sun Microsystems computer workstation that runs Satellite Technology's communications system can legally be exported to Iran as part of a satellite terminal. Iran--like Cuba, Libya, Vietnam and Iraq--is subject to varying levels of federal restrictions against trade with U.S. companies.
The Sun workstation is a complex computer that could also be used for military purposes, such as weapons development.