Meade Instruments Corp.'s stock took a beating on Wall Street on Wednesday, a day after the Irvine telescope maker posted disappointing quarterly results.
The stock slumped 33%, or $1.56 a share, to $3.81 in Nasdaq trading after Meade posted earnings of 13 cents a share for the third quarter ended Nov. 30, far below analysts' estimates of 41 cents a share.
An extensive advertising campaign for its ETX and DS series telescopes, as well as sluggish sales of the company's small refractors, accessories and ETX-60AT telescope, contributed to the disappointing results, the company said.
The company's fourth-quarter prospects also appear uncertain, analysts said.
Brian Tanous, senior research analyst at First Security Van Kasper, said Meade Instruments had counted on higher sales of its new telescopes among lower-end consumers during the Christmas season--a season that proved not to be as merry as the company might have hoped.
"It's been terrible timing with the retail season this year," Tanous said. "People are just not spending the money to buy telescopes."
The company will have to wait and see how excessive inventory in the pipelines was sold and determine how much of a price discount would be necessary to move these products off the shelves, said Gerald Fleming, technology analyst at Tucker Anthony Cleary Gull.
Because of the poor sales of its telescope products, the company had taken to adding free accessories with telescope purchases, Fleming said.
The bonuses, which included tripods and other costly accessories, came directly out of Meade's pockets.
"It was not an easy decision," Meade Chairman and Chief Executive John Diebel said in an interview. "These are expensive promotions. Looking back, I'm convinced this was the right thing to do in such a difficult sales environment."
Diebel said the company has a bright future, "given a good economy."
One shining spot for Meade Instruments is its higher-end telescope business, which remains strong and unaffected by the difficulties facing the lower-end consumer telescope models.